U.S. Government Doing So Many Stupid Things All At Once

“How do you feel now?” asked a reporter for a local investment magazine. “I mean, you’re a contrarian…and you were right about so much?”

“Not exactly,” we explained. “Yes, we saw the problem coming. And we expected the government would do all the wrong things – which it has. But we never imagined that they’d do so many stupid things all at once.

There are only two examples from modern history of depressions such as this – the ’30s in America and the ’90s in Japan. Both times, the governments did stupid things. But this time, the U.S. government has outdone them all. They’ve committed $13 trillion to programs that make no sense theoretically…and have never worked when they’ve been tried.

If you’ll recall, the dog that bit the world economy was rabid with debt. The feds are trying the old ‘hair of the dog’ technique. But they’ve rounded up every mangy cur and stray bitch in the country. And now they’re adding debt to the world economy at a much faster rate than ever in history.

Of course, as feral economists, we love it. We never thought we’d see such a thing. Gone are the mealy-mouthed reservations of cautious economists. Gone are the hesitant…hedged…halfway measures. They’re pulling out on the stops. It’s the pedal to the metal…it’s hell for leather…

What a bold experiment! What a brave undertaking! What a crackpot thing to do!

They must think the planet is under attack from aliens. It’s as if the survival of the human race were at stake. Nearly the entire output of the largest economy on the planet for an entire year – debt, not savings – is being spent to…to…to…well…to do what?

To try to stop the speculators from getting what they deserve!

But wait…it gets even madder. Of course, if you put food out in the alley, it’s bound to attract rats.

Not surprising then, that the government’s bailout cash is giving rise to an astonishing number of new fraud and money laundering accusations.

The complex nature of the bailout program makes it “inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering,” says an internal government report.

“You don’t need an entirely corrupt institution to pull one of these schemes off,” said an expert. “You only need a few corrupt managers whose compensation may be tied to the performance of these assets in order to effectively pull off a collusion or a kickback scheme.”

But don’t worry. The feds are on the case. They’re said to be investigating. Just the way they did with Bernie Madoff. And who knows? Maybe the crooks will tell their families…and maybe the sons and daughters will turn them in, just like they did with Bernie.

There are always a few rotten apples in every barrel. But from here at Markets and Money’s South American headquarters in Buenos Aires they all look brown to us. Even Business Week magazine opines that the whole bailout program is nothing more than a scheme to pick the pockets of the nation’s retirees in order to give the money to rich bankers.

“Monday afternoon, Goldman Sachs (GS) reported much larger than expected first-quarter profits on the heels of the strong earnings Wells Fargo (WFC) reported last week.

“No one should be surprised.

“The Fed has permitted the banks and financial houses to park vast sums of unmarketable paper on its books – securities made nearly worthless by the misjudgment and avarice of bankers. In return, the Fed has provided these paragons of finance with fresh, cheap funds to lend at healthy rates on credit cards, auto loans, and even mortgages.

“While the Fed cuts the banks slack, the bankers are busy turning the screws on their debtors by raising credit card rates and fees, and harassing distressed borrowers with all the zeal the Roman army displayed sacking Palestine.

“It takes good banking skills to borrow at 3%, lend at 5%, and make a profit.

It takes much less business acumen to borrow at 2%, lend at 5%, and make a profit – which is exactly what has happened. The extra fees are just gravy.

“This all comes at a cost to someone – America’s elderly.

“Many retirees depend on interest from certificates of deposit. Those rates are down dramatically and as CDs expire, retirees are compelled to reinvest their savings at lower rates and live on less income. They can take comfort that their sacrifices are helping pay off Wall Street’s losses from the lavish bonuses that were paid bankers – for example, the $70.3 million Goldman doled out to CEO Lloyd Blankfein in 2007.”

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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2 Comments on "U.S. Government Doing So Many Stupid Things All At Once"

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Hi Bill, How can bailouts and printing money to reduce the wage disparity between US and China be a stupid thing? I believe no union or worker in the US would be ready to take a 90 to 95% pay cut to get on par with his/her Chinese counterpart. I guess the only way to achieve this is to devalue the US dollar 10 fold or more. Albeit it would make gasoline at the pump more than 10 dollars a gallon in the US, it would give the much required boost to new innovation for alternative energy and life style… Read more »
Arian I.
Per-hour wages in China have been rising, but are still much lower than in the West. You can thank cheap & easy credit for allowing what would otherwise be an untenable practice – manufacturing stuff in China and selling it in the US for half of what US-made products go for. In a time like this, the US can compete on exports due to the devaluation of the USD$. With attention to quality and craftsmanship, American products canbe just as good as Germany’s best – for half or even ¼ the price. However, I do not think America is in… Read more »
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