In Washington D.C., bankers and Wall Street types are being subjected to the same government torture. Bank CEO’s who were (in a few cases) forced to take TARP money are lectured on responsible lending by the same Senators and Representatives who demanded that Freddie Mac and Fannie Mae make loans to borrowers who had no plausible means of paying back the loan. Congresswomen who fly personal jets at the expense of taxpayers lecture CEO’s with plants and employees across the globe about why they should fly commercial.
The same government which created the Department of Energy, 32 years ago, to wean the nation of our dependence on foreign oil is now hell-bent on making the domestic energy business as unprofitable as possible in an effort to somehow make solar energy relatively more cost effective, despite the fact that solar and other renewables cannot begin to close the gap in the near future, whereas gas and nuclear could have allowed the U.S. to be energy independent years ago.
The same government which failed to regulate banks adequately during the heyday is now thought to be competent to run them after they are nationalized. The government that turned social security into a $52 trillion unfunded liability now wants to take over the healthcare system in order to protect taxpayers. The same government that created an enormous illegal immigrant problem by neglecting for decades to develop a legitimate process for documenting foreign workers is expanding its programs of paying people for not working instead of stimulating the economy so that businesses can keep people working in their jobs.
In Colorado, a quick look at the “shovel-ready” projects includes bike paths for Boulder, but now that judges can cram down new loan terms against the lenders’ wishes, tossing private property rights out the proverbial window, the capital markets remain so locked up that charter schools can’t have access to fund building programs that would take kids out of the modulars and give them a brick & mortar building in which they can study.
Capitalists are running for cover. Stocks continue to plunge. The nation elected a President who is slightly to the left of socialist Bernie Saunders when it comes to his voting record, and our system of allocating capital has seized up. In “The Ascent of Money,” Niall Ferguson demonstrates that a sound banking system is a prerequisite for social prosperity. Under Bush, and Clinton before him, big government failed to protect our banking system from managers and directors who were value-less in more ways than one. Under Obama, policies designed to transfer profits from capitalists to “the people” will find that neither profits nor capitalists can long endure the assault.
The bankers who plundered are guilty. Kudos to Andrew Cuomo for going after those individuals. Why aren’t the Republicans equally roused? However, the banking system needs to be saved, not punished. That is why the TARP bailout was necessary. Prosperity depends on accountable management, a respect for private property, responsible accounting standards, and a Securities and Exchange Commission that is capable of rooting out mis-deeds and punishing the evil-doers, rather than just chasing paper while Rome burns. Individual companies should be allowed to fail, unless they would take the rest of the system down with them.
There are many democrats, though not in leadership positions, who believe in freedom and enterprise and small government. Where Republicans have shown little compassion for problems in our inner cities, there are democrats who have both a heart for “the people” and are smart enough to be outraged by the current attempts to dismantle the free and capitalistic ways that allowed America to become the envy of the world. Moderate democrats, unite! Save us from ourselves.
There is a lot of discussion, these days, about how Obama’s bold and courageous policy shift is trying to re-make a culture that has benefited, mostly, from the cultural shift toward Reaganism in the early 1980’s. People forget that Reagan had a compassion for “the people” that allowed him to be a great communicator. Reagan believed in a moral America and, I believe, would have been deeply disappointed by the antics of today’s CEO crowd. Reagan, the former union leader, believed in people getting paid a fair day’s wage for a fair day’s work – and would have been aghast at today’s policies of paying people not to work, paying bankers not to lend, and paying government staffers for working against the very cause that their department’s were created to pursue…all at the behest of special interest groups.
President Obama, we do need change. And, yes, you did win the election. However, the election was about reforming the healthcare system, not trying to expunge profits from the system in an ignorant attempt to appropriate profits in order to make sure illegal aliens don’t suffer discomfort while on our soil. The election was about making the capitalistic system start working for everyone rather than just the managers who feel entitled to pillage companies for their own benefit, not abandoning a hundred years of property law in order to pay for the promises made to voters during the campaign.
Our government leaders are aligning the vast resources of the government against the millions of business owners, without whom an economic recovery will not be possible. After inciting the masses with promises of unearned material gain, taken from the vast stores of wealth that belong to capitalist dogs, the socialists-in-charge are going to find out the hard way that as 401(k)’s become 201(k)’s and then 101(k)’s, the end result is that we are all slumdogs in the end.
The nation is following California’s lead. Our government over-spent during the good times, only to find that unwise governance leads to economic difficulty. During the tough times, California borrowed more and continued to build a state-run politically correct republic, self-righteously looking down on the rest of the country for not getting in line, only to find that it couldn’t begin to fund the promises made to its people. Now California is sending IOU’s to its taxpayers and begging flyover country for a bailout.
At the national level, we have learned nothing. To paraphrase JFK (in Berlin), “we’re all Californians, now.” But who will bail out the US?
I don’t know if we’re headed into a Depression or not. This is the first time in 27 working years that this has ever been a legitimate worry for me. America, the old America – Reagan’s America, is a great and resilient country. I hope that America can withstand even this latest regime change. But if we are going into a Depression, I can tell you that I know of no good strategy for capitalists or the people they employ. There are no winners. There is only extreme pain, often followed by abuse from arrogant powers in the government and, ultimately, the atrocities of war.
In the short run, the market is a voting machine. In the long run, it is a weighing machine. Every time our policymakers open their mouths, the markets have been voting “No!” Let’s hope that in the long run, these policies don’t leave the nation’s storehouses empty with nothing left to weigh.
Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.
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