The USA is now headless and directionless

Remember the $700 billion 'Poulsen plan'? It's now known as the TARP - Troubled Asset Relief Program(me). The idea was for the Treasury to buy up dodgy debt and store it in a quarantined environment. Having taken off the dodgy debt from banks' balance sheets the banks will be OK. Not so, as we know. But things are happening to the TARP fund. Bush has failed to get Senate approval for a bailout of the carmakers so he has agreed to bail them out from the TARP fund. Yikes, is this even legal? In any case, we have the spectacle of major US carmakers being paid by the Government to make cars that nobody wants.

The twist today is that the original $700 billion was actually voted in two tranches - of $350 billion and it so happens that after giving the carmakers their $14 billion or so, there is nothing left of the first tranche. So Congress needs to approve the second tranche. But now Congress is insisting that if they are going to vote for this, money will also have to be made available from TARP for 'homeowner relief'! Where is this all going to end? The TARP fund has become just a big pot of cash for corporate and individual welfare.

One problem is that this money is being borrowed and printed. The other problem is that it is not going to do anything to resolve the underlying problem -- it is a panic measure to try to maintain the status quo for a few more months. The carmakers are going to go down. The vulnerable homeowners are going to lose their homes. This must be obvious to everyone.

The real issue is that the United States, the world's largest financial and military power, is headless and directionless. That is terrifying.