Stranger than Fiction; America Must Continue its Debt-Fueled Ways to Survive

When I read all of the literature about how to solve the financial system, I realize that any rational solution cannot work. We have too many extenuating circumstances to return to a normalcy of spending because we have simply gone too far with our debt fueled existence to dial it back; without increased government spending, our economy as we know it will sink like a stone.

Right now we have a convergence of consequences from the various forks of the economic road requiring the largest outlay of deficit spending in the history of the country. We have corporate welfare with the bailout of the banks, insurance and auto companies. We have an escalating national debt, initially inflated by George Bush and his policies but now alarmingly exacerbated by President Obama's stimulus efforts. Finally, we have entitlement costs - social security and health care - and military spending that will bust the national budget in a few short years not to mention the interest payments on the national debt.

We are a nation depending on the kindness of China and Japan, the largest purchasers of our treasury bonds, to finance our debt. We are a nation completely unprepared to spend within our means. When times were good, our previous President, Mr. Bush, racked up annual deficits and doubled the national debt in his 8 year tenure. Now that times are bad and there is little real money flowing in our economy, our current President, Mr. Obama, needs to spend big and it is scaring the bejesus out of us because the debt that he inherited was already incomprehensible.
Unfortunately, we were all happily flush with cheap credit to worry about the debt when it mattered.

Now we have the Republicans, flagrantly disregarding the trillions Bush added while America's fortunes seemed rock solid and who lack a cohesive party agenda, blindly caught up in the throes of a full-fledged deflection of this stark reality and blaming President Obama for his profligate spending though it has apparently saved their bank accounts. Huh? I urge any Americans sucked into this rabid plot to reconsider and understand that the mechanisms for the problems we are facing were set in motion long before Obama.

Anyhow, efforts to balance the budget may well be the final nail in the coffin for the economy. This is an economy based on spending, 70% of it generated by consumer spending alone. The consumer is under siege due to the crash in the housing market, crash in their investment and retirement accounts, crash in credit financing and associated crash in employment. The government has to replace this spending in the interim to save the economy and it has to get us the credit we need so that we can start spending again.

As a result, the Federal Reserve and the Treasury are pumping all the money they possibly can into loosening those credit markets which, much to our distress, places the banks in the enviable position of ruling our economic roost. We cannot do anything about it because we all need the credit to move forward, including the government. It is counter-intuitive to think this way. After all, rational spending should be the basis of a sound economy and the solution of continuing our credit-fueled existence should sound stranger than fiction because it led us to this crash in the first place. But, it truly is our only hope at least until the economy can generate "real" money again. How, what and when will that be?

Sadly and ironically, the banks are cutting their consumer credit lines to shore up their balance sheets thus refusing to realize that by doing so will unleash a deadly negative impact to our consumer economy. They may be happy that they are racking up deposits because the consumer has learned the very hard lesson of not saving for a rainy day and are currently stashing cash but without credit cards and other consumer loans, we will buy nothing and that is much worse for America. So, we have to continue our debt-fueled ways because every other solution is an economic buzz kill. Yikes!

Don't Cry for Me Argentina

At 8:03pm I tuned into President Bush's farewell address to the nation so I was already a little late. Thankfully, the station that the TV was already on was broadcasting the address allowing me the true benefits of my trusty TIVO; I could rewind to the beginning. Unfortunately, there were so many interruptions, children, telephone, chaos and the like that I must have rewound 20 times for it was well after 9pm that I finally heard the last word.

I must admit that at least half of those rewinds were me realizing I had just tuned out yet again and I had to focus my attention. I pretty much have had this trouble for every one of Bush's speeches - staying fully engaged - maybe because there is no sense of emotion or gravitas; nothing to reach out and draw you in. These speeches are read with a blank expression and bad phrasing; speeches that quickly decend into the iconic Charlie Brown teacher drone.

This speech, in particular, lost me almost immediately as it became evident that he would focus, yet again, on 9/11 and the Iraq war and how he had kept his promise to keep America safe. The premise was, we may not have agreed with all of his actions but look how well things turned out; there will be a lasting legacy of democracy in Iraq and Afghanistan, a goodwill of freedom throughout the world and let's not forget the absence of another terrorist attack on American soil. We are supposed to accept what he says, expect little and cut him some slack because he has no choice but to find and trot out whatever successes he deems to have merit. He did his job and we should be grateful.

There was a brief mention of these being difficult economic times and that his stopgap measures - I assume that he is referring to the Congressionally approved TARP funds in conjunction with Federal Reserve Funds and Treasury Funds - have been successful in minimizing the impact of the economic collapse. I must interject that today Citigroup's financial services model will be torn asunder to survive, even after receiving $42,000,000,000 in federal funding and some $300,000,000,000 in asset guarantees; AIG just continues to quietly ask for more funds through its now direct pipeline to the Treasury despite the $150,000,000,000 in federal funding already received; and Bank of America needs another $20,000,000,000 in federal funding on top of the $25,000,000,000 it has already received and requires up to $120,000,000,000 in asset guarantees if it is to complete its purchase of Merrill Lynch. We should give the TARP that familiar slogan "the gift that keeps on giving" now that the Senate has agreed to release the remaining $350,000,000,000.

All we can hope for is that it is well spent and documented but somehow I think not, but miracles can happen - today a US Airways jet "expertly" crash-landed into the Hudson River shortly after take-off when it "collided" with a flock of birds who apparently were sucked into the engines disabling them; everyone survived. Hallelujah! My husband flew down to Orlando this week for his company's convention on US Airways. I hope this pilot is at the helm of his plane. Certainly as I prepare to take that vacation I was wailing about yesterday, where I intend to include air travel for myself, because I have not been on a plane since 2001 and for my children, one of whom has never flown and the other who last flew as a toddler, I will not take this as any sign whatsoever.

However, I have already practically talked myself out of going anywhere. Maybe there are too many travel websites and too many reviews; should I spend thousands of dollars for a few days and nights for an overpriced room and food? The more I think about it is the more it becomes a bad idea. I tried to pitch some US-based destinations to my husband today but his immediate sticker shock only added to our usual discourse; I will start to talk myself out of it and he will let me. Rest assured, it happens in reverse too.

The reality is that our biggest excitement is the possiblity of refinancing our mortgage as the rates descend to 4% - we have a pretty good rate already so we need it to be in the low 4s for us to benefit. I have, however, promised my children a vacation and we will have one, regardless. Although, after hearing my complaints about costs and charges, my eldest will be happy to go anywhere as long as there is a semblance of a vacation that includes a hotel with a heated pool; might not have to go too far at all.

Bush, on the other hand, will go back to Texas to his new digs, moderately priced at $2,000,000 for a man with family cash, and find those 20% of believers who will donate to his library. Doesn't the phrase "Bush Presidential Library" seem like an oxymoron? Be nice now- it is almost over.

Bailout Bill Stinks

Oh how our Congress people, House and Senate, held their noses to sign the new bailout bill which was suddenly more appealing because it included an additional $110,000,000,000 in what are essentially earmarks. So, the last great act of George Bush’s Presidency, which has been characterized by reckless and excessive government spending, is to alleviate the credit crisis by enacting the largest most reckless government spending bill with the purpose of bailing out Wall street in the name of saving Main street. The House and the Senate drank it, swallowed it and made it better by increasing the monetary size of it. I’m glad they got that straight…not!

Democrats and Republicans should be ashamed at their own shortsightedness that all they could do to solve the credit crisis was to take the one and only $700,000,000,000 offer from the Bush Administration, courtesy of appointees Paulson and Bernanke, and make it even more egregious than it already was. After the House bill was soundly defeated on Monday, not one solitary Congressperson or Senator could offer another approach that would achieve the same end without selling the taxpayer a bridge to nowhere? The best they could do was take the same bill, triple the number of pages and to take a phrase from Ted Stevens, almost but not totally disgraced Senator from Alaska who was head of the transportation committee when he resigned, “stuff that bill like a turkey.”

In the interim between Monday’s failure and Friday’s begrudging acceptance of this disastrous piece of legislation, the Federal Reserve pumped hundreds of billions more into the monetary system so in essence we, the taxpayer, spent more than $1,000,000,000,000 this week on the premise that we had to do something. There is a difference between needing a solution and accepting a bad solution out of sheer ineptitude. If I were Barack Obama I would abandon this race and let McCain win. He might have to repeat his “thing with Hilary” but I would let the Republicans take George Bush’s mess and go down with that ship. After all the expenditure and economic disaster yet to come, I say, let them have it.

Bailout or Else: The GOP Politics of Fear in Full Swing Yet Again

Having now presided over the biggest economic collapse in recent history, George W. Bush and friends are out to convince the American people that the best and only solution is to hand over $700,000,000,000 to the Treasury Secretary to bail out Wall Street and that it should be done expeditiously and with as minimal oversight as possible. This Administration has perfected the Karl Rove politics of fear methods so completely and, unfortunately, so successfully that they have no qualms rolling it out whenever they need to force the hand of the American people.

Right now we are witnessing almost to the letter the same playbook used to rush us into war 6 years ago. Tonight the President spoke on television right before Congress is to go on break, like he did 6 years ago, giving us the old “act now or doom will befall you” speech. These same tactics were employed during Bush’s re-election campaign and are now being employed in more extreme fashion in John McCain’s campaign. So far, they have been successful at these methods even though the outcome has always been disastrous for the American people.

Though the Congress is trying more diligently this time around to mitigate the damage of hasty decision-making; this plan seems destined to come to fruition in some form albeit with greater restrictions. Why isn’t anyone else coming up with an alternative solution? Why is this expensive bailout the only way to bring order to the markets? While the GOP continues with their lies, fear and deceit, the American people are once again swept up into a situation where they are taken for a ride and this time around instead of fearing the GOP; they fear the intelligent black man who actually does want to help them.

Bailout Bonanza Continues to Prevent Trickle Down of Bad Debt

The Federal Government reversed itself after 2 days of record declines in the financial markets; it is pretty clear that there is no faith in the financial markets without the government guarantee. The mantra of “too big to fail” has completely taken over though I do not understand the criteria used to choose who wins and who loses. Why let Lehman fail but not AIG? As I write the Fed and the Congress are feverishly meeting to create a new government entity to buy up the rest of the bad debt out there. If this is the case, Lehman got a bum wrap.

However, it was good news for the market and it leaped over 400 points. I am not convinced this is the best solution no matter how much we fear financial failure because I am not convinced that it is a good idea for the government to keep borrowing funds for all of these bailouts. If the government had the money that would be fine but it doesn’t. The taxpayer is on the hook for the largest transfer of debt in American history.

Before George Bush was elected President, the discussion centered on his ability to ruin just about everything he touched. 9-11 saved him from himself for a while and delayed the inevitable. There was a point when he enjoyed incredible popularity much to my dismay, I might add. We were “winning” the war on terror and Americans improved their standard of living; trading up to bigger houses and better things because George Bush was right prosperity did trickle down. Unfortunately, we did not realize the sleight of hand; victory and prosperity were an illusion. And while the war rages on and the rest of us take on 2^nd jobs and plunder our 401k’s to remain afloat, the government has chosen to bail out some of the richest companies in the world supposedly to prevent all of that bad debt from trickling down.