Last week the “financial Reform” bill passed Congress … but there was no mention of the 2 complicit GSE’s, Freddie Mac and Fannie Mae. They have cost $160B so far and will likely cost $1 TRILLION to clean up.
And the people that wrote this new bill? The same people who DENIED over and over again that the GSE’s were just fine:
Rep Richard Baker (R-LA) asked in 2003 for more regulation of these corrupt giants. Watch Rep Maxine Waters (D-CA) say “We do not have a criss at Freddie Mac, and particular at Fannie Mae, under the outstanding leadership of Franklin Raines” [later convicted of fraud, a current Obama advisor] .
Watch Rep Gregory Meeks (D-NY) say “there is nothing wrong”, “we don’t need it [regulation]“. Rep Lacy Clay (D-MO) called the hearings a “political lynching of Franklin Raines” (who happens to be an African American). Rep Barney Frank (D-MA) says “I don’t see anything in this report that raises safety and soundness problems.”
Watch this if you can stomach the lies!
These same blockers received campaign donations (Obama was #1) from these GSE’s. How can we believe anything will change? I don’t
Those who fail to learn from history are doomed to repeat it.
Listen to the wisdom of Reagan.
If you can keep your head when all about you
Are losing theirs and blaming it on you
Rudyard Kipling
So-called “intelligent people” are continuing to call shots and give advice to the US President and Congress that is leading us straight over the financial cliff.
Obama claims that the root causes of our financial crisis are: a) Bush, b) Wall Street, c) Banks, and d) Republicans.
Paul Krugman, like Obama, a Nobel-prize winner (which should say something about his credibility) is a perma-Keynesian who writes for the NY Times. I noted recently that he has been one of the prime proponents of MASSIVE borrowing and spending by the Federal government.
Now on Sunday the 27th, he warned we are entering a Depression. He whines about the lack of spending from government:
“you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.”
Gee Paul, what part of reckless spending don’t you understand? He says that not spending is a deliberate mean-spirited act:
“the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.”
It now seems that Krugman, Obama and his merry men are becoming a smaller and smaller voice, as governments all over the world wobble with crushing debts and deficits. Obama encouraged the G20 in Toronto to spend; they told him to pound sand.
Rebuffed, Obama still cannot bring himself to reduce government spending — rather we will see some wild-ass tax proposals. As far as he is concerned, though federal expenditures are up 21% in the last 2 years, spending isn’t the problem. He wants to hike taxes, but knows he hasn’t got a chance before the November elections, so he sent a veiled warning from Toronto:
“I hope some of these folks who are hollering about deficits and debt step up, because I’m calling their bluff, And we’ll see how much of the political arguments they’re making right now are real, and how much of it was just politics.”
Why wait? Well, he has to wait for his blue-ribbon debt commission to come back (after the election), so he can propose taxes, taxes, taxes .. to save us. But that committee looks like there are some no-nonsense members, like Alan Simpson, who aren’t going to pussy foot around — so that may blow up on Obama.
Of course, the root causes of the financial crises are not, according to the government:
- Reckless government spending
- Unfunded programs: social security, medicare, prescription drugs
- Unfunded government union pensions
- A non-transparent and reckless Fed, who is trying experiments never tried before
- Freddie and Fannie, encouraged by Congress, backing ridiculous loans to anyone with a dog
- And did I mention? reckless government spending
The reality is that we cannot spending our way out of an over-spending problem, regardless of what Nobel-prize winning economists say.
Allan Meltzer writes in today’s WSJ: “Why Obamanomics Has Failed:
“Almost daily, Mr. Obama uses his rhetorical skill to castigate businessmen who have the audacity to hope for profitable opportunities. No president since Franklin Roosevelt has taken that route. President Roosevelt slowed recovery in 1938-40 until the war by creating uncertainty about his objectives. It was harmful then, and it’s harmful now.”
The solution? Reganomics anyone?
“The contrast with President Reagan’s antirecession and pro-growth measures in 1981 is striking. Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending. Recovery began about a year later. After 18 months, the economy grew more than 9% and it continued to expand above trend rates.”
Are we too late to following recovery plans like Prices’s “Stop Reckless Spending” plan, or Paul Ryan’s “Roadmap for America’s Future“?
I’m afraid we will suffer a lot of pain before then. Mish Sherlock wrote this week that “An Economic Depression is Here“. Congress and The Fed are to blame.
Hold tight … this won’t be fun.
Is it a requirement of people who run for public office that they must abandon all sense of fiscal sanity? It would seem so.
A review of the headlines over the past 2 weeks shows us that Forrest Gump was right:
Stupid is as stupid does.
Where do we start?
Governments Borrowing to Pay Debts
What would happen to your family finances if you took out a Home Equity Loan to pay the mortgage? It doesn’t take a rocket scientist to figure it out .. you will have more debt that you have to pay off down the road. But it seems that governments all over the place have developed this very habit. The Solution to Overspending on Credit? More Credit, of Course.
It started on June 11 when Gov Paterson of New York borrowed $6 Billion from the New York State pension fund to pay … the New York State pension fund! Talk about dumb! The pension fund plans to earn 8% on its investments, but is willing to lend it to the Government for a mere 4.5% – 5.5%! Sort of stupid .. sort of really corrupt. When the cows come home to roost on this one, God Bless New York!
Even more frightening to us all is the bottomless liability posed by Freddie and Fannie. Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case. Now a Trillion is a lot of money. Rather than collapse these disasters and turn mortgage underwriting and insurance back to the private sector, these living dead will suck the blood out of us for years to come …
Government Drunk on Spending
I always preface drunken government spending comments with this quote from Ronald Reagan:
We could say [Democrats] spend money like drunken sailors, but that would be unfair to drunken sailors. It would be unfair, because the sailors are spending their own money.
Want to really get concerned? Take a look at the US Debt Clock. The Total Debt Per Citizen sits at $175,281, or $669,993 per family. Given income per family is only $62,445, it would take 10 years of working just for the government for us to pay of this debt.
Add liabilities of Social Security, Prescription Drugs, Medicare and other unfunded liabilities – the total liabilities per citizen rises to $352,617. Assets are $235,844. So we are technically bankrupt. We are short $116,773 per man, woman and child in the country!!
Government Ignoring Need to Stop Spending
Encouraged by Keynesian economists like Paul Krugman who wrote even this week: The Bad Logic Of Fiscal Austerity. He argues that borrowing a $1 Trillion and paying the interest is affordable and
not much cost to pay for generating jobs when they’re badly needed and avoiding disastrous cuts in government services.
Ah! The last thing we can do is stop government spending! If in fact government spending was actually positive, then is there a limit? Why not spend as much as we can borrow? (Oops! I think they are already doing that!!) Now don’t think you have permission to argue with this Nobel Laureate or the anointed economic elite. You just don’t “get it”.
During the last 5 years, governments have increased their spending and hiring by leaps and bounds, while their revenues have shrink. According to the Krugman crowd, this makes sense.
Who is Footing the Bill?
But you will pay the bills. I extracted some figures from the Debt Clock to create the following analysis:
Private industry workers (who pay ALL the bills) comprise 51% of all people working, unemployed, retired or working for governments. Government employees, who are 14% of this total, consume over 30% of the GDP. So 1/2 of us have to pay for the other half … BUT WAIT!
Only 1/2 of us who file tax returns pay federal taxes! If we assume this is evenly distributed among private industry workers, we have 1/4 of the population paying for the largess of government!
I don’t think this ends well. It can’t. It doesn’t make sense. And when you need a Princeton PhD to explain why it does, I know it doesn’t.
The Federal government (through the quasi-private Federal Reserve Bank) is the only level of our government who can coin money. So profligate spenders at state, county and local levels are going bankrupt , especially under the weight of bloated salaries and pensions for pubic workers.
Mish reports a story of the pending bankruptcy in Miami.
The city of Miami is in such financial dire straits that commissioner Marc Sarnoff is using the “B” word, bankruptcy.
“We are not the only city, municipality to be going through this. It looks like Los Angeles sometime next week or the week after will be going bankrupt. It looks like there will be 30 more cities following suit.”
Increases in public worker salaries is one of the main reasons why the budget is so tight. The average salary for a Miami city employee is $76,000. The average salary for a Miami city resident is $29,000.
Employee pensions are choking the budget too. In 2000, pension payouts cost taxpayers $16 million. In 2009 that number spiked up to $70 million.
Not un-coincidentally, state governements all over are cutting pay, payrolls and crushing pension benefits:
- Education Minnesota Drops Opposition to Curbing Benefits
- The Atlantic reports: Public Pensions Headed for Disaster
- New York City’s pension contribution for 2011 is projected at $7 billion, more than 10% of the entire budget.
- Even the New York Times cries: Padded Pensions Add to New York Fiscal Woes
more than 100 retired police officers and firefighters are collecting pensions greater than their pay when they were working. One of the youngest, Hugo Tassone, retired at 44 with a base pay of about $74,000 a year. His pension is now $101,333 a year.
This widespread and obscene theft of public money is unsustainable and is crashing down all over … as it must.
EXCEPT …. to the rescue is the nanny of all nannies – the bottomless pit of money from the Federal government: Sen Bob Casey (D-NJ) has proposed bill S.3157 to “save” public pensions .. those pensions that pay public workers 2-4 times the average private individual … with the money from .. you got it .. the poorer private individuals.
I think few in the private sector voted for this “fundamental change” in America — where private individuals are plundered for the benefit of overpaid public workers. This has to end NOW, or it will crash in an ugly fashion.
