Economic Suicide or Economic Suicide: You Pick!
Gary Johnson is a dork. He couldn’t pick a world leader he admires. He forgot what Aleppo was. He made a really goofy joke about winning the debate with his tongue sticking out. And I don’t care. Here’s why.
Our Path to Economic Suicide
The economy is on life support. Soon, it will be time to pull the plug. Who pulls it, and in what fiscal environment we are in at the time, will dictate whether we recover or become a truly failed state.
The laws of economics are as hard and fast as gravity. Like gravity, economic forces can be overcome for a short while. But as in the case of gravity, what goes up, must come down. The higher you go, the bloodier the crash. And all economic bubbles will pop. The more you grow them the worse the implosion. For decades, and especially since the burst of the real estate bubble in 2008, we have been building toward an epic crash.
We learned nothing from 2008. All the major players in the disaster, the U.S. Government being the ringleader, are still in place. In one form or another, they are still engaging in the same practices that ruined the economy to begin with.
Before the bottom completely fell out in ’08, we had already identified two of the biggest contributors to the problem. We had banks too big to fail because the FEDERAL GOVERNMENT colluded with the biggest deposit banks allowing them to comingle their traditional bank services with high-risk investment banking. We also realized that the everybody-can-have-a-house idiocy created by the federal government was utterly unsustainable.
We had a chance to take the punch in the face back then. We could have paid the insurance on existing accounts and let the banks fail. (“Too big to fail” is a euphemism for “into the politicians for too much money and know they’ll be bailed out”.) It would have hurt. People who had invested poorly would have taken a bath. But we’d have recovered in about two years. Instead, we gave over $8 trillion to the banks, pretended to fine them (out of that same money) and left all the fiscal malpractice in place.
We continue to finance crap mortgages for people who never should have been able to buy their home to begin with.
On top of that, we added Dodd-Frank. That was a bank bonanza tarted up to look like it was there to help the poor American citizen.
We added Obamacare. That was a government scam to give millions of captive customers to the biggest insurance companies. It has nothing to do with medical care, except that it will reduce the quantity and quality of care available over time, while we are already seeing costs skyrocket out of control.
We added reams of new government regulation, often without the consent of a cowardly and ineffectual congress.
To create the illusion of a functioning economy, the Federal Reserve has been pumping funny money into a thin layer of the economy. They did so by giving Wall Street high rollers access to near-zero interest money. They allow investors to borrow for pennies on the dollar, buy huge chunks of stock from the healthiest horses in the glue factory. This triggers automatic computer buys and market sentiment. The activity drives up the price of the equity involved. At some point, the borrower slowly sells off his shares (or holds them for a while if the stock outperforms expectations) and then goes back to the Fed for more cheap money. If all this nets only a couple of points on the stock, the traders have doubled or tripled their money. Often these large buys result in much higher gains.
Important side-note here: We have a whole generation of investment brokers who have built their careers on this funny money scam. They have no experience actually investing in a company based on fundamentals and long-term expectations. They will be useless when we have to go back to doing business the right way.
While letting Wall Street play with the funny money, the Fed also enables the Federal Government to compete against you and all American businesses for every dime of credit. While you have to jump through hoops to get a substantial loan for a car or a house, all the government has to do is have the Fed print more money and “borrow” it. They also borrow from foreign banks with the same terms. This profligate borrowing will be the cause for much more heartache, instability and possibly war around the globe later.
There are two ways the stock and school loan bubbles burst. One will be if Trump gets elected. As soon as he takes the oath of office, the Fed is going to pull the rug out from under the funny money scam. The crash will be horrendous! The Left and stupid people on the right will say it was Trump’s fault. The media, out of obedience or ignorance will simply report this as a fact.
Wall Street, where everyone has been watching and saying, “Oh my, we have a good economy,” will suddenly just reflect what the national economy has been for almost a decade. Without the very profitable fig leaf of moving money around for no real reason, Wall Street will look like Harrisburg or Flint. Wall Street will become what the nation has been since the real estate bubble popped. The flow of money they have been providing through artificial means, the life support mechanism, will no longer be there.
The other possibility will be if Hillary Clinton gets in. Soon after, the Fed will slowly bump up interest rates. Wall Street will have a mild stroke, but will keep shuffling cash as best it can. To look like she is doing something, Clinton will start to push for Obama stupidity on steroids. As businesses and municipalities fail, she will up the tempo of her power grabs and phony “give-aways”. The justification will be that it all had to be done to prevent disaster. We will be told that as much as the government has done to undo the damage George Bush did, further drastic measures must be taken. “Do you see?” they will shout. “Trickle down economics doesn’t work. You can’t depend on the private sector to make your lives for you. We must do that. All the greedy businessmen do is take, take, TAKE!” Clinton will claim, as Obama falsely claims, to have saved us from another crash. The reality will be that the government, Obama’s, Bush’s and especially hers will be responsible for the creation and implosion of the existing financial bubbles.
And Trump is no better. As we have a generation of investors who have spent their professional lives trading with cheap government money, often ignoring fundamentals, we have a presidential candidate with a FEW new-found conservative concepts who spent his life in the world of big government crony finance and maneuver. Trump may actually believe that his programs (every bit as expensive as Clinton’s) are sincere. He may believe his trimming at government around the edges, as we’ve seen politicians pretend to for decades, is productive. And a tiny bit of it may just bring spending down a fraction of a percent. And this might bring down the debt a tinier fraction. It is more likely his programs will explode the debt, as will Hillary’s. But that isn’t what will make all the difference in the coming 24 months.
While my second desire is to see someone taking a wrecking ball to the federal budget, my primary concern is the coming crash. I told you how Clinton would handle it. If faced with an even more immediate crash by a Fed sabotaging a Trump presidency, Trump himself would revert to type.
His first and most immediate concern would be to bail out the banks. That would be banks that have borrowed madly to fund an empty run on stocks and those involved with lending mortgages and student loans. “They are still too big to fail,” we will be told. The Donald will not be able to see it any other way. Throughout his entire adult life, government and private sector worked together in an unholy alliance of you pay, you can do. Whether it is zoning fees, licensing fees or outright bribes, Trump has never existed in a purely capitalistic world. He will initiate as many “bale outs” and “stimulus packages”, just as many government take-overs as Clinton will.
This is why I don’t give two shits that Gary Johnson didn’t name a world leader he admired (a Miss America question anyway). This is why I don’t care if he forgot what Aleppo was. I wouldn’t care if he forgot where London was. The fact is his instincts for small government are exactly what we will need to get through the next financial bust and start to grow. He was effective as a two-term governor in shrinking the size and role of New Mexico's government in people's lives. We NEED him to do that in DC! Trump and Clinton will be hands-on and will double and triple down on what has kept us from recovering since 2008.
We have tried socializing banks. IT DOESN’T WORK!! The government, under Obama and without the authority of a cowardly congress took over the school loan program. It is still going to crash. THAT DIDN’T WORK!! But those are the approaches that will be taken by the two leading candidates.
Obama has nearly destroyed our status as a nation that can affect outcomes in the world. That ability is what allowed us to flourish over the last century and a half. If we are to re-establish that, we must get through this next bust with as little interference from the federal government as possible. The federal government must concentrate on those things, there are precious few, that it is chartered to perform; national defense, interstate trade and foreign affairs. We must be left alone to do the rest for ourselves.
Johnson is wired to do just that. The other two lack the integrity and/or the knowledge to limit their overreach in such a situation. So, dear reader, the choice is yours. It’s 2 October 16. You have a few days left to abandon Clinton and Trump and make the right decision or follow the cult followers over the cliff.
Matt Jordan is a travel writer, political commentator and author of 16 20 24. Get your SIGNED copy here!
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