America has given indications that it has reached its peak and is on a downward slope. The U.S. government has taken measures in the last 11 months that appear to be a desperate attempt to keep our dysfunctional corrupt financial system propped up.
The phrase “Jumped The Shark” comes from the 1977 episode of Happy Days where Fonzi jumps a shark on water skis. It was so far outside the 1950s nostalgia realm of the show that it marked the peak of the great sitcom. It was all downhill to its ultimate cancellation.
Have the extreme socialist schemes implemented by the President, Treasury, Federal Reserve, and Congress marked the climax of our great capitalist experiment? There is still time to get our Republic back on its original capitalist path, but time is running short. It will take straight talk from our leaders, intense political pressure from common citizens, politicians scared of losing their jobs, and Americans willing to change their ways and sacrifice for the good of the country.
Another media created consumer fraud called Black Friday has passed again. The media and retailers have created a false sense of necessity and urgency to drive sales on this particular day. Americans are so consumed with materialism on this day they are willing to trample an innocent man to death so they can get a deal on a flat screen TV. When did Americans turn into savages to the point where they will murder an innocent man in their desperate pursuit of a bargain at Wal-Mart? On the same day, two men shot each other to death in a Toys R Us after their women got into a fight. Why does anyone carry a gun when you go toy shopping? I guess you need some extra leverage to get an Elmo Live doll. Happy Holidays!!!
On Monday, the depressing stories of death were cast aside with the marvelous news that weekend sales were 3% higher than last year. The pundits on CNBC were thrilled that clueless Americans ignored the worst recession since the 1930’s by spending more money they don’t have, for things they don’t need, with credit cards charging 23% interest. Over 2 million people have lost their jobs this year, with another 3 million likely to lose their jobs next year. If ever there was a time to cut back and save, now is the time. But, the government and media are encouraging consumers to keep the spending ponzi scheme going for as long as possible. God bless us, everyone!ARE WE SAVING THE RIGHT BANKS?
According to the FDIC, there were 8,384 banking institutions with $13.6 trillion of assets as of September 30, 2008. Hank Paulson has dished out $180 billion to the largest 30 banks in the country in an effort to keep them solvent. It has now become quite clear that the largest banks in the country, with the “smartest” MBAs, took excessive risk, created and then bought their own toxic derivatives, and lied to the public and their shareholders about their true financial position. So, we had about 8,000 banks that loaned money to people they knew in their local communities, kept the loans on their books and generally acted like George Bailey. A handful of large banks did all of the damage to our global financial system and these are the banks who are receiving all of the TARP billions. Maybe just maybe we should be giving the TARP money to the 8,000 conservative banks run by George Bailey type bankers rather than the horrible, too big to fail, banks run by Mr. Potter type bankers. Badly run banks need to be replaced by well run banks. Every time a bell rings, another bad banker gets a billion dollars. I see many Potterville’s in our future.
The honorable professor from Princeton, Federal Reserve Chairman Ben Bernanke, couldn’t have been any clearer in his November 21,2002 speech:
U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior). One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.
The U.S. dollar is a green piece of paper. The only thing that gives it any value is confidence and trust. Confidence and trust are the only thing that distinguishes a U.S. Buck from a Schrute Buck. The more that we print, the less valuable they become. The government certainly appears to be printing money and distributing it willy-nilly. In 2002, Mr. Bernanke honestly admitted he had no idea what the economic effects of injecting money into the system would be. I guess we will find out.
Following is a chart put together by Barry Ritholtz that details what the Federal Reserve and Treasury have accomplished in the last 10 months with your money. This hodgepodge of frantic programs has committed you, your children and grandchildren to a maximum of $8.5 trillion in bailouts for dreadfully run financial institutions. Our government officials have already dished out $3.1 trillion or $300 billion per month. It was only a year ago that President Bush submitted a budget that showed surpluses by 2012. Ho Ho Ho. That President Bush is a real card. He should have submitted that budget with a Mission Accomplished banner behind him. These programs have been rolled out non-stop during 2008 and the result has been a stock market that is down 37%. The Federal Reserve has been printing dollars in mass quantities. Famed investor Jim Rogers observed that, “Bernanke’s gonna keep printing money ’til they run out of trees”.
Columnist Robert Samuelson points out Mr. Bernanke’s dilemma in a recent column.
All this is a vast and daring monetary experiment, global in scope and fraught with hazards. The new money and credit issued by the Fed are created out of thin air. But too much money and credit might someday boomerang as higher inflation. Considering the consequences of being wrong, Bernanke faces an enormous intellectual challenge and no less an agonizing personal burden.