- Image by Don Solo via Flickr
I thought long and hard as to whether I should even post this. It’s not on-target for this blog. I’m considering it a post on macro-economics. You could call this post a rant. I prefer to call it an exposé. This goes hand in hand with the last post (
A Look at the Two Dual Rallies in the SP500 and US Dollar Index in 2009 | Afraid to Trade.com Blog). The dollar will fail again.
I don’t necessarily agree with every premise that Leigh makes but banks have been doing this for years. In the coming year I sense record bank profits again. Fear Your Cash, Hate Your Bank | Leigh Drogen
Consider the big picture for a moment. The government has spent upwards toward $2 trillion dollars helping our financial system (read; mostly banks) out of this last crisis. Now the The House has a bill ready to spend another $4 trillion to do the same in 2010.
When the phrase, “To big to fail” was bantered around in October and November of 2008 we all thought that the government was talking about the banks’ behavior. Instead the government spent money as if it was “too big to fail” to the tune of upwards of $2 trillion, exacerbating the problem they were suppose to solve. Now another $4 trillion is soon to be thrown at the problem. Money, yes. Solutions, no. If that money was given to every American, all 330 million of us or there about, it would amount to over $18k persons. You do the math.
No inflation on the horizon… Maybe not on the consumer level, but on the government level I see $6 trillion dollars worth of inflation and we are the government. Add health care to the mix and you have the unprecedented expansion of government that will never be able to be reversed.
It isn’t the bills (Why are they called “Bills” anyway?) Congress and the President passes but the processes that can’t be stopped that they include. It seems that fearing our cash and hating our bank isn’t the only things we should be doing.
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{ 2 comments… read them below or add one }
Leigh,
I agree that the bank bailout was necessary. I also agree that the finnies may move higher before they start rolling down. But as for the why of it, I disagree that low interest rates are driving enough money back into the market to maintain this level, let alone to drive it higher.
But what we have here is a margin call by investors to the banks that were then bailed out of by the government.
It’s akin someone’s daddy paying theirs gambling debts because their daddy didn’t teach them to manage money. And daddy is managing his money the same way.
Unfortunately, daddy’s money comes from us and we can’t call his margins.
If it was an individual he’d forced to liquidate and probably forced into bankruptcy. Instead, the government just continues to charge higher and higher taxes.
So now we have the same type of Ponzi scheme that the banks gambled and lost to that is now being ran by the government. And they are making pretty d*#m good use of it.
Fear and greed is now back in balance in the stock market. Fear from the retail investor and greed from the institutional investors (banks included) and the government.
For all that, and yet no fix for the problem of too big to fail, we taxpayers are being soaked to the tune of $6 trillion.
People are going to start voting with their pocketbooks and I just hope that they start while they still have one.
I appreciate the link to the post, and the thoughtful analysis. The problem with giving that money directly to the public, on one form or another, is that without a banking system none of it matters. The whole populist, help main street not wall street movement is missing the bigger picture, this country, nor the entire world, can operate without a functioning American banking system. The public still does not quite understand the dire straits that these banks were in, hell, Paulson got down on his knees and literally cried and begged Pelosi for the bailout, that kind of thing doesn’t happen. Yes, the banks made a lot of money because of the government, and some banks that didn’t need the money, Goldman Sachs, made a crap load as well because the government needed them in the asset reflation scheme. Was this all kosher, hell no, there was no precedent for the type of action the took, but was it necessary, you bet.