"The TARP is the most expensive boondoggle in history. No one even knows what the banks are doing with the money. There's neither accountability nor transparency. As a result, investor confidence has deteriorated and stocks have continued to fall. No one trusts Paulson to do the right thing anymore; it's that simple."

(Mike Whitney)

There's a funny lesson most folks learn at some point in their lives; money doesn't magically solve problems all on it's own. Yet, as a society that's the exact approach we've taken, which shows that collectively we don't have a clue. We're literally throwing money at a problem, which we are told is never a good idea unless there's a sound plan to achieve a particular goal.

Let me break this down with a story;

Once upon a time, I had a friend who was down on his luck. He had a full-time job that he gave all his effort to, but for some reason he always had trouble with money. He got into the payday loan racket, credit cards and all that bad stuff. I felt bad for him, and one day he came to me with a sob story that he was trying to get his act together and get out of debt. At the same time, once out of debt he was going to save his pennies so that he could bring his wife, living in a foreign country, into Canada, which of course costs money on immigration and airfare. (this part worked out well... it took him a couple years but she finally got in country and they lived happily ever after)

So, I decided I'd help him out and give him a leg up; I gave him a chunk of money, on the express understanding that this was NOT a loan, but a gift, with the belief that he would use the gift to help himself out of debt....word to the wise, NEVER loan money to friends or family as that will ruin the relationship- either give them money with no strings attached or don't give it to them, no inbetweens.

A while later I checked in on him to see how he was doing, and his situation had actually gotten worse.

What had he done with the money I gave him?

He had bought a brand new big screen TV, purchased a bunch of DVD's and a new laptop. Debt situation was the same if not worse. I wasn't angry so much as deeply disapointed that he had squandered the opportunity to get out of debt.

The moral of the story is, you can give all the handouts to someone in the world, but if their behaviour remains the same as before then the handout will have no effect on the end outcome, except for maybe delaying it a little bit.

If someone is bad with their own money and loses it, then they will make equally poor choices when given someone elses money.

It's basic logic; if you carry out the same actions over and over again, expecting a different result is ridiculous.

Now, this is NOT a rail against charity or welfare or helping people out. There are lots of folks in life who genuinely do need a hand up and when they get it, they do indeed turn around and live a better life. But many admittedly do not.

So, how the heck does this apply to the banks and TARP money they've been given?

THEY HAVEN'T CHANGED!!!

Oh sure, they've made little changes. A lot of the securities they farted around with before are dead, although they and paulson are trying like madmen to revive that part of the market.

But fundamentally, at the core, for them it's business as usual. And that's why we're so utterly screwed!

They lost massive amounts of their investors money, so now they're well on track to losing the taxpayers money.

The only thing that's changed is that instead of private investors buying into the ponzi scheme, now public money is being poured into it, money which so far has evaporated at record pace and probably will continue to do so.

The U.S government would be better off printing 2 trillion dollars worth of paper money and shipping it off in stacks (say 1 or 5 dollar bills) so that folks can use it to burn for heat in the winter time, or maybe to stuff in between the walls of their soon to be foreclosed homes for insulation.

The longer you try to delay the inevitable, the worse things will be when the bill comes due. This is nothing revolutionary or new.

Clearly, the banking and financial sector is rotten to the core. They've had their time in the limelight, and now their shenanigans have spilled over into the real economy, dragging down legitimate companies and businesses that actually do tangible stuff.

There's another time-honored lesson in all this;

When the system is broke, you fix it, you don't try to keep it running as is!!

If a car starts breaking down, you need to find the problem and fix it. If you just keep pouring more oil and gas into it (or maybe applying the odd piece of duct tape) without addressing what the real problem is, you risk damaging it irreparably to the point that you need to junk the whole thing and get a new one.

Now we're not quite at the point of writing things off, but if we continue down this la-la land road to oblivion we will be.

Have you watched or followed the premier financial experts on channels like CNBC?

I don't know if I'm watching a financial program or a therapy session anymore. The same "experts" who said this would never happen are now backtracking, sputtering and clinging to a system doomed to fail, unable to admit that the smoke and mirrors of structured finance designed to create maximum leverage with minimum capital were a recipe for disaster.

It doesn't have to be this way, and only a few decades before we operated on a platform that was much more stable. But that old way of economics was way too 'boring' for the avant-garde mavericks of finance we have today. The old way of doing things calls for realistic, small profits that increase gradually over time. This however, has the downside of meaning that executives can't claim multi-million dollar bonuses in a single year and would probably have to settle with a few hundred thousand per year. Oh the humanity!!!

The current system we have is pumped up on steroids and strung out on crack, expecting and demanding double-digit growth in profits and appreciation in stock and real-estate prices year over year.

And each time it starts to come down off it's artificial high do we rush it into detox?

Nope! We give it another dose of crack, another "stimulus" to keep what's soon to be a terminal addict going just a little bit more, just.... one.... more..... rally!!!!

Again, the old way of doing things is just too boring and ideologically unpalatable- it calls for realistic margins, sound practices on lending and leverage. This applies across the board, from manufacturing to real estate. Under older practices, a house can and should appreciate in value (well, not the house but the land that's valuable) but that appreciation should be very small and gradual. Maybe a couple percent per year, tops. Same goes for companies profit margins, the revenue and value should mirror the organization's actual value, unlike a hedge fund that can claim 800% profit in one year with no real rhyme or reason behind it's valuation!

Saddly, it's highly unlikely that the masters of the universe, the titans of finance will admit they screwed up royally.

Instead, they will stick to their guns, arguing that everything will be fine and the bulls will come charging back anyday now. And of course there's plenty of sucker rallies to come where they will exuberantly declare that the market has a floor and will only go up from here!

In the meantime, the chearleaders of the apocalypse, the puppets and polyanna's of the free market will continue to chirp away merrily that everything is fine and the problems we see are just the result of nervous ninnies. They'll never admit the faults and fallacies of modern economics, because they don't have the framework to do so. They've been so utterly conditioned that what we have now is the end-all be all and there's no other plausible option. And that is why we may be in for some very nasty times ahead.

The system is broken, and it's time to fix it.