I was just listening to Karl Denninger’s U Tube expose on the government stimulus package. I pretty much agree with his math, and what it will cost the average home owner, but I believe that the Fed and Congress have with a little miss-direction, something else in mind. The problem is far bigger.
Don’t believe for one minute that Congress decided to give us a stimulus check. Examine the S&L collapse of the 1990’s. We, the tax payers, paid over 100 billion to bail out the banks. This is just a different approach, kind of a pre strike initiative. The ultimate goal is to inject the cash into the banking system, resulting in increased liquidity for the financial markets. The average Joe on the street thinks the government is doing something for him. Yea right!
To view it in a different light, everyone’s savings was just taxed at 10%. No tax was collected. $10k in the bank now has the purchasing power of $9K. Deposit the check and $10K becomes $11K but it's only worth $10K. The taxpayer got nothing out of the transaction except a warm and fuzzy feeling that the government did something good for them. As Karl mention, we got screwed by Congress and we thanked them to boot. The irritating thing is a majority of people have no idea what we are discussing here and I am afraid it will remain so.
The Fed (Bernanke et al) and Congress are trying to keep the financial system from imploding. Any solution, in this case, no matter how ever far fetched, is worth a try. Their reasoning, "It’s at least a 2 to 20 trillion dollar mess. If we can spend 5% of that and keep it from happening, it is well worth the investment." The alternative is an inconceivable financial collapse. This is a "Hail Mary Pass" for the end zone. The only trouble is, this isn't the last seconds of the 4th quarter.
Government can't create money out of thin air. Inflation is a government tax. Accept that as fact, and the picture becomes clearer. In algebra, adding the same amount to both sides of the equation does not alter the values. If you want to call it a Stimulus check, be my guest.
There is one problem that everyone is glossing over here. Two to twenty trillion dollars has been lost. Whose money was it? There is only one place with big money like that, our retirement savings plans. Let's keep quite about this; we sure wouldn't want to start a panic.
Don't pay any attention to the pictures; they have nothing to do with what I'm talking about (I'm lying). Double click the picture above for a larger image, you need to read the fine print.
A $100 doesn't go far any more. Look for the $1,000 bill to be reissued back into circulation. Do you notice a pattern starting here??
Copyright 2008 All rights reserved