Friday, March 13, 2009


Time for Obama to tell his economics team to “Cut the crap!”

“You say you want a revolution?”

Einstein once famously said, “The definition of insanity is doing the same thing over and over again and expecting different results”. Starting with Treasury Secretary Hank Paulson and FED chair Ben Bernanke and now continuing to Bernanke and new Treasury Secretary Tim Geithner, all have repeated explicitly that, in their efforts to resuscitate the economy, they want to “re-inflate” the housing bubble! Think about that for just one moment. These “Masters of the Universe” want to commit us to the very self same path that has brought us where we are today. By Einstein's definition, this is the very definition of “insanity”!

One of the major problems that has led to the crash and burn of the worldwide financial system and, probably the crash of our domestic economy and, maybe even a Depression, is the series of “economic bubbles” that have been encouraged and grown by such as former FED chairman, Alan Greenspan. Greenspan was responsible for inflating the dot com bubble and, when that collapsed, for inflating the housing bubble. Greenspan was also highly in favor of the myriad “innovative financial instruments”, all of which were completely unregulated (by design) and with no oversight whatsoever!

This whole idea of economic “bubbles” is based on the idea of increasing lending which leads to increases in investing and, especially, increases in spending. As Paulson and Bernanke and Geithner and a whole myriad of other economic “bright boys” have said, “We need to get credit flowing again!” There's only one problem with this, to have lending you must have borrowing. The public has borrowed itself out. Borrowing means, to the individual, debt. As it is, the vast majority of credit worthy borrowers have maxed out. They are carrying as heavy a debt burden as they can. And, lending to the not credit worthy was what the whole charade of the “NINJA” (No Income, No Job, No Assets) loans was about. When you lend to people who can't pay back those loans, the loans go bad. When the loans go bad, the various “bundled debt instruments” built upon those debts go bad as well.

Loans are still available for credit worthy individuals, it is just that they are not borrowing anymore. As the old saw goes, “You can lead a horse to water but you can't make him drink.” The borrowers aren't drinking anymore.

More than anything else, the government needs to:

  1. Stop throwing good money after bad! The Wall Street banksters have become incredibly wealthy by gaming the system. Wall St. has, for at least the last decade, been running the market like a casino. Well guess what? They've bet badly and lost, badly. The government should NOT try to “save the Wall St. banks”. If the Big Boys (AIG, Goldman Sachs, BoA, etc.) are broke, they should be taken over (gasp, Nationalized!), restructured, broken up and, when they are made sound again, privatized. After all, that's what we have an FDIC for, right?
  2. Get rid of the thieves! It is more than high times that all those “bright boys” that have led us to this dismal place take their medicine. Those who knowingly, willingly skirted the rules should be prosecuted, ala Bernie Madoff. ALL the boards of directors of all the Wall St. banks MUST be fired. They are all criminally incompetent or simply criminal. Either way, it's out on their ear with them!
  3. Investigate, prosecute, jail. It is well past time to investigate those governmental agencies and officials who were tasked with monitoring the banksters and yet somehow managed to miss every single red light on the board. There are rare exceptions. Sheila Bair, Chair of the FDIC, has for years been pushing for more stringent oversight. Oddly enough, under the Bush administration all her pleas fell on deaf ears. Once the investigations have been completed, those officials and ex-officials who allowed the shenanigans that felled the financial system should either be prosecuted or fired or both. And, those found guilty of collusion with the Wall St. banksters must go to jail. And not Club Fed either. I mean federal penitentiary, with bars and big, bad, nasty boyfriends.
  4. Stop blowing bubbles! Stop trying to maintain the broken system that has gotten us here! No more “bubble economics”. If we are to persist with a capitalist economy, let it be a true capitalist economy. You invest in companies because you believe in the service/product and expect to gain from the success of that venture. If you guess badly, poof! there went your money. No more of this insanity of capitalist socialism! No more “privatize the profits but socialize the losses”!
Byzantine Blog