Did you know?

The Great Depression didn't happen over night. The history books state that it started in 1929 but it took a few years for things to get really bad. Today, it's been just over a year since the near collapse of Bear Stearns (who is now dead) that has signalled the start of the the bad times the economy has been going through. Nevermind that this was predicted years in advance with the Fed encouraging bubble after bubble after bubble and transparency now nonexistent through deregulation in the market.

Did you know?

Since August 2007 the Federal Reserve has gone through almost 80% of their balance sheet trying to keep the market floating. How much are we talking in dollars? Approximately 800 billion. If you've been following what's been going on in the economy, since August of 2007 several major investment banks and firms have gone under. Each time they've done so, the Fed's solution has been

1) Lower interest rates at which money is loaned.

2) Inject 'liquidity' into the system. Liquidity is a fancy term for money.

So, with all the trouble going on in the economy, the solution the Fed used was to artificially (and unsustainably) cheapen the cost of doing business AND throw money at the problem. The almost 800 billion dollars that has been thrown at the problem, will ultimately be paid for by U.S taxpayers. This money, paid for by yourselves and your children, has gone to one of the biggest cases of corporate welfare in the history of the U.S. It's been loaned out so failing banks could keep running. Well they failed anyways, all it did was delay the inevitable for a little while. It's been used to finance 'buyout' deals in which a still surviving bank would buy a dying one for pennies on the dollar, which still required billions. The most recent use of some of this money was an 85-billion dollar deal in which the Fed will now have an 80% controlling share of AIG. Before that they pumped 70 billion into the market after monday's pandemonium with the death of Lehman Brothers.

Did you know?

None of it has worked. The Fed has thrown money at the problem, which has only staved off the inevitable for a short time. And the truth is, there's not too much they can do anymore. They've only got around 200 billion left to play with (just over a year ago they had approx. 1 trillion) so if things continue at present the Fed can only step in to bail out and buy out and inject money for a few more months, maybe. Furthermore the question is SHOULD the Fed be doing this? Remember, in the end this is money that in one way shape or form will be payed by YOU, the taxpayer of the great United States of America, and it's money that's essentially been thrown to the wind. Also remember their title- Federal RESERVE. Emphasis on the word RESERVE. Once their remaining capital is gone, the word 'reserve' should be removed from their title.

The real reason why things haven't gotten better is that this isn't some blip on the radar, or part of the natural boom bust cycle. I'm all for capitalism, but what we have today is not that. We have now invented Casino Capitalism. This is Enron writ large people. We've removed regulation and oversight of the economy. Banks were left to police themselves, and so they made up numbers and cooked the books. Don't believe me? Try and find out how much capital the big banks have, vs their debts.... the truth is even they don't know. They don't know themselves where they sit because they've spent years cooking the books to turn toxic debt into fake nonexistent money that they invested in the marketplace. They spent years getting away from 'asset heavy' ventures to find ways to turn hypothetical, nonexistent money into even more hypothetical nonexistent money.

We've gotten away from the meat and potatoes of capitalism, in which tangible goods and services are the source of revenue and profit and instead we've replaced them with the fancy and unsustainable idea called 'wealth creation' in which money trades hands to create more money, magically, with no real products or services traded.

At the root of everything, however, there must be something physical. Some tangible asset, good or service. For years, that asset has been housing. The banks took the value of a home, grossly inflated it hypothetically, then used it as collateral for all kinds of monkey business. Now that trouble has arisen with that collateral, the house of cards they've built is falling down. And we're the ones who are paying for it.

Did you know?

The Government has done nothing. At this point, Bernanke and Paulson are more akin to the real president and vice president of the nation. The Supreme Court has done nothing, when they should be stepping in cracking heads with criminal investigations. Why should they be doing this? Because there is no longer transparency in the market. If there's no transparency, folks and businesses (especially foreigners who unbeknownst to most Americans have been financing your 1 trillion dollar VISA bill adventure in Iraq and Afghanistan) lose confidence. If investors lose confidence in a market, they pull their money. When you have no transparency, no confidence in a market, what do you get?

A Casino! Welcome to Casino U.S.A. Want to buy into Mutual Funds or a 401K plan? Step right up, your choice of Roulette, Black Jack, or if you're very well moneyed there's always poker. It's a little more fair if you know what you're doing. For all the little folks, there's the slots! This is the kind of market you'll have to live with- no oversight, no transparency, no accountability. Average working folks can invest their money and it's a crapshoot what happens after that. And the house always wins (as proven by the 800 billion dollar taxpayer bailout of your PUBLIC money going into PRIVATE banks hands)

It wasn't always this way. Back when the market had accountability and transparency folks could confidently make an investment if they'd done their homework and conducted proper research. Yes, there always have been failures and unexpected disapointments. But for the most part, with accountability and transparency and investor could usually know if they were getting into risky business.

Did you know?

There is one person who started cracking heads and asking uncomfortable questions. His name is Elliot Spitzer, you may remember him as the disgraced former Governor of New York who was ousted after he was caught in a liason with a prostitute. The news media covered it as a typical major corrupt politician scandal, but left out the fact that he had Wall Street running scared. He started asking the tough questions and had the clout to actually start getting answers. Many folks don't know that there were many sighs of relief in the boardrooms of major banks when Spitzer went down. Now I'm not defending the man, but isn't it convenient that just as he was putting the banks on the hot seat, suddenly his dirty little secret (which had been ongoing for years) suddenly took him out of the picture?

Did you know?

This article has gone on way too long and I'm sure you're beyond annoyed with my dumb little 'did you know?' gimmick. Thank you for taking the time to read, and let me leave you with this unsettling tidbit-

Both of the presidential candidates, McCain and Obama, have no real plan to deal with this. They've both made speeches that roughly say "there are problems with the economy, we'll rally and fix them, we'll cut taxes at some point to try and make things better, go U.S.A!!"

They have no clue what to do. Cutting taxes won't fix a systemic problem. It doesn't even address the problem. And I highly doubt that either of them will take the banks to task and ask the tough questions that need to be asked. Saddly, this will probably degenerate into some childish democrat vs. republican pissing contest of finger pointing. Ultimately, I doubt neither candidate will do much to fix this because it's become abundantly clear that the banks and major business interests are far more important than you, the taxpayer.

Welcome to Casino U.S.A. The house always wins.