The underlining problem of all economic problems is solvency. The governments 700 billion, plus 150 billion of “pork” to massage the voting, was a liquidity treatment. The issue is debt, as some are lately finding out. The federal government owes too much,maybe 13 trillion when all bail-outs are completed. Businesses, small and large, are over-leveraged. Households owe 14 trillion. Severe inflation is the only cure for the variety and depth of this debt. But, that comes at high moral cost. A cost, I hope no one is willing to pay.
As the big bank resuscitation continues to accumulate debt, few seem to see debt itself as a threat. The largest debtor nation in the world is getting substantially more in debt each day, as the “capitalist” on Wall Street keep begging at the door of an accommodating Treasury.
Now, they are talking about a trillion dollar annual deficit. It was 455 billion at the fiscal year that ended Sept. 30. A trillion dollars is 7% of the economy. These are, like, after WWII figures.
During the Democratic Party primary season one candidate used a 30 second television commercial showing the President taking a 4:00 A.M. phone call, the message being an emergency. That phone will ring! The world is full of uncertainty and volatility. It could be a foreign invasion, disease outbreak, natural disasters, communication and transportation crisis, terrorist, or any number of things and it is sure to happen in time. All national emergencies require vast sums of money to address. Because, we as a nation, are effectively broke we cannot take the call.
It is distressing watching the numbers come in on housing, auto sales, retail, and the stock exchanges. But, who could be surprised? The western world got caught in an ancient credit trap that everyone should have seen coming.
The extraordinary efforts of the world’s central banks have not checked the downward spiral of stock markets worldwide or thawed credit. Nothing works as planned. Almost everybody is losing money daily. Most assets are worth less than they were at the beginning of the year. Retirement funds are turning into dust. What do we do now?
First, the world cannot stop and worry about the carnage. Life must go on. There are bills to pay, babies to feed, old people needing medicine, payrolls to be met, etc. The demands of the economy will not permit us to wallow in this misery.
When the nation gets around to it, this experience of the last six months and much longer should produce substantial reforms and more. When people in the streets were giggling about 110% loans the Congress did not lift a hand and rarely a voice. Maybe, they were giggling too. Even now, as the government ,in various forms ,are providing money from the citizens and their heirs to bail out selfish scoundrels. AIG, who has received 122.8 billion in relief to the minute, is having half-million dollar parties is California. Just making a mockery! One of their executives still receives one million a month. He has received 280 million in the last eight years. These perpetrators are not going to jail or losing their jobs.
More regrettable, this election cycle I suspect we will return guilty House members and near one-third of the Senate. These are the most guilty of omissions that will cause wide spread suffering for a very long time. Yes, regardless of the election results, resignations are in order. For many, if not most, it is the only decent thing to do.
The personal suffering, which should be the principle concern for everyone, will no doubt cause a lot of people to take personal value inventories. It’s about time we all did. Yet, we can trust the scripture: “The Lord is good, a strong-hold in the day of trouble; and he knoweth them that trust in him. (Nahum 1:7).
The bail-out become law today. It was a narrow palliative in a very broad, world-wide illness. It was sold as a program to protect average citizens or “main street” as they phrased it.
Earlier in the week the Senate passed the legislation with 74 affirmative votes. It was nauseating to watch those old birds brag on themselves and tell how patriotic they are, and all they are doing for “main street”. They don’t know anything about “main street” or even where it is located. If they wanted to go to “main street” they would have to Mapquest it. The whole country knows the Senate’s urgency was for the big boys.
It was reported today that automobile sales were off 30% by major manufacturers as measured against last year. I don’t remember seeing figures like that before. GM was actually down 16%. The cheerleaders would say that was a positive note. But, most everything else is down too. All we have heard for days is the credit market freeze. There is more to it. The consumer can’t go on. He is over-leveraged already. Then, you add the living costs; the power bills, gasoline, food etc. People cannot buy cars because they owe too much money already.
Wall St. gets the attention. Wall St. finances poliltical campaigns. After the bill passed the Senate tonight some politicans were saying it was not a bail-out bill. They were right. It was more of a welfare bill. I don’t have expectations of this 700 billiion plus producing desired results. The big question is: is there enough money to restore the economy to recent levels. There is more too it then the credit markets.