This has been some week in the US Financial markets. Who knows what ‘knock-on’ effects all of this is going to have Worldwide, but one thing is for sure: Can anyone think that we are not now sliding into a global recession. If the home of the Market economy has lost two of their largest Investment banks, their largest Insurance company was saved only by the Government, and Merrill Lynch was sold off a fire sale prices, in order to keep it afloat. In fact, when you add the amount of foreclosed property still unaccounted for, with the money it cost to bail out Fannie May and Freddie Mac, plus the amount poured into these massive banking institutions, it TOTALS 20% OF US GROSS NATIONAL PRODUCT. One fifth of the amount the country earns is now aimed toward this one problem.
Now that the treasury own both Federal housing agencies, and have majority votes in banking, saving and Insurance to millions of people, many conspiracy theorists see a communist state just around the corner. Personally, the real problems I see are much closer home. For a change of pace, I wanted to relay a personal story to illustrate this.
A friend of mine recently closed his online business. He had to – a change in the law within the US so affected his marketplace, he lost both his customers, and his prospects for future sales. How can this happen, how can one government sway the Internet? Isn’t it meant to be free for all? Many of us learned over the summer that the Chinese government have a strong interest in what their citizens do and see online, but they are communist, right? This is what an Evil Empire do to their people? Well there was a law change in October 2007 that affected everyone that use the Internet. In an attempt to ensure that no American citizen accidentally gave money to a Terrorist Cell, the US government passed a homeland Security bill that included a ban on US citizens using Visa and Master Card to gamble on offshore casino and poker sites. What?
The reasons given to add a game of chance to a Homeland Security Port control were Kafka-esque at best, but lets add some more facts to this situation. The addition was added last minute to this bill. It was sponsored by two Republican politicians that have received funds from Large Nevada gaming operators, and was passed at almost midnight with hardly anyone in the house realising it had happened. Sounds positively underhand, doesn’t it? Sounds as if these people wanted to protect their sponsors, and found a way to disguise what they were doing and to do it in a way that wouldn’t attract attention.
There are many effects to this law change, and it only affects operating a legal business, and now have lost over 60% of their marketplace. It also affects people that enjoy a hand of poker, or a bet on a game – something that the rest of the World can do whenever they wish.. The fact that the former are small-scale entrepreneurs, and the latter have a free choice in how they spend their money doesn’t appear to mean much. The reasons given for the passing this law is that gambling is an evil and children have to be protected. Why, then do state governments sponsor lotteries and local gaming boats, halls, reservation resorts etc.?
The reason is, I have found, that local gaming is part of General Revenue for cities, states, and national governments. In our city, we have a casino that gives 10% of it’s earnings to the city, as a pay-off for allowing a charity casino to exist. 2007’s take for the City? $2 Billion. The Mayor immediately announced a long-promised road building program. In other words the infrastructure of any city has become too expensive to repair. The building boom of the ‘60s and 70’s meant that cities were upgraded and modernised, but this work couldn’t continue because of the recession. Now, amid the collapse of bridges, and cracking of roads and freeways across North America, we have to use gambling funds to either fix them, or build even more infrastructure. Just in time for another recession. We have sat on this problem for over 30 years and done nothing about it. Those that have to pay for it are using post-taxed income to do it – in an area that even governments admit is a possible problem – and my friend’s company is one of many that will close because of it.
And what is this infrastructure for? Drivers of fossil fuelled cars, a transportation system that everyone agrees is about to become obsolete. Why don’t local authorities approach large investment banks or Insurance companies and get long term loans at competitive prices for such large-scale work? Well, if they try that in the US, now, they will be talking directly to the Federal Government. Now who’s living in China?
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