Obama reappointed Bernanke as Fed Chairman earlier today, effectively sealing their fates as men that will take us from a recession into the Greater Depression.
For those “economists” who’ve lately been singing his praises on CNBC, all I have to say is this…
It takes a special kind of system (government) to screw up this badly and still be resoundingly supported by its leader.
In his reappointment speech Obama also pledged support for the continued secrecy independence of the Federal Reserve.
How foolish of citizens to inquire where trillions of dollars are being spent… clearly we should trust the former bankers running the Federal Reserve that regulate the banking system. After all, they obviously know what they’re doing.
Instead of perpetuating the broken system financed by politically embedded financial organizations, Obama could have attempted any of the following:
- Raise awareness of the ghastly unaffordable pension schemes which will inevitably crumble
- Strictly enforce FASB mark to market accounting standards instead of allowing companies to use “judgment” to value their toxic assets
- Clamp down on High-Frequency Trading
- Require the FDIC to close and wind down insolvent banks before the government taxpayer-funded safety net has to be used
- Eliminate alphabet soup bailout programs which are forms of corporate welfare
- Demanded transparency for toxic assets which traveled from insolvent banks to taxpayers
- Slash parts of a budget (military, NASA, HUD, etc.) that are so bloated we must borrow billions from foreigners to stay afloat.
Would that severely correct the housing and stock markets? Yes, probably. Can we continue on our current path? No. Will we eventually face unbearable consequences for our decisions? Yes.
Ironically, neither Bernanke nor Obama nor either political party seem to care about the following message:
It is not the responsibility of the Federal Reserve–nor would it be appropriate–to protect lenders and investors from the consequences of their financial decisions. – Ben Bernanke
So, Obama reappointing the guy who didn’t see any of this coming, who bailed out the irresponsible, who continues to provide cover for banks in the hopes that things will return to normal still makes Obama the “man of the people”? Why aren’t those who voted for Obama clamoring that this Bush appointee is more of the same? Why do horrible decisions not matter when *their* party is in charge?
The reappointment of Bernanke does have a silver lining. All the people that bought into the hope proffered in eloquent speeches that government can provide jobs, clean energy, healthcare, education and other goodies will eventually learn a valuable lesson. The love affair Americans have with celebrity, good looks and good speeches and a lack of discourse/intellectual honesty will finally meet its match against a tidal wave of financial reality.
We are witnessing firsthand government selling Hope while funding Grift.
A generation will learn that our government system, like all systems which redistribute power and wealth, is one that is relentlessly gamed and manipulated for the benefit of those in charge.
Takeaway: Strip away the external validation that media/family/friends give to people and institutions and think for yourself.
One of the biggest problems facing our country today is the lack of awareness/consciousness about how much things truly cost.
The obfuscation via government intervention in all its forms (stupendous deficits, subsidies to failed corporations/business models, pork barrel handouts) is one of the factors seducing people into a false sense of complacency that our economy is just fine. Borrowing money to keep your bills paid might seem ok, until you realize the borrowed money must be paid back with interest.
In less government-dependent/credit-fueled times, a major decision like raising a child was saved up for and anticipated. Healthcare was funded out of pocket or with straightforward insurance. Retirement required savings. Nowadays, our government promises us all these goodies with borrowed money, which we will eventually pay for with interest (assuming the dollar doesn’t collapse first).
In less government-reliant times, there were fewer entitlements, senses of entitlement or bogus lawsuits which now haunt would be doctors and entrepreneurs. Why bother using your MIT degree to start a new business when you can day trade and make the “market more efficient”… hah!
Even the stock market used to be a reasonable measure of future economic value. Now it is a game profitable game to be played/manipulated with enormous leverage. The S&P PE ratio is over 100 according to S&P and the graphical evidence is stunning. Anyone with their 401(k) invested in stocks is asking to be smoked. Meanwhile, insiders are bailing out.
I have no desire to go back to days of extreme hardship or give up technology, but it seems the more government obfuscation we allow to seep into our lives, bit by bit, the further we get from the truth and honest consequences of our lifestyles. A single woman with three kids who is reliant on the state for breakfast and lunch year-round is in a worse off position since the true costs of her lifestyle are not borne by her, but rather, the taxpayer, who is under increasing pressure to stop paying them. This “help” that the State provides via welfare, subsidized housing and other giveaways are not sustainable and ultimately dangerous for its beneficiary.
If you want to ruin a man, give him everything he wants. Never let him fail, struggle, grow or mature into a man. – Inthon.com
As a result of government encroachment on all levels of life we are living in delusion about how much things *actually* cost and how they function. There are now entire families dependent on the government for food assistance, educational assistance, medical assistance and job placement assistance. This is neither normal nor sustainable.
As the credit-fueled economy inevitably slows down and inflation spike or benefits are cut, there will be a lot of disillusioned, angry and unprepared people. There have been numerous chances to come clean from politicians, media and leaders. Instead, all we hear are happy bromides about how things will be back to normal. The only voices sounding the alarm that the debt-fueled economy is unsustainable are drowned out.
Takeaway: I hate to be so closed-minded as “government bad” “free market good”, but it is obvious to anyone paying attention that the more we cede our power and money to the government, the less reliant, intelligent, capable, stable and robust we are as a society.
We could not have allowed the big banks to fail since they are vital to the powerful, monied interests that control elections, special interest groups and media that enrich the status quo serve the needs of the common citizen
Just because someone is Socialist, Green, Communist, Anarchist doesn’t mean their views should be dismissed. Often, it is “radical” individuals who feel more comfortable voicing the truth than those that are popular and have more at stake. People like Dennis Kucinich, Bernie Sanders and Ron Paul bring a lot more truth to light than those that are far more popular.
Andrew Cockburn, a socialist, writes an important piece for Counterpunch detailing the extent to which a few financial firms have the full ear of the White House. As the US consolidates more power at a national level and with the Executive Branch of government, we see that these conflicts of interest will be more pronounced and dangerous.
Takeaway: Popular arguments are rarely thought-provoking. That which assuages us, nurtures our pre-existing worldviews and cannot possibly help us learn and grow. Read what you disagree with.
The problem with corporate welfare is that, unlike personal welfare, the most sinister elements go unnoticed. A government subsidized contract, bailout or tax break which rips off the taxpayer is far less obvious than the person cashing their welfare check or food stamps.
One of the biggest beneficiaries of corporate welfare is Citigroup. Aside from TARP funds and asset buybacks (taxpayer buying their lousy loans at full value), there are even more nefarious examples of how Citigroup is ripping off the taxpayer.
Below you will find the Standard and Poor’s and Moody’s credit ratings for Citigroup.
Further down, you can see how these rating agencies gave Citigroup very safe ratings days before Citigroup would have gone bankrupt and gone out of business if not for the bailout.
In other words, these rating agencies, Moody’s and S&P, gave Citigroup ratings of AA- and Aa3, respectively, while Citigroup was days away from dying.
In their own words…
An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. – S&P
You’ll notice that Citigroup’s ratings have never fallen below investment grade. So, despite needing and continuing to need your tax money to operate, these credit rating agencies never saw the need to downgrade them significantly.
Normally an incompetent credit rating is nothing to get worked up about, however, Citigroup’s bogus credit ratings have consequences that ripple all across the capital markets, which subsequently affect the taxpayer.
Here is how: With an artificially high credit rating and numerous government handouts, Citigroup’s cost of capital (the rate at which it borrows money), is artificially low. This allows Citigroup to borrow money at artificially low interest rates.
Since its credit rating and government handouts allow it to borrow money very cheaply, it sucks up productive capital from other enterprises competing for capital. This is called “crowding out“.
This means healthier companies and local governments have to pay higher rates of interest to borrow when they issue corporate bonds and municipal bonds, respectively.
Guess who pays the artificially higher interest payments on municipal debt?
So, in a sad way, Citigroup gets two forms of corporate welfare. One is explicit, the other implicit.
Explicitly, your federal taxes pay to keep alive Citigroup via asset buybacks and other federal programs to “save the (inherently flawed!) financial system”
Implicitly, bogus credit ratings and government handouts give Citigroup a facade of safety, allowing it let it borrow cheaply, which force other, legitimate debt issuers (companies and municipalities) to pay more in interest to receive funding.
Even if the federal government were scared of a run on all the banks, they could have easily unwound Citigroup in a reasonable fashion. They could have zeroed out all the equity (stockholders) and, in an orderly way, liquidated the firm to other institutions which could buy up productive assets cheaply and let the creditors take losses on the parts which no one wanted.
Since Washington is afraid to say no to the financial bozos that own Citigroup stock, this strategy was not employed. Instead, they are flooding Citigroup with cheap money and hoping the money will be lent out or miraculously make Citigroup solvent.
A free market efficiently allocates capital and provides price transparency which allows individuals to make accurate decisions on how to best maximize their resources. Government intervention is permanently damaging our economy by obscuring these valuable pricing mechanisms with bailouts, “liquidity facilities” and other forms of corporate welfare.
Intervention via corporate welfare all in the name of helping the little guy is a gross form of statism and market distortion.
Takeaway: Government intervention to save banks is not a Democrat/Republican issue, it is a right/wrong issue. More intervention, bailouts and stimuli are not the answer.