As they said in Alice In Wonderland, this gets curiosier and curiosier. The explosion of bailouts and stimulus proposals and actual implementation is growing so fast that I doubt anyone is able to keep up with them all. Can you? What really worries me is that all these “smartest guys in the room” types in the administration and the ones to come don’t know the full gamut of programs going on across the breadth of our gargantuan government. I am not comfortable letting our economy be a classs exercise for some MBA or Phd. economics program. Regrettably that is the impression I am getting. People are dusting off old school papers and articles in supposed learned journals and now getting to try out those theories in real life. But this is real life for most of us and this experimentation is reaching competitive levels. The danger is that these aren’t harmless experiments in a class room but affect us all in the here and now. It has become apparent to me if not to you that even though they may be the smartest guys in the room their ideas aren’t any better than some of ours. They may make wonderful charts and graphs and talk of the velocity of money and M1 and the treasury bill spread but that doesn’t mean they know how to pour water out of a pail.
First, let’s talk about all this money the Fed is printing. My heavens, have you paid any attention to that? Just yesterday they announced the possibility of buying Treasury notes to affect the long term rates on those. Talk about from one pocket to the other. So the Treasury will owe money to the Fed when those notes come due. Wow, like that is going to help us. That is as sick as the way they allow one branch of the government to simply issue IOUs to the social security or medicare when the actual cash flow is insufficient to meet payments. The huge concern is that the Fed is literallly printing up money to buy these items and make these investments. Don’t you wish you could merely go to the garage and print up some money the next time you wanted to buy a new car? All that money that has nothing behind it, including sanity, will cause inflation. Y0u did notice didn’t you that the dollar has dropped about 10% in value against the Euro this week alone. It is a fact of life we underachievers can understand that if you print more money it becomes worth less each passing day. I heard one of the leading advocates of this stimulus and printing madness last night say it was nothing to worry about “for the short term”. He had no answer for how to deal with the overhang when the piper wants to be paid. People around the world will not want their business deals denominated in dollars and will soon prefer other currencies because we keep printing and printing money that diminishes in value with each new round. We are talking trillions here, not chump change. If it was modest amounts we could weather the storm but these totals are staggering and the ineluctable laws of supply and demand will work as they have since man first organized a street market. Of course the government can’t fool us all; that inflation is one way for it to pay off all its debts with much much cheaper dollars down the road. It would not be the first time that has happened. Check some history, it has occurred many times, but usually in some banana republic or a country devastated by war or turmoil. They are feeding us a poison pill with a delayed time release. All action has consequences and this will too.
Another small point is that the government has given all these billions to the banks and then has raised the fees it charges for FDIC insurance. Likewise know that the government has an equity stake in some of these outfits and they are creditor, owner and the regulator. Talk about a conflict of interest. If you or I tried to pull that off we would lose our license or go to jail. And if by chance these banks in up making some money then the government will collect taxes out the wazoo on them. Simillarly the SIPC is increasing its fees to the brokerage houses, many of whom are now debtors to the very same government. Maybe the worst danger is that Congress will ramp up its “oversight” and start telling the banks exactly who to make loans to. Hmm, of yes, that is what got us into the subprime mortgage mess in the first place. We can’t afford for our banks or brokerage houses to lose their independence. If Congress runs the banks they will operate with the same efficiency as the IRS or Social Security. If you haven’t had any dealings with either of those government agencies ask some friend or relatives who have.
We are assured the new stimulus package will create millions of jobs but how many jobs will be lost due to the focus on “green energy” and green this and that? There will be lost jobs. There is always a trade off. You do your own thinking about it. For every job created to make a building green what about the job that is lost because of that change. Like the glazier or the heating and air conditioning contractor who worked on the “old” equipment. For every solar job made there will be one lost in the oil patch. That roughneck will just as unemployed as anyone else. All I am asking is that the debate be based on real facts not campaign sound bites and nice sounding promises. We can handle the truth better than they think.
I trust the market. If only we would let it work now. Yes, there will be some pain, don’t think for one minute these government programs won’t have their pain also. I hate the centralization of power in so few people. The market is made by all of us with our individual choices and options, some good, some bad and yes we get the consequences whether good or bad. I hate bad consequences imposed on me from far away for arrogant demigods.