Friday, January 30, 2009

The Only Thing to Fear: Money Vanishing into Thin Air?

Wednesday, Diane Rehm cited a statistic that the world has lost 40% of it's wealth in this financial crisis. What does that mean? In physics, the law of conservation of energy states that energy cannot be created or destroyed. Isn't there a law of conservation of wealth? I don't buy the idea that the world's wealth just spontaneously combusted. The world's confidence in the markets is all that has disappeared?

Miscalculations in finances and physics can cause great unpleasantness. These are the roots of our current financial problems. But wealth doesn't just disappear. During the housing bubble, a lot of people paid too much for houses. But that means someone else received too much. So where is the money now? Vaporized? No, it's under people's mattresses and sealed in bank vaults. The money is still here; it just isn't moving. If movement of money is what defines wealth, then we just wake up tomorrow and start loaning, rehiring and spending. There's that 40 percent back. No body burned the money supply. Our means of production are still intact. We still remember how to build houses, don't we? The wealth didn't disintegrate. Our confidence in the markets did.

So we've decided the U.S. economy is too big to fail. I can accept that. The powers that be have determined the best way to prevent that is to take the housing bubble, the credit crunch, the tanking auto industry and every other disaster we are experiencing and send them through the pipes to become one big National Debt Bubble (to expire when we all lose confidence in the phrase “full faith and credit of the United States”).

But we live to pay another day I guess.

What troubles me most is that this solution doesn't do anything about the confidence factor, and without that I don't see our great grandkids getting their money's worth. I don't believe there is a magical amount of money that will save the economy. A few months ago, I thought $100 billion was a lot of money. If Doctor Evil demanded that amount now we would all die laughing. We're well into the trillions with all these bailouts. If Secretary Paulson had asked Congress for $200 billion with conditions that financial institutions must use the money proactively or get flushed, and the architects of the bailout had convinced me it would be enough to stop the downward trends, I would have gone out and bought a house. So would you at these prices. Given, some Wall Street execs. would have had to weather a year of smaller bonuses, but they would have pulled through I'm sure.

President Obama's stimulus package is the same story. Americans would do a lot more with $819 billion in a confident mindset than they would in a “depression” mindset.

Bankers, employers and consumers only part with their money with expectations that more will come. If our leaders and media stop using claims of the world's wealth evaporating as hooks, I believe we could be well on our way to recovery by the end of the year. We need more than a comprehensive list of what the money will be used for. We need to know our leaders are confident what they are doing is going to work. Then it has a much better chance of actually working.

Here's my theory about what ended the Great Depression. It wasn't the New Deal or WWII. Roosevelt actually got those poor saps to believe the only thing to fear is fear itself. Then they ended the Depression.

Saturday, January 17, 2009

Midnight Bush-Bashing

Bush's presidency is done, but some Democratic leaders aren't finished bashing him yet. Politico reports that this week House Majority Leader Steny H. Hoyer distributed a video showing how Bush failed America. House Judiciary Chairman John Conyers Jr. released a 486-page list of grievances about the Bush administration. I'm no fan of GWB, but this makes Kenneth Starr look like Ryan Seacrest.

These last minute jabs seem even lower than the usual Washington partisan fighting. There aren't many conservatives still waving GWB's banner. The guy is no longer a threat. So why attack him now?

If there is justice to be done to the Bush administration leadership, I'm all for that. But I find it hard to believe after all the administration has been accused of off the cuff in the last eight years, the democrats are just now getting their case together.

I felt many times that GWB overstepped his bounds as president, but the congressional leadership never seemed to be able to do anything about that while he was in office. It seems Democratic leaders are finally getting heroic now that he has no power. Conyers wants President-elect Obama to launch an investigation of whether the Bush administration broke any laws. Somehow I don't see President Obama making that a priority.

Kenneth Starr is remembered today by many democrats as a politically motivated vigilante for his investigations of Bill Clinton during his presidency. But Starr didn't follow Clinton after his eight years were up. There wasn't any point.

Nothing of what the democrats are now bringing forward appears to contain pointed evidence of any crime, just more of the same politicking and negative campaigning.

In my opinion, the democrats saw how well the anti-Bush rhetoric worked in 2008, so they want to try to stretch it to 2012.