The Root to all Evil

So maybe the picture I made is a bit of a stretched hyperbole, however, you get the idea.  According to a recent article on Yahoo Finance, should Congress pass Obama’s stimulus bill, it will make the U.S. government’s total for trying to solve our financial crisis a sum of about $9.7 trillion dollars.  Conincidently, this same amount is enough to pay off 90% of the nations mortgages, which in essence gives you an idea of how much liability is floating around the U.S.

So ask yourself this question:  We have heard of the $700 billion bailout, this new $826 billion stimulus, and last year’s $168 billion stimulus payment, what happened to the other $8 trillion?  Makes you stop to think doesn’t it? Supposedly most of that money has gone to pledges made by our U.S. government to help get us through this financial crisis, but you know our government, and that lie “fact” can be taken to the bank, which isn’t the best place to go as they might use whatever to take to them to payoff their CEOs.

Still don’t understand the magnitude of our debt, let me break it down even further.  This massive amount of money is equal to paying each person in the U.S., man, woman, child, a sum of about $1,430 and is about 13 times the amount spent in Iraq and Afghanistan.  Ridiculous isn’t it?  And they said this war was what was expensive; think again.  In fact I think the war is a good thing.  Just ask Roosevelt what he thought about the war?  What do you think got us out of the Great Depression, yeah you guessed it, the war.

I do admire one group of individuals over at Bloomberg who have decided to sue The Fed.  Yes you heard right, sue The Fed.  Basically they want some more disclosure on the amount of lending and to who the money has been going to.  I myself wouldn’t mind knowing too, as in case you didn’t already know, when I say $9.7 trillion, I mean $9.7 trillion taxpayer dollars.  Want more fuel?  They plan on spending another $200 billion in asset protection for banks and other financial institutions and have pledged more money to the Bank of America and Citigroup securities.

Call me crazy, but how is it logical to try and fix debt with more debt?  That is like having two maxed out credit cards, and paying half of each by using a third credit card.  Granted this is normal practice to save on APR, however, in the government’s case, they are then going back and maxing out the first two cards again and maxing out the third newly acquired card.  Obviously this analogy is a bit simplistic, however, the general idea is the same.

I know we have to spend money to make money, however, when does it stop? When do we begin to realize that while taxcuts are a nice security blanket to sleep under, as well as a nice pacifier for the American people to suck on so we can somehow feel at ease with everything else that is going on ,taxcuts are not the answer.  Taxcuts just make us taxpayers feel warm and fuzzy and reduce government revenue, causing them to seek funds elsewhere, and I can’t imagine who they would turn to.

The topic of the bailout may be over played and over heard at this point, however, with good reason.  Should the government continue down this path, expect the dollar to be worth peanuts, expect inflation to kick into 5th gear, expect unemployment to continue rising, expect the going rate to slowly creep its way back up and expect the supply of money to either become scarce due to more government issued lending or due to the simple fact that it just won’t exist.  See if that makes you feel warm and fuzzy….yeah didn’t think so.

Bailouts, Bankruptcies, and another “B” word I can’t say…

This all to familiar image above is but a taste of things to come.  With cash becoming more and more scarce and banks still dubious to release funds to anyone, it is no wonder more articles are springing up about companies going out of business.

Obviously Circuit City is the most well known company to declare chapter 7 bankruptcy, however, so many other businesses out there are headed in the same direction.  When you see a company declare chapter 11 bankruptcy, expect 2 things: They will either downsize and cut costs and try to come up with a fresh source of financing to aid in the process of rebuilding, or after time passes and little changes, declare chapter 7 bankruptcy.

What I don’t understand is how despite the fact that the government threw $700 billion dollars at financial institutions, banks are still finding it difficult to loan money.  I know that rules and regulations are more stringent than they were in the past, in the past all you needed was a first name and a pulse and you had a loan for anything, even if it was funding your lacadisic tendencies(Which seems to be the case for most), however, their needs to be some type of structure in place in order to make sure the right people are getting the money they need to continue doing business.

I don’t want to get into a discussion about the bailout, as it would lead to  a post about how Bank of America is talking about nationalizing itself and how the government is rewarding failing firms for failing, instead of helping those who are doing well continue to do well in these hard times, but let’s be honest here, where is all this money going?  And why do I hear more about CEOs using golden parachutes and splitting with millions, while the unemployment rate soars above 7.8% soon to be 10% by 2010.

The government isn’t doing anyone any favors.  They aren’t “stimulating” the economy; in reality, they are stimulating themselves.  I saw a clip of the John Stewart show a friend of mine sent me, and I have to say I agree with what he was saying.  His idea was to do a reverse stimulus, which would work its way from the consumer and then lead to the bank.  This makes sense, as most money spent by consumer to either pay bills or make purchases, ends up being deposited into the bank.

I honestly don’t see any of the bailout money being put to good use.  Obama’s stimulus bill, while yes it does look promising, carries a high price tag in that not only does it cost close to $900 billion, more importantly, it allows for more government regulation, something I am opposed to and something that usually borders socialism, depending on the magnitude of the regulation.

There does, however, exist a positive side to all this.  The fact that companies nationwide, specifically retail stores are doing poorly in sales means that consumers are beginning to understand the idea of living within their means, something we as Americans have lost sight of.  Part of this whole problem is people paying debt with debt and digging themselves deeper and deeper into a hole with a shovel they never owned and a lot of land that was never theirs.  

Don’t be dicouraged by the failing companies.  Recession is not always a bad thing.  For some it is an ideal buying opportunity.  Let us not forget too that recessions are a natural part of the economy.  The reason this recession is so painful is as a result of consumer spending with no concern for reality, major companies frivolously wasting money on bad investments and hopeless projects (Yes GM I am talking to you and your truck-line, being produced in a $2-3 a gallon of gas economy), companies amasing large amounts of liabilities, and banks throwing money at anyone with a first and last name.

It is almost like banks want government regulation.  Then again, who wouldn’t want the government to spoon feed them everything, in return for loyalty.  Good thing Bank of America isn’t nationalizi…..err….yeah it isn’t looking good….