What will happen to the U.S. when the Federal credit card gets shut down is horrific beyond words.
Posted on 09/23/2009 12:45:29 PM PDT by BGHater
I wholeheartedly endorse Peter Schiff for Senate.
To understand why, in spite of previous differences between us, please consider the following compelling case, starting with a look at government bailouts, the moral hazards of too big to fail, the current rise in the stock markets, and the "great government advance" of corporate welfare and bailouts at taxpayer expense.
Robert Reich, former Secretary of Labor, Professor at Berkeley, discusses government intrusion in Why the Dow is Hitting 10,000 While Everyone Else is Cutting Back.
So how can the Dow be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. One out of six Americans is either unemployed or underemployed. Homes can no longer function as piggy banks because they're worth almost a third less than they were two years ago. And for the first time in more than a decade, Americans are now having to pay down their debts and start to save.Misguided Calls For Government Intervention
Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed "takeover" of health care, autos, housing, energy, and finance? Their anguished cries of "socialism" are almost drowning out all their cheering over the surging Dow.
The explanation is simple. The great consumer retreat from the market is being offset by government's advance into the market. Consumer debt is way down from its peak in 2006; government debt is way up. Consumer spending is down, government spending is up. Why have new housing starts begun? Because the Fed is buying up Fannie and Freddie's paper, and government-owned Fannie and Freddie are now just about the only mortgage games remaining in play.
Why are health care stocks booming? Because the government is about to expand coverage to tens of millions more Americans, and the White House has assured Big Pharma and health insurers that their profits will soar. Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales. Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out. Why are federal contractors doing so well? Because the stimulus has kicked in.
....
The most popular storyline offered by these Monday morning quarterbacks is that the mistaken decision to allow Lehman to fail resulted from the Bush Administration's misplaced faith in the free markets. In this telling, the real crises began in the days following the Lehman bankruptcy, which unleashed a financial panic that would have caused complete economic collapse -- if not for the subsequent federal intervention.Super Regulator or Super Nightmare?
In reality, Lehman's demise was simply the result of an unfolding crisis that began years before. Popular belief aside, allowing the institution to succumb to the overwhelming debts on its balance sheet was perhaps the only correct decision made by government since this crisis began. The propagandists' complete reversal of cause and effect now threatens to spur the government to compound prior mistakes and bring on the next phase of the financial crisis. Unfortunately, this chapter will likely be much more dangerous than what we saw last fall.
However, politics quickly trumped economics, and the Lehman trial balloon soon turned into the Hindenburg. Washington had no stomach for the ensuing financial carnage, and when other institutions began to topple, Bush, Paulson and Bernanke abandoned their prior convictions and threw all they had into the ensuing bailout bonanza. As a result, the moral hazard that they had sought to avoid now exists on a scale unprecedented in our history. Capitalism has been extinguished on Wall Street, and our financial institutions now exist as public utilities. The presidents of our biggest banks are now the highest paid civil servants in the world!
Since market forces are no longer allowed to allocate capital and control risk, these decisions are now made by government regulators and are then passed through to their subordinates on Wall Street. This perverse organizational structure constitutes a new form of American fascism.
It hasn’t taken long for Peter Schiff, who recently announced he’s running against Chris Dodd and others for his Connecticut Senate seat, to attack Dodd over his recent proposal to create a super regulatory agency by combining four existing regulatory agencies into one.American Fascism
The four agencies Dodd would want to make into one include the Federal Reserve, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Comptroller of the Currency.
Dodd’s point of view is that the reason there was a economic crisis last year was in a large part because banks were allowed to choose which of the above four agencies they wanted to regulate them. He also asserts these agencies weakened regulations so the banks would choose them as their regulator of choice.
Schiff responded to the proposal of Dodd in a press release, saying this:
“Existing regulators had all the powers they needed, and more, and they failed miserably to foresee and prevent this crisis. Chris Dodd is now asking us to put all our eggs in one basket and trust a ’super regulatory agency.’ He should know better than to centralize power in the hands of Washington bureaucrats – it’s precisely the arrangement that caused our current problems. I think most Connecticut voters know that we need fewer czars in Washington, not more. As long as Fannie and Freddie and Congress are meddling with the economy, changing the structure of the regulators is basically rearranging deck chairs on the Titanic.
Corollary Number Two: The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.It's time to put a stop to this madness. The only way to do that is to throw the bums out. If you want more government intrusion, corporate bailouts, and fascism, then vote for Chris Dodd.
Corollary Number Three:
Don't expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem.
What will happen to the U.S. when the Federal credit card gets shut down is horrific beyond words.
Ah, yes... the coveted “Mish” Shedlock endorsement.
I just ordered Schiff’s book, “Crash Proof: How to Profit From the Coming Economic Collapse” from Amazon. Looking forward to reading it.
Take a look at this 2006 video of Schiff vs. Art Laffer and notice who was right on the mark re: the economic collapse that occurred in 2008. Hint: It wasn’t Laffer.
Laffer has also said that he voted for Obama, further cementing his status as a fool.
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