'Credit Crunch' Scam Used To Sell TARP?

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AlterNet Excerpt:
There is something approaching a consensus that the Paulson Plan -- also known as the Troubled Asset Relief Program, or TARP -- was a boondoggle of an intervention that's flailed from one approach to the next, with little oversight and less effect on the financial meltdown.

Of course, no one disputes the fact that as the economy has tanked, the number of new loans being issued to American families and businesses has plummeted. But is because credit has dried up for qualified borrowers?

Economist Dean Baker doesn't think so. He explains the situation in simple terms: The media, he argues, "are blaming the economic collapse on a 'credit crunch' instead of the more obvious problem that consumers just lost $6 trillion of housing wealth and another $8 trillion of stock wealth."

Some of that wealth Baker mentions was lost in property value, numbers and personal equity only, the basic essentials you need in order to borrow money. No question, if a country loses $14 trillion in equity, things will begin to spiral out of control. What I believe played just as big a part was the $700 billion a year in hard cash that was confiscated from American pocketbooks for artificially overpriced gasoline. Over a period of several years, this could have drained as much as $3 trillion out of the U.S. economy alone. Again, this was not in numbers or equity - but real paper currency.

My point here is not about energy independence or the money leaving the country, but about regular folks being left with little money in their pockets after they filled the tank, week in and week out and year in and year out beginning in late 2003. Under the fear of media induced pipeline bombings, hurricanes, phony supply and demand explanations including Bush Administration propaganda rhetoric, international speculators ran wild inflating the price of a barrel of oil, thereby draining the liquidity out of the global economy.

Countries whose national budgets and programs are fueled and paid for by revenue from oil like those in the middle-east were reaping huge surpluses, not in stock or commodity swaps, but in liquid cash. That can only go on for so long before the world runs out of money. So, many different events and actions transpired to bring us to this point, but if I had to choose which one of the two arguments played a larger role in the global economic decline, I would think it's more about a lack of liquidity – and less about a lack of credit.

I also believe that's why our Federal government is printing more and more currency and creating tax and rebate stimulus plans. They want to put liquidity in pockets quickly, through any and all tools and vehicles they have at their disposal.

On the credit side, the Fed lowered interest rates to zero and threw billions (liquidity) of dollars to the banks - yet, none of that really helped borrowing or mattered on the global scale. It's a solution for a different problem. Credit will magically re-appear when any collateral necessary to secure debt and spur borrowing gains value - that includes most importantly - the collateral offered by good job security. They can throw hundreds of billions at that problem and accomplish nothing but a gargantuan national debt.