February 6, 1995
A populist revolt over the bail out of Wall Street speculators after the devaluation of the Mexican peso forced Bill Clinton to use his executive powers to rescue the Wall Street Welfare State. Three weeks ago, the bailout appeared to be a done deal with the leadership of both parties predicting swift passage. When a coalition of anti-NAFTA Democrats and first term Republicans refused to acquiesce, heavy hitters from America’s ruling class – The New York Times, the Federal Reserve Board, and past Presidents – bludgeoned the American people with apocalyptic warnings. The public didn’t buy it, with polls showing over 80 percent opposed to the plan.
When Mexico devalued the peso six weeks ago, Wall Street bondholders saw their investments tank 40 percent in one week. This accelerated the flight of foreign capital from Mexico’s central bank and Mexico had no chance of repaying the $16 billion in junk bonds that were are due this year to the Big Boys on Wall Street. Thus, just like the Savings and Loan bailout five years ago, our financial elite demanded that the hard working middle class taxpayer come to their rescue before they fell behind on their yacht payments.
Bill Clinton didn’t let them down. By reaching into a fund reserved for stabilizing the U.S. dollar and jawboning the IMF (International Monetary Fund), he was able to assemble $50 billion to send to Mexico, thwarting the will of the vast majority of voters who are tired of seeing their tax dollars bailout an arrogant financial elite who believe that market discipline applies to everybody but themselves.
The financial markets reacted favorably to Clinton’s announcement with the peso rebounding and the Mexican stock market gaining 10 percent in one day. What really happened here, though, is what the Big Boys on Wall Street call a “dead cat bounce.” Our financial elite know that Mexico’s problems are political and economic and that $50 billion is not going to change anything. They just wanted their money back courtesy of the American taxpayer.
The line Clinton gave to the public was that this bailout will not cost the taxpayers a cent, American jobs will be saved, illegal immigration will be reduced and the financial markets will stabilize. This remains to be seen.
Mexico is a one-party plutocracy with the descendants of the Spanish conquistadors calling the shots. While the middle class has seen its real wages decrease 75 percent over the past decade, the main product of the ruling oligarchy has been billionaires, as well-connected elites – under the guise of “privatization” – acquired national assets at fire sale prices. This wealth transfer has political instability, resulting in the assassination of two Presidential candidates and a Roman Catholic cardinal who sided with the peasants revolting in Chiapas.
The vast majority of the $50 billion, including the $17.8 billion contributed by the IMF, is guaranteed by the American taxpayer. In the next several months, it will be sent to wealthy speculators to pay of the Mexican junk bonds. Where will Mexico get the money to pay off their debt to the United States?
The government will launch new “austerity” programs and raise taxes on the middle class and working poor. The peso will remain weak as political unrest continues. Newly-impoverished Mexican workers will no longer be able to afford American exports, which must be paid for in dollars. Illegal immigrants will continue to flood our borders. So much for the NAFTA scam.
Thus, Mexican officials will soon tell the U.S. government, “No tememos dinero.” Meanwhile Republican House Speaker newt Gingrich – who supported this obscene bailout – will continue to amuse the populous with threats to cut off funding to Big Bird. He will continue his balanced budget gimmicks and hope that the public is so engrossed in the O.J. Simpson trial, that it won’t notice as billions of dollars are tacked onto our national debt.
Clinton assures us that Mexico has pledged its oil revenues as collateral. This completely ignores Mexican internal politics. Mexican leaders will be very hard pressed to send their oil wealth to the United States in the face of a massive decline in living standards of average Mexicans. When they refuse, what are going to do? Invade?
Meanwhile, major financial interests, emboldened by their success, are already sending signals that they expect to be bailed in Orange County too. Local officials are refusing to raise taxes or cut spending. They are threatening to default, knowing full well that the well-manicured hands of wealth bond holders will soon be reaching for their cell phones and threatening to cut off the spigot of campaign cash to our professional politicians if they not dutifully bail them out.
The true tragedy of Clinton’s bail out is that it missed the opportunity to reassert good old-fashioned market discipline into our financial system. Work built America, not speculation. But our financial elite have sent a message to the masses in our post-NAFTA economy; not only do we have the power to move your jobs overseas, but we can force the professional politicians to bail us our at taxpayer expense if our investments tank. The Presidential candidate who capitalizes on this arrogance of our financial elite may find himself in the White House in 1996.