"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
- Ronald Reagan
"A depression is not merely a pause...it is the end. Unless the meddlers can work miracles – such as raising the dead – they will just make things worse. Because, while they are trying to revive a corpse, they are standing in the way of change."
"Bad bets don’t get better when you lend the bettor more money. They just become more expensive."
- Bill Bonner, The Daily Reckoning
"The good news is they are going to spend a trillion dollars," said James Cox, managing partner at Harris Financial Group. "The bad news is they don't know how."
And the meddlers, bunglers, and buffoons are working overtime this week. What a pathetic display of governance and financial ignorance. Repeatedly we are told these are "unprecedented" financial problems that America and the World are facing. Yet day after day we are offered solutions to this fiscal calamity that are either outdated or proven failures.
Unprecedented problems demand innovative responses. Not some professorial rehash of what "should have been" done during the last depression. Does anyone else find it the least bit queer that Ben Bernanke "student of the Great Depression" finds himself in charge of the US Federal Reserve as the nation stares down a Greater Depression? It's ridiculous the "faith" that has been put in this individual from day one of this meltdown "because he studied the depression. It almost makes one wonder if this Greater Depression wasn't forecast years ago, and they had to find "just the right guy" to stop it. LOOOOOOOOOOOOOOOOOOOL! He's doing a great job isn't he?
When will these paper pushers wake up to the FACT that it is 2009 and not 1932. The world, AND the financial system, are far different today than they were the last time around. It's so simple Ben. The banks that are insolvent need to be closed IMMEDIATELY. Yes Ben, a lot of shareholders will get wiped out [like they haven't been already] and a lot of criminals will be out on the street looking for a new bank to destroy, but propping up these zombie banks isn't going to fix a damn thing. Are you serious about turning the corner on this crisis by next year Ben? If so, then GET RID OF THE BAD BANKS!
Mr. President, borrowing more money to throw after the bad money you've already spent is foolish and irresponsible. You're only digging the whole deeper. Just print the dam money and save the country the cost of borrowing more. Just print it and get it over with. O yeah, and while you're at, end this foolish suppression of the Gold and Silver prices. What are these zombie banks doing shorting Precious Metals anyways. These banks are insolvent and should be prohibited from ANY and ALL activity in the futures markets. Seriously, Mr. President, where are these banks getting the funds to short Gold and Silver [Gold and Silver that doesn't even exist mind you]. Their balance sheets are underwater, way under water, and they're over at the CRIMEX shorting Precious Metals. How? I guess we should also point out to you that they are doing this illegally as well. Ah, but whats a couple broken laws when there's so much potential for profit by ripping of the public. Change? How 'bout changing that Mr. President. Change? Mr. President, you don't have the guts for real change. Your Administration is less than one month old, and it is already a failure.
Mad Science: Geithner and Obama Keep Policy of Supporting Zombie Banks
The stock market gave Tim Geithner's new "Financial Stability Plan" a rousing Bronx cheer on Tuesday. For most, the disappointment was either over the lack of details on the plan, specifically over the structure of the public-private investment fund the Secretary proposed to buy banks' toxic debt.
But at the end of the day, the real problem with Geithner and Obama's new plan is that it doesn't deviate from the "too big to fail" doctrine followed by Paulson and Bernanke, prompting The FT's Martin Wolf to ask if Obama's presidency has already failed.
Yes, banks will be subject to a "stress test" under the new plan, but there's no evidence those who fail the test will forced into FDIC receivership, declared insolvent and/or otherwise be nationalized.
In this critical regard, Obama and Geithner's policies continue to evince a massive disconnect between the economic reality - some big banks are insolvent - and the fanciful idea that the problem is just one of liquidity and confidence, i.e. the belief toxic assets are merely temporarily mispriced and might someday return to their peak values, or thereabouts.
Unless and until policymakers and politicians are willing to face up to reality, we are simply repeating the same mistakes Japan made in the 1990s and allowing "zombie" banks to live off the government's largess.
These banks will have an insatiable appetite for funds and, like all zombies, will try to eat our brains. From the looks of what's coming out of Washington, maybe they already have.
http://finance.yahoo.com/tech-ticker/article/173345/Mad-Science-Geithner-and-Obama-Keep-Policy-of-Supporting-Zombie-Banks?tickers=BAC,C,XLF,FAZ,SKF,JPM,%5EDJI
Gold Leads the Way
What is wrong with our age is that almost everyone is living in the past. This is particularly true of those who describe themselves as progressives and pride themselves on being modern. They are living in the 1930s and have accepted a number of lies about that period:
that the economic events of the 1930s were unplanned and came out of nowhere; the fact is that they were a deliberate policy of the Republican Party of the time and were called the policy of the 5¢ cigar; this policy caused a decline in the money supply so that prices fell by 30% from 1930-1933;
that these economic events constituted a depression; but a depression is a period when the vast majority of the people in the country get poorer (such as WWI or WWII or the period from 1972 to the present); that did not happen in the early ‘30s; it did not happen until FDR came in and started killing pigs and plowing under crops; FDR’s advisors said that killing pigs and plowing under crops would make the country richer, and the media called these advisors “the brain trust.”
Alas, the media were wrong.. There wasn’t a single brain in the whole “brain trust.” In fact, the Republicans were right. Their policy was to restore the value of the nation’s savings, which had been cut in half during WWI. This they succeeded in doing, and all the savers benefited. The Republicans knew that this would cause a period of unemployment, but the unemployed were, at the worst, 25% of the work force. The savers were close to 100% of the people. Further, the unemployment was temporary. All this had happened in the 1870s, and this same policy of restoring the currency had worked beautifully. In the early ‘30s, consumption of meat rose sharply, people switched from margarine to butter and gave more to charity – all proof that the majority of Americans were richer.
The people who were poorer in the early 1930s were Wall Street and the banks. The banks were unable to make loans. The stock market went from DJI 381 in 1929 to 41 in 1932. This was not the catastrophe it is made out to be. Charles Dow’s earliest stock records begin in 1885, and for 40 years the DJI mostly fluctuated between 50 and 100. Lows of 40-50 were common throughout this period. But Wall Street had been spoiled by the “boom” of the late 1920s. They threw a tantrum like a small child. They focused on the unemployed because for all these rich people to complain would have gone over like a lead balloon.
So almost everything you have learned about the “great depression” is a lie, and most of the people from whom you get your information are liars (or in most cases are stupid enough to believe in the liars).
Where are we now? What is the reality of today? The reality is that there is no problem of contracting money supply or declining prices. The last year in which prices declined in America was 1955. All the Republicans have died and been replaced by RINOs (except for a few people like Ron Paul). And the threat we face today is not from an appreciation of the currency (“deflation”) but from a depreciation of the currency (“inflation”).
You see, we human beings have a terrible failing. We have an overwhelming desire to have the same opinion as our fellows. This gives the media an enormous power. They can create an opinion, and no matter how absurd everyone will think that this is the opinion of the majority. The desire to agree with the majority will then lead them to agree with the media.
Rather than sit around and wait for the establishment to apologize and admit that they are wrong, I would rather look for a few good men who don’t want to be happy. I am looking for the kind of men who will go to a social gathering and get into a big argument with everyone there because they lack this all-too-human trait to have the same opinion as the majority. I am looking for the kind of man who insists on seeing reality as it is.
http://news.goldseek.com/GoldSeek/1234204363.php
The Coming Great Depression
We can't over-emphasise that the Great Depression did not become "great" due to the economic problems signaled by the 1929 stock market crash, but, instead, due to government policies undertaken to counteract the economic problems. The policy errors we are referring to do NOT include the Fed's so-called failure to prevent the money supply from shrinking, but do include government actions designed to boost prices, expand credit, create employment, and re-distribute wealth. These actions delayed necessary adjustments, and as a result it took more than 15 years for the economy to do what it should have done in 2-3 years. As Franklin Roosevelt's own Treasury secretary, Henry Morgenthau, lamented in an address to Congressional Democrats in May of 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises ... I say after eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"*
It is commonly believed that the Second World War finally ended the Great Depression, but this is not true -- the Depression didn't finally end until government controls were eventually relaxed after the War. Preparing for and fighting WWII made sure that everyone had a job, but minimal unemployment does not necessarily go hand-in-hand with economic strength. In the former Soviet Union there was very little unemployment, but living standards were "third world". Herein lies the problem with treating job creation as a primary goal of economic policy.
As noted above and in our earlier commentary on this topic, government today is unfortunately enacting the same policies that made the Great Depression "great". Additionally, policymakers have stepped-up their efforts and appear to be more committed than ever to the path of increased spending, monetary pump-priming and economic intervention. As a result, we think the probability of a great depression has risen to the point where such an outcome is almost inevitable.
http://www.kitco.com/ind/saville/feb102009.html
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