02.25.09
Bigger Is Brokener: The Economy
Stocks up on Bernanke remarks; focus now on Obama – Yahoo! Finance
Bernanke told Congress on Tuesday the recession might end this year, and that regulators aren’t planning to nationalize banks. The news alleviated some of investors’ worries about the economy and the banking industry, and lifted the Dow Jones industrial average and Standard & Poor’s 500 index off their lowest levels since 1997
The recession might end this year. True, it might. Or it might end in 2020. Personally, watching the way the government is still trying to bail out the bankers, I expect extended pain–on the order of years, not months–but I am not an economist nor a psychic. In other words, I could very easily be wrong, wrong, wrong.
What we do know, however, is that the increased size of our financial institutions and the dramatic increases in the quantity of funds that moved through them made everything they did more risky, not in the sense of increasing the chances of any particular outcome, but in the sense of making negative outcomes, like positive ones, much more intense than they would otherwise have been.
Big increases the danger to innocent bystanders. When big banks, big investment banks, and big insurance companies make big bets with lots of money involved, mistakes hurt everyone. Wnen my granddaughter, Vi, is thirty, we just may have finally paid off all the funds we borrowed to keep the big, mismanaged banks in business. She’s 11/2 now.
The hope of America is not a particular politician, no matter what his ancestry, no matter what political party he represents, no matter how many people proclaim him the messiah. That man can fail, and he will fail, even as King David failed. President Obama can make the mistake of thinking that the government is like Astarte / Asherah the fertility goddess whose multiple breasts not only symbolized fertility, but provision–if you could not grow or catch your dinner, she provided mother’s milk. Indeed, his past and present speeches tend to indicate this belief.
Yet, the truth is that just as large corporations have their own agendas and are not to be trusted, so the government has its own agendas and is not to be trusted. Many have suggested parallels between the Reichstag fire and 9/11. Certainly our present financial crisis has parallels in the Great Depression. Just as FDR’s work programs did not fix the problems then, the present initiatives will fail to fix the problems now. In seeking to preserve the status quo ante, the government and these corporations are spreading the harm to all of us. Instead of acute, but intense pain that lasts a few months to a few years, they are loading us down with chronic pain that will last many years into the future.
A shift from an economy based on unrestrained spending and borrowing to spend more, over to an economy based on saving, investing, and independent business will be wrenching. Remember that about 70% of our economy in recent years was related to consumer spending. As the unrestrained spending goes away for the long term, I would expect that far less than 70% of the economy will be devoted to consumer spending.
Expect a whole lot of crying. Large out-of-area corporations (LOOACs) have had a lot of money and a lot of influence. They will call in every favor they can in an attempt to survive, sticking us and our children and grandchildren with huge debts in the process. The hope of America is not the government. It is not GM or any other large corporation. It is not the man in the White House. (Thankfully, as we’d be in trouble eight years from now when he is replaced with someone else.) No, our hope, our only hope, is in God above and in individuals and small, locally-owned businesses (SLOBs) acting with an eye toward the long-term benefit of the families and communities they are a part of.
I mention God above, because of the ant problem. When ants try to navigate through the terrain in your yard, they cannot see far enough to know that moving an inch to the left will help them completely avoid an obstacle. But I, standing overhead, can see this. I cannot communicate with the ants to inform them of this. But God is not limited like I am. In dependence on him, we can have some inkling of obstacles ahead, which potentially could lead us to avoid such obstacles.
Think about it. The economy was bubbling up, based on unsustainable prices for real estate, unsustainable amounts of debt, and unsustainable levels of spending. All of those things need to be reduced sharply and to stay down. Yet, the whole premise of the recovery plans is that spending, lending, and real estate prices are going to return to their former levels. This is madness, I think, madness.
The economy was based upon «… unsustainable prices for real estate, unsustainable amounts of debt, and unsustainable levels of spending.»
… and of course those special “I can’t see what you’re doing” glasses for our regulatory agencies. That also played a big part, because they should have known that letting the financial industry invest in opaque securities was dangerous both to the industry and to its customers, and ultimately to our whole society. This is the same government that regulates what kinds of end caps must be on a bicycle’s brake cable. Yet they allowed companies to play games with people’s retirement funds without similar scrutiny. Sounds very suspicious if you ask me.
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