On The Economy

The economy is a very,very complex subject. I won't pretend that I know everything there is to know ( I doubt anybody does), but I do read a bit and try to follow it a bit. And I am very concerned about where the "conservatives," or whatever you want to call the GW Bush crew that's in charge, want to take us. Following are just some of my random thoughts.

On the international side of things, I do believe that Bush's tax cuts and deficit spending have put us in the position of borrowing way too much from foreign countries. So much so that I think the existence of the US as the world's largest economy might be endangered. You just can't borrow that much money indefinitely without ceding too much power to foreign governments. Even now, the oil producing giants (including Russia) have us over a barrel (pun understood). Our economy has grown too fast (on borrowed money) and our demand for the black gold has increased so quickly that we need oil that we can't get (thus the rise in oil prices).

A case in point relative to my comments above - the declining value of the American dollar against almost all foreign currencies. The dollar has not fallen so far yet as to make our exports more affordable overseas (not when Asian workers still make as much for a days work as American workers make in an hour), because our deficit trade balance is at an all time high - principally because we are funding our economy with borrowed money.

And speaking of borrowing - the "financial crisis" here at home - Bush's proposed hundred-billion dollar bailout - Bernanke's quick push to lower the Fed's lending rate - the housing crisis - are all a plot designed to get us - the middle class and our government - to pay for the games of the filthy rich. The unemployment rate isn't so high that it could possibly cause the drop in the price of stocks or the bank defaults. No, the problem stems from the obscenely wealthy playing games with their money and getting caught.

The housing crisis? Not so much, I'd guess. First of all, because of the US Government borrowing so much foreign money and spending like drunken sailors on a war and the war machine, a lot of people and institutions got extremely rich. Newly wealthy banks, lending institutions and hedge funds, looking for places to invest their incredible sums of money, found a market in middle class investors who saw the rising housing market and figured they could get better than average returns in property rather than in stocks and bonds.

So the folks with money loaned money, at very good teaser rates, to those with less money. Some people bought homes they couldn't really afford figuring that they would be able to sell them later in life and assure themselves a decent retirement. Others bought homes they couldn't afford so that they could turn around and sell them for even higher prices within a year or two. No matter, they bought homes they couldn't afford and they should have known they couldn't afford them

But then the prices on homes stalled. And the teaser rates started phasing out and the REAL interest rates started to kick in - the interest rates that the banks, mortgage lenders and hedge funds had thought would bring them THEIR big returns. Only everyone involved had been really stupid - not even one-tenth as smart as they thought they were - and the money wasn't there to pay these high interest rates. Everyone who played this game is getting creamed.

But who is losing? Huge banks, lending institutions and other speculators who should have known better. Also, small time gamblers - folks who thought they were smarter than the banks. There isn't ANYONE who's getting clobbered by this fiasco that doesn't deserve it. Not one. These people and institutions knew that they were gambling and they deserve to pay for their mistakes. There needs to be a market correction.

Now, if the government bails these institutions and people out of their jam by lowering interest rates and by borrowing another hundred-billion dollars from China, they're going to reward them for their stupidity. Worse than than that, inflation will soar with all of that additional money in the streets, more speculators will borrow and spend, and the crash, when it comes, will be just that many times worse.

We need to stop borrowing. Now. Yesterday. From now on. Stop. It. The savings rate among US citizens is negative. This can't go on.

Bush is a moron. A complete, unadulterated, unvarnished, stupid, blithering idiot. If he doesn't get hold of the government's spending NOW, our entire economy could go under. Not a recession, but a DEpression.

This is serious stuff, folks. We're not playing games - this is the real world. I just hope it's not too late.

But that's all just how I see it.

For an interesting article that argues against the Bernanke Bailout, visit The Motley Fool.