Capitalism

It isn't politically expedient for any of our leaders to publicly state the obvious, and they are afraid of losing their positions by supporting what must ultimately occur. It's a shame because most of them are fully capable of understanding what must be done. This is, of course, just my opinion, but not mine alone. We have to face facts and deal with them as they are.

The fed failed miserably as they have reduced the cost of money to virtually zero. They have therefore exhausted all of their capabilities at restoring economic stability. That was to be our hedge against just these sorts of catastrophes, and has worked up until now, but in reality has only put off the inevitable.

In the event that your household or mine was financially defunct, we would be forced to reduce our expenditures, and probably sell the cars we couldn't afford, or the house we couldn't pay for, and start over with a smaller monthly budget. Our current monetary crisis was precipitated by the sudden realization that the housing prices that Americans have been using for a piggy bank, had been echoed throughout our financial institutions, the investment bankers were allowed to own commercial banks, which should have never happened, and it all has come crashing down on our heads.

So my answer is: that we have to take it on the chin for now. We have to stop building any new housing, perhaps give tax credits for people to buy existing homes, until the housing market stabilizes at 20 to 30% under the current market, or whatever the market forces the prices down to.

The banks that have these toxic assets will have to be allowed to fail. The non-toxic assets will then have to be liquidated and will ultimately be bought by the regional banks that are left solvent. Very few non investment banks have any liquidity issues. They have suffered from falling stock prices because of changes in accounting rules, and the fact that institutional and hedge fund investors have created these ETFs to short the stock prices of all financials. Their very existence should be prevented by the SEC, but that hasn't happened, as the financial sector keeps falling in capital value as the short sellers continue to make every dollar the banks lose. It is absolutely ludicrous.

No one in authority (SEC, FED, Treasury, Senate Banking Committee) has done anything to prevent this sort of unethical investment practice, and now Obama has hired Timothy Geithner, who has been square in the middle of these practices over the past 8 years to be Secretary of the Treasury. I don't know if Obama doesn't understand it yet, hasn't done anything yet, or plans to do nothing. I fear a little bit of each.

But I digress. One the investment banks that are bankrupt are allowed to fail, and once the housing market recovers to a price point where new building is forced to resume because the supply of houses is used up, we will have gone through the worse part of it. I have no idea how long that will take, how many jobs will be lost in the meantime, but it has to happen. There just is no free lunch. We can't print dollar bills without ruining our currency.

We have put more new money into circulation in the past year, than in the previous 10 to 15 before that. I saw a single line chart the other day representing the printing of money since 1946, and it is an inverted L, with the spike in 2008. Think about that, draw if for yourself. The upward portion of the inverted L is equal to the horizontal line since 1946. It is unfrieakingbelievable. That is no way to run a railroad, and certainly not the U.S. Economy. What I am advocating is simple capitalism. That's what our country was built on, and it is still the only method the world has ever seen that guarantees freedom to succeed, if you are willing work hard, and follow the rules.

Obama is advocating something very far left of a capitalist society. It didn't work here in the 1930s. It didn't work in Western Europe after WW2, and it didn't work in Japan in the 90s. There is so much historical evidence that proves without a doubt that bailouts, and government stimulus plans fail, every single time in the history of the modern world, and yet we still want to find the easy way out. As long as politicians will promise they can fix things without any pain, we will follow like sheep to the slaughter.

When I was a kid in Hamblen country I helped a farmer with his 100 or so milk cows for 50 cents an hour. I learned a lot about cattle in that short time, and I find it remarkable that people act in much the same fashion. We have grown accustomed to our trappings..... credit cards, and anything we want, just like cows are accustomed to being milked the same time everyday. Take away our credit cards, our toys, and we will agree to rid ourselves of the principles the founders instilled in us with the constitution, and follow the guy who claims he can fix everything by spending trillions of dollars that doesn't really exist, unless we print it. The same as cows will follow anyone at daylight every morning, no matter where they lead.

What he doesn't say is that printing more money will devalue the current dollar by whatever amount he prints, and in the end we will still have to go through all the pain of allowing the same banks to fail, the housing market to recover, and all the rest of the pain that goes along with those things. In the meantime, an already scary situation with China and Japan owning the majority of our bonds will become increasingly worse until they will own us out right. I can't imagine being told what to do by Beijing, but it will eventually happen, then we will be faced with one helluva conundrum.

This may sound like a stretch, but it's really basic economic theory, not that I am an economist, but I have paid attention to history, at least enough to understand it keeps repeating itself. I now feel helpless to change anything. The fact that I worked hard all my life, took care of my money, followed the rules, and sound monetary policy, paid off my house and reached the point where I could truly live the American dream will evaporate before my eyes as the dollars I've saved turn into pesos. There are ways to try and get around the loss, mostly by purchasing foreign currency, but that's risky business and really out of my league. We are witnessing the single largest deviation from the American values in our country’s history, and the saddest thing of all is we are being led in the spirit of change that we are told represents the middle class, and the poor. When was the last time a poor person or a middle class worker gave you a job? The answer is of course never.

We are demonizing those who make it possible for us to succeed. We already have the highest corporate tax rate in the free world at 35%. By the time Obama leaves office I predict it will go even further upwards. A few years ago, the U. S. passed new laws governing IPO’s where hundreds of thousands of people were able to attain instant wealth. Guess what happened to IPO’s. They all moved the London Exchange. When the U.S. corporate tax rate goes up, major blue chip companies who sell their products world wide, will move to London, or perhaps Beijing.