According to the Wall Street Journal, Bank of America (NYSE: BAC) is offering to repay part of the government bailout money it received last year, and the U.S. isn't ignoring the offer.

Supposedly, the U.S. wants the bank to pay at least $500 million in order to stave off a pact that would result in the government losing on certain assets. People familiar with the matter classify the moves as an "extra measure" of federal aid for Bank of America in order to complete its acquisition of Merrill Lynch. Supposedly, both sets of the discussions would allow Bank of America to "reduce a layer of federal involvement in its affairs."

Here's the definition of socialism:

1. a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
2. procedure or practice in accordance with this theory.
3. (in Marxist theory) the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles. (from dictionary.com)

Here's what's going on in the U.S. economy: the government is currently dictating terms to the auto and financial industries in return for much needed money to save companies from their past mistakes. Seems only fair. Any time anyone or anything accepts money, there are obligations that go with it, whether they're in the form of interest payments or equity. That's as it should be. The question is: how much control does the government need to have once the terms are in place?

Update: Many readers and other people who have seen this quote making the rounds on Wall Street believe it is a hoax.

Hedge fund manager Whitney Tilson sends out wonderful e-mails about every day. I just got a new one today, and he included this incredible quote from Karl Marx:

"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism. (Das Kapital, 1867)

What does it all mean? I'm not really sure. But Karl Marx's theory that capitalism would inevitably lead to communism has mostly been dismissed -- proven wrong by the survival of capitalism and the fall of communism.

And while it is true that there was a fat lady singing at Obama's inauguration (she was great by the way -- just sayin'), Karl Marx may still have the last word yet.

Of course some Republicans will point to Obama as a step toward socialism. So does that mean Marx was right?

Financial Times columnist Martin Wolf inquires, do Americans understand their financial and economic system?

Anger at Wall Street's - - and regulators' - - lapses is justified, but at the end of the day to oppose the rescue package is at once self-defeating, contradictory, self-punitive, and borders on nihilism, Wolf states. Take your pick regarding which is the most damaging.

Congressional representatives, particularly conservative Republicans, but also others, opposed the flawed rescue plan as a bailout for the rich, and as a statement against 'socialism.' Socialism? Yes, the plan is flawed, Wolf states, but the ruin that will result from rejecting the plan will destroy the legitimacy not of socialism, but of the market economy. Exactly what are the packages' opponents fighting?

The Congressmen/women also say that they are 'taking a stand for Main Street and against Wall Street.' A contradiction, Wolf writes. Wolf: Wall Street and Main Street are streets that meet. That is what streets do.

Then there is the future. What is the opponents' alternative? The loudest voice here appears to be 'let the market sort things out by itself,' under the assumption that the damage, costs, and negative consequences really won't be that bad. Wolf: This is not prudent, if the early 20th century's experiences are a guide.

There's been a lot of talk about how the proposed bank bailout is somehow socialist. Senator Jim Bunning recently said that the bailout is "financial socialism," as well as just being plain old "un-American." Congressman Ron Paul has made similar statements, and some of the bloggers here at BloggingStocks have joined in the chorus as well (here and here).

Now, I understand that the bailout violates the much loved principles of 'free markets' and 'democratic capitalism', but we can't let this violation muddy the meaning and history of different economic forms. In the long history of capitalism, socialism has represented an alternative that fundamentally challenges the capitalist structure of political and economic power. This bailout does no such thing.

If the bailout were truly socialist, it would result in long-term state ownership of the banking industry. No such option is on the table. Even getting a minority, non-controlling interest in the banks in return for the massive public investment has been controversial and thus far impossible.

Socialism has a long and complicated and even contradictory history. But the basic principle is pretty clear: economic activity should benefit all citizens and not just a small upper class. Accordingly, in a socialist state, major industries should be publicly owned and wealth should be shared. There are plenty of examples of socialism in action, including the state-owned industries in much of Europe after World War Two, as well as the fairly weak political forms of the welfare state in the U.S., including the Social Security system.

Last week, I wrote a post about why people might want to be careful about dumping all of their money into commodities like gold, silver and oil. In response, one of my readers suggested that the best solution to the current economic crisis would be to round up the richest people in the country, take all of their money, take all but one of their homes, and give each one $1 million to start over. As my reader pointed out, this would save 90% of the country, while only robbing 1,000 people of their wealth, property and civil rights. As a sop, he suggested that we give the formerly rich folk a lifetime exemption from all property taxes.

I initially dismissed this as ridiculous, overblown nonsense. After all, robbing people of their personal property is the kind of thing that the Communists did when they took over Russia. As much as I might despise our latter-day kulaks, I simply couldn't justify this kind of blow against free enterprise and the rule of law. Then, of course, the federal government started getting into the nationalization game and I found myself wondering what the difference is between a socialist solution that robs from the rich and a supposedly capitalist structure that taxes the middle class in order to subsidize the rich. I feel like I'll have an answer to that question somewhere around April 15.

By now, we all know a fair bit about what's happened on Wall Street over the past few weeks; what eludes us is finding a way to fix it. Logic would seem to dictate that we need to close the book on our brief exercise in deregulation, chalking it up as a bad idea. While we're at it, we should probably think about re-instituting FDR's Home Owners Loan Corporation, a New Deal program that helped millions of people refinance their mortgages and keep their homes. By the time it ended, the HOLC had turned a small profit. More importantly, it had kept people in their houses, paying their mortgages. This, in turn, helped stabilize banks and the larger economy.

News that Venezuelan dictator Hugo Chavez urged his Latin American allies on Saturday to begin withdrawing billions of dollars in international reserves from U.S. banks, warning of a looming U.S. economic crisis, begs the questions: Is Hugo an astute financial planner who feels the need to preach global diversification, or is his ulterior motive, to confiscate these reserves.

"We should start to bring our reserves here," Chavez said. "Why does that money have to be in the north? ... You can't put all your eggs in one basket." That sure sounds like it's a direct quote from a financial planning 101 course.

Of course many would postulate that Hugo is just trying to stir up trouble, as good dictators are wont to do. With the recently launched ALBA -- Bolivarian Alternative for the Nations of Our America -- organization sure to be an economic powerhouse, with such countries as Nicaragua, Bolivia, and Cuba, and the newest addition, the Caribbean island of Dominica, should Hugo's neighbors to the north be worried?

Would you be worried if Dominica pulls reserves? If I was Dominica I would be worried that Hugo is setting you up to raid the purse of ALBA and confiscate all your hard earned money. Dominica, watch out!

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 1/27/08

AOL Money & Finance recently provided us with an insightful article regarding the current and future condition of our nation's government-administered retirement system. That article, written by Richard Wolf for USA Today, was as good an explanation of the current state of the Social Security funding horror that I've ever read. What Mr. Wolf failed to hammer home was the fact that this situation isn't really news. I officially entered the manufacturing work force in 1979, and I'll tell you what folks, I knew at that time that the Social Security system would most likely be nothing to me but a tax on my income. I didn't expect I'd ever get a dime from SS then, and I still don't.

Honestly now, why not just stop howling about it and accept the reality of the whole mess? Those clowns in DC have tangled our courts, hamstrung our unions, disemboweled our public schools, castrated our military, flattened our industrial base and they're doing a fine job of bankrupting our retirement system. Did you really expect any different? Did you think that a government riddled with millionaire businessmen and back-room lawyers would vote themselves a wage freeze until they got things straightened out for the rest of us? HA! I'm just glad that I'm able to work two jobs so I can afford to pay my full state and federal tax burdens and still have the $2,000 it will cost me to heat my tiny home this winter. Life is good.

Until and unless there are some drastic changes in our nation's capital, in the form of an independent president with stones, nothing is going to change. We'll hear the same old tired rhetoric from the same old twisted mouths with the same pantie-waisted results and all the while they'll take a couple percent more from your hand each year. We're a once-great nation that's been diluted with government lies in pursuit of global socialism and they're not going to stop the carnage until we're a cashless society with every virtual dollar passing thorough government hands between the time you earn it and the time you spend it in a government-accredited manner. Yeah, it's an ugly picture, but it's the picture they're painting in the chambers of our government right now.

Where are Ross Perot and Jimmy Hoffa when you need them?

Yesterday, there were numerous press reports stating that Venezuelan president Hugo Chavez would nationalize the country's electrical and telecommunication companies, continuing to transform Venezuela into a socialist state.

However, entering his third term, Chavez's plans may already be running into trouble. According to yesterday's Wall Street Journal (subscription required), Venezuelan inflation is approaching 17% due to Chavez introducing his own version of socialism and unilateral redistribution of wealth policies. Additionally, Chavez has promised much of the windfall money from high oil prices to leaders of other countries in the region that are tempted to re-explore socialism as a way to govern.

The Journal article suggested that if oil drops below $50 per barrel, Chavez could run into trouble keeping up with all the promises he has made. In addition, oil below $50 per barrel might mean he cannot meet Venezuela's external financial obligations.

Before politicians can get in a frenzy about Mr. Chavez, the market may simply take care of him itself.