By: Allen Wells
# 007 March 27, 2009
Today was a big day in the market… traders appear (so far) to have bought into the digital cash for toxic assets plan… yet another of the massive bailouts for the big boys while the rest of us sit on the side lines waiting for the next shoe to drop… and by shoe I mean inflation.
Do you realize the money being spent on the economic bailouts now total more than the entire New Deal, the Korean War, the 1980’s Savings and Loan crisis, the entire Iraq war, and all the money ever (yes, I said ever) spent on NASA – COMBINED! What’s the saying, “we can put a man on the moon but we can’t …”. Ouch.
I ran across an interesting comment from President Change (I mean Obama). Yesterday’s Wall Street Journal carried an article “Obama Defends Budget Plan”. The article states: “He repeated his call for new authority to seize and dismantle nonbank financial institutions like troubled insurance giant American International Group, Inc.” Whoa… is that what I thought he said? Is our President suggesting the Federal Government should now have the power to seize entire companies? Forget socialism, isn’t this fascism?
Understand, I am not accusing or suggesting that our President is a fascist. I’m just saying, the economic and political paths upon which we have embarked have a faint scent of fascism. Check the Wikipedia explanation of fascism… “Fascists thought that private property should be regulated to ensure that “benefit to the community precedes benefit to the individual. They also introduced price controls and other types of economic planning measures. In terms of economic practice, this meant promoting the interests of successful businesses while banning trade unions and other workers' organizations.” If it walks like a duck…
It could be that President Obama is listening to advisors that have more sinister plans for our way of life… perhaps he is innocent in all this. I have no doubt that our President wants to be liked and respected as much as Lincoln. The point President Obama must understand is that Lincoln wasn’t that well liked when he was President. He had to preside over a horrible war and then be murdered in his prime before he became and icon. Hopefully this isn’t in President Obama’s future.
Moody's has now downgraded Bank of America bonds and Wells Fargo bonds. Interestingly these are the same ratings services that gave AAA ratings to the mortgage loans that led to the recent downgrading of the banks. Of course, this is the same bond rating agency that stands to make millions upon millions rating the new issues that the USG will be offering as a result of the new “toxic” loan disposal program.
S & P downgraded its rating on Warren Buffet’s (the smartest investor in the world) Berkshire Hathaway from stable to negative. Berkshire Hathaway lost a third of its value in 2008 and has lost an additional 12% this year. This is the same Warren Buffet (the smartest investor in the world) that told us at the end of last year that he had “faith” in the economy, so he bought stocks… recently he announced that “… the economy is in shambles.” His Berkshire Hathaway profits are down 96% from last year. Like the song says, “you gotta have faith.”
I have faith that he same major banks, BofA, Citi, Morgan Stanley, Chase etal will all make millions with these new government (read Taxpayer funded) funded bail out programs. I have faith that the same bond rating agencies, Moody’s, S & P, Fitch, etal will make millions (maybe billions) rating the new “toxic assets” for sale to the same investors… I guess this is called the circle of life (or the circle of wealth).
“A policy of subsidizing failures will end in an economy strewn with capital-guzzling industries long past their time of profitability--old companies that cannot create jobs themselves, but can stand in the way of job creation.” George Gilder, Wealth and Poverty
Given the recent bailouts, “public/private partnerships and ongoing congressional rhetoric, it has become clear that Americans cannot trust their elected officials to defend our rights and interests.
What happens to a person when they are elected to public office? Suddenly they feel they have the right to spend everyone else’s money, without reason or logic. I guess I have to agree with H.L. Mencken who said; “an election is an advance auction on stolen goods.”
By the way, has anyone noticed, with all the hoopla this month about the “great economic news” we’ve failed to notice the USG is lowering statistic after statistic for January’s economic growth (or lack thereof)? Virtually all of the major indicators have been adjusted down… I’m not saying there is a USG massaging of the numbers going on but…
So, now we are told is that the USG is going to work with the private sector (using the people who got us into this mess) to get us out of this mess. Investors will be working together with the government bureaucrats, as equals to solve this problem.
I don’t know if there is anymore I can say about that. I guess I will close with the words of the French Statesman and Philosopher, Frederic Bastiat: “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.”
I thought you might just want to know!
Allen
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