The Exercise of Vital Powers

US Treasury secretary puts a gun to the heads of major banks and say “You will take this $25B, and give me preferred equity. We don’t care if you need the money or not.”

Yeah, the imminent death of the Internet has been predicted many time before. However this doesn’t bode well: FCC Clears Free Wireless Web.

A proposal to create a free, national wireless Internet service got a boost as Federal Communications Commission engineers concluded that concerns are overblown about such service interfering with other carriers.

The report clears the way for the FCC to move forward with a plan to auction off airwaves to a bidder who agrees to offer free, national wireless Internet service. The FCC is expected to finalize rules this year and could begin auctioning off airwaves in early-to-mid 2009.

If the Internet is primarly a wireless medium, will all the bogus New Deal Era policies regarding public ownership of the airwaves kick in? Will there be a blogosphere equal time rule proposed? What about material that hypersensitive Christian pansies find offensive? Hypersensitive leftist whiners? Can I say the work ‘Fuck the Congress’ or will that trigger an FCC fine? If the internet is 100% wireless what will the security model be? Will is use strong encryption, or crippled-encryption allowing Law Enforcement access to near-realtime monitoring of everything everyone does.

A free wireless network will drive out competition from Cable and DSL so you’d pretty much be stuck using this government sponsored solution.

Caveat Emptor: This product may be such crap that no one uses it. Still once the Internet is going over what used to be channel 5, the FCC will make a power grab to regulate it the same as they did Channel 5.

What we have seen the past two weeks is not a failure of the market. Its a failure of Government and faith in Government. Congress fails to pass a bailout, Dow drops 700pts. Congress passes a bailout, Dow drops 600pts. After the bailout, Dow drops another 2000pts.

Federal Reserve, US Treasury, and FDIC are buy companies, guaranteeing and making loans, and upping deposit insurance. Credit is still frozen, and financial companies are in panic.

Nothing the Government has done is helping.

First, the business model of Government Sponsored Entities (GSEs) in which profits accrue to the private sector but risks are underwritten by the public has proven unworkable. It would be a grave mistake to preserve the GSEs in anything resembling their current form. –George Soros

Don’t get me wrong. I’m still immensely pissed off at the Bush Administration for giving Barak Obama at trillion dollar credit line to go buy up whatever he wants on Wall Street. However, i wonder if the US Bailout package didn’t suddenly send the problem overseas. The Fed answers (to nearly) no-one, and the Treasury just needs agreement between Democrats and Republicans - both of which face elections in under 30 days.

The Euro Governments are much more split as the article below describes. Germany sat on France’s bailout proposal because the Merkel Government didn’t want the German taxpayers bailing out “Latin Europe”. Can’t say I blame her. The Telegraph does however: Germany takes hot seat as Europe falls into the abyss - Telegraph

As for the US itself, it has not yet exhausted its policy arsenal. It can escalate further up the nuclear ladder. The Fed can cut interest rates from 2pc to zero. If that fails, it can let rip with the mass purchase of US debt.

“The US government has a technology, called a printing press,” said Fed chief Ben Bernanke in November 2002. (His helicopter speech).

In extremis, the Treasury/Fed can swoop into any market to shore up asset prices. They can buy Florida property. They can even buy SUV guzzlers from the car lots in Detroit, and mangle them in scrap yards. As Bernanke put it, the Fed can “expand the menu of assets that it buys.”

There is a devilish catch to this ploy, of course. It assumes that foreign creditors will tolerate such action.

Japan entered its Lost Decade as the world’s top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.

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The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again.

The Fed can now hope to pursue monetary stimulus “a l’outrance” without being slapped down by the currency, debt, and commodity markets. Take comfort where you can.