The Debacle

Americans who may believe We are alone in suffering from the idiocy of Bankers, should consider the plight of Europe. There comes a Point when one has to ask if collapse of the banking sectors is not cheaper than Bailouts. Examine the $700 billion American Bailout plan: Does this Cost not seem greater than letting the Economy go into Recession? The only thing that the Bailout has going for it is a 1 in 6 Chance that We will make a Profit on the Money. The Downside, here, is the engagement of the Government as a Private Sector Participant, a factor which will turn into horror as We progress. I can only tell Europeans that the new Totalitarian State consists of Bankers who refuse to come out into the Light, and are determined to extract every last pitiful Euro from painfully built Savings.

Paul Krugman has an infuriating habit of explaining an economic circumstance in terms where the correct conclusion is lost to the Reader. He correctly points out that the Fed only has about $800 billion of assets compared to the $50 trillion Credit market. Translated: this means that the Fed is the proverbial Fly on the Elephant’s ass of Old, and relies only upon reputation to influence the Markets. The fall of T-Bills to near-zero interest rates is important, but relatively undetectable from Paul’s definition. Translated: Buyers consider T-Bills equivalent to Cash, with probable identical rates of Inflation as Cash (hard Read here, but Buyers expect T-Bills to lose value at the same rate as Cash, but with a delay drag of about 60 Days). The near-zero interest rates become an Expectation of result Inflation over the term Period. It is only the expression of Business belief that Inflation has slowed once again, after it’s rapid advance over the past year.

Paul Krugman suggests that the Fed is losing its power to effect Monetary policy, and it is. The Fed is exactly is like position with the European central banks, and culmination of the current Crisis will find the Fed sinking into a simple Regulatory agency, with fiscal and monetary policy left to Congress; an institution known to lack Moderation, or even Common Sense. I fear for a World led by the Lobbyists. lgl