Opinion-Columns.com

Smash the Presses Before Ben Bernanke Starts Printing

In about a year it will be the 90th anniversary of the establishment of the Weimar Republic, the nickname for post-WWI Germany and a moniker forever connected with the hyper-inflationary economy of Germany. That circumstance lead directly to the democratic election of Adolph Hitler and WWII.

In 1914, the German mark was worth about 25 cents, or four to the dollar. Nine years later in 1923, Germany had printed itself enough marks to make 50 million of them worth exactly one dollar.

Fed to Make $200 Billion Available To Lenders
Bank Seeks to Loosen Credit
(Neil Irwin and David Cho, Washington Post Staff Writers, March 8, 2008)

The Federal Reserve took strong action yesterday to restore order to frazzled lending markets while a new report showing unexpected job losses underscored the toll that credit markets are taking on the economy.

The world's financial plumbing is so clogged that the central bank sees a need for new steps to clean it out to prevent severe damage. Mounting panic in the credit markets is making it harder for Americans to get mortgages and is increasing the rates they must pay on credit cards and auto loans. Even solid businesses are finding it difficult to raise money to expand.

Ben Bernanke, who is the current chairman of the Fed is hardly a plumber. One can only wish he was.

Under his tutelage, we may as well take the book from the left hand of the Statue of Liberty and replace it with a can of gasoline. A torch in one hand, gasoline in the other, the perfect metaphor for an American economy so distorted and so finance-driven, it hardly deserves the name.

"Send us your investors, your huddled capital funds"

We are no longer a capitalist society and have not been one for some years now. We are an interest-rate dependent consumer society and the sole, wheezing, smoking engine left to support that house of cards is consumer confidence. Essentially, the American dream has become a confidence-game (noun: a swindle in which you cheat at gambling or persuade a person to buy worthless property).

The immediate problem is that a massive sub-prime mortgage fraud has sucked us dry of the basic fuel necessary for staggering on--confidence. There ain’t none left. The tank is dry.

Ben Bernanke is going to fill ‘er up on money. He and George Bush and Henry Paulson have connived between them a ‘stimulus package to bolster the economy.’ If you look up ‘bolster,’ one meaning is to support and strengthen and another is to add padding. I leave it to your judgment which definition most closely defines giving each taxpayer $300 to $1,200 of his own money to goose the economy in the sole interests of the above-named public officials' personal friends.

None but the Washington Post (deprived in these days of cutbacks of any true financial writer other than Steven Pearlstein) could possibly swallow without a fit of coughing, the swindler’s excuse that ‘the world's financial plumbing is so clogged that the central bank sees a need for new steps to clean it out to prevent severe damage.’ Who on earth fed WaPo that line? Certainly it was not vetted by Steve. I don’t doubt he choked on his coffee when he saw it.

The Fed said it will make $200 billion available to financial institutions in an effort to ease a crisis of confidence that is making it harder for families and businesses to borrow money.

"They're recognizing that financial markets aren't functioning well, and that that creates risks to the real economy," said Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former senior Fed official.

Where do they get these people? Can I get a job at the Fed?

Financial markets have been looted, Ben. Wake up. This is not about families and businesses, this is about pumping up the worthless investments hedge-funds created. It’s about papering-over the hole in the missing billions before their major institutional investors sue them for fraud and send the whole crop of $100 million a year criminals off to Sing Sing.

Bernanke’s $200 billion is merely the camel’s nose in the tent. He proposed to create (read that print) $100 billion a month to prop up the banks for at least a year, but essentially for as long as it takes. Another ‘surge’ in an unwinnable war--anything it takes to get George safely back at the ranch before this whole swindle collapses on his head. Every 12 months (unless it’s not enough), Bernanke proposes to add $1.2 trillion to a money supply that totals approximately $7 trillion.

And the sworn duty of the Fed is to prevent inflation. Don’t cry for me, Argentina.

The dollar this administration has contrived to devalue by approximately half during its brief term in office, is now to be further demolished by stimulating, diddling, futzing with and printing their way over the edge of the cliff.  The printing press is to monetary policy as Viagra is to maintaining an erection. The one gives you a sore dick, but the other turns the United States into Argentina.

"A lot of what we've done has been mostly just to offset the tightening of credit that has arisen because of the financial situation," Fed Chairman Ben S. Bernanke said in congressional testimony last week.

Instead of simply cutting interest rates further, the Fed responded to this latest crisis yesterday with carefully targeted measures. The central bank said it will auction $100 billion to financial institutions, injecting money into the banking system by trading cash for troubled securities. The Fed will also make another $100 billion in cash available in exchange for securities issued by Fannie Mae and Freddie Mac, trying to restore confidence to the market for home mortgages.

The problems are the latest wave of a crisis in debt markets that began in August and reappeared again in November and late February. This crisis is one major factor in a pullback by consumers and businesses that has driven the economy to the brink of recession, or possibly over it.

• Lie #1: Offsetting the tightening of credit is (for Ben) easier than tightening the handcuffs on the criminals who profited from this fraud on the taxpayer.
• Lie #2: Measures were not carefully targeted, but recipients were. Wall Street will get its plumbing unclogged and you, dear taxpayer, will get the bill for it. (Before all this manipulation was factored in, your personal share of ‘unfunded debt,’ including tax breaks to the rich and an untaxed war, is—as of 8pm today-- $30,967.40. Family of four? Pony up $123,868.96.)
• Lie #3: No one is injecting anything. They are not ‘trading for troubled securities,’ they are buying bad debts with your tax money. They are bailing out criminals, so that no one will call them at their game, which has been to fleece the American public and blame it on ‘market conditions.’
• Lie #4: Bailing out Freddy Mac and Fannie Mae does nothing to restore confidence to the market for home mortgages, it merely supports fragile government backed institutions, who have been part of the game—again, with your dough. The same money you don’t have to pay child-care and health-insurance.
• Lie #5: There was no August crisis in debt markets. In August, we had the first indications of a purposeful financial fraud, committed against investors by a consortium of co-conspirator mortgage salesmen, mortgage bankers, bond rating companies, investment banks and hedge-funds. This will probably turn out to be the largest and most damaging Wall Street fraud ever to bring down an economy—far larger than the 1929 crash.
• Lie #6: A misnamed and lied-about ‘crisis,’ cannot possibly be a factor in anything other than the continuing cover-up of massive financial fraud.

Six lies is a lot of lies to pack into three paragraphs and 161 words. Amazingly, the WaPo failed to call a single one of them. No major newspaper in the United States has been carrying this as the widespread crime that it is. Steven Pearlstein has come the closest, which is why he no doubt spit coffee all over his office when he read the piece.

There is a cure for all this sickness and greed and fraud, but it will not be found in the halls of Congress, the meeting rooms of the Fed or within a new administration, no matter how much ‘change’ is promised.

Attempting to repair a half-century of financial malfeasance is as dreary a chore as trying to ‘fix’ communism. Just as Ronald Reagan never ‘won’ the Cold War (the wheels finally came off, while he happened to occupy the office), Bernanke, Paulson and Bush haven’t a clue about what to do. Other, that is, than run around with a torch in one hand, gasoline in the other, trying to calm crooked markets.

"The Fed has been running around putting fingers in dikes," said Diane Swonk, chief economist of Mesirow Financial. "Without that, the dike would have imploded, and water would have been spilling in."

Diane is closer to the truth than any of them. The dike will indeed implode and therein lies the only viable cure. An international crash.

The world danced around the Argentine problem, the Mexican difficulty and the Asian unpleasantness, but the financial capitals of the planet are not strong enough or flexible enough to waltz their way past an American crash.

From the ashes, we may be sufficiently humbled and perhaps even wise enough to do the things we haven’t courage enough to accomplish now;

• Oversee the absolutely uncontrolled hedge-fund industry that triggered this mess
• Disconnect business and industry from the IPO as a borrowing mechanism and send them back to traditional loans at traditional banks
• Do away entirely, completely and irrevocably with leverage
• Disabuse the investor of the charming fairy tale that uncontrolled growth is anything other than the definition of malignancy
• Return corporate stock certificates to their intended purpose of investment, rather than speculative instruments
• Make criminal the offer of stock options as incentives to management
• Consider laws initiating minimum-term (3-6 month) investment requirements to reduce the volatility of markets
• Tax capital gains as ordinary income
• Do away with the income tax
• Re-institute logical trade tariff policy

Those would be a few things that could be successfully accomplished following a crash. Add to those massive government investments in infrastructure, schools, public transport, alternative power sources, the de-corporatizing of agriculture and re-planning of our auto-centric and dehumanizing suburban sprawl.

Taking back control of the investment community would prevent the flight of scarce capital from the have-nots to the haves. Infrastructure investment, reorganizing agriculture, instituting tariffs and killing off the income tax are positive ways of creating good jobs at good wages. There is simply no political will to accomplish any of these goals, otherwise they would hardly have gained the half-century momentum that set us up for the current financial landslide, avalanche, tsunami or metaphor of your choice.

Meanwhile, someone please take the keys to the currency-printing presses away from Ben Bernanke.
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Media comment;

• Bloomberg-Most Read on Bloomberg: Carlyle; Bernanke on Mortgages; Ambac
• New York Times-When Ben Bernanke Speaks
• Financial Times-UK-Mortgage principal forgiveness will meet resistance from servicers
• Bloomberg-Paulson Says Deal `Very Close' With Congress on Housing Bill
• Wall Street Journal-Trichet Urges Dollar Unity

Elite? You Got a Problem with Elite?

Immigration—everybody’s hot-button issue--and America is once again arguing across the metaphoric back-fence and having the very devil of a time trying to balance fairness and equity.

BEING POOR--AND MAINTAINING YOUR POVERTY--IS A VERY EXPENSIVE PROPOSITION

The typical conservative leans back on his couch, meditatively stirs his Chivas and water with a pinkie and declares (with some considerable justification) "Well, it’s their own damned fault if they got in over their head. What the hell were they thinking?"

BUSTED--THE COMING CREDIT-CARD MELTDOWN

A brutally frank and honest assessment of our past 30 years would make the argument there is little hope for the credit-addicted working poor but a '29 style crash. An entire nation has been sold down the river of hopeless wages and easy credit.

The Grapes of Wrath, 2008

After 30 years at a factory making truck parts, Jeffrey Evans was earning $14.55 an hour in what he called “one of the better-paying jobs in the area.”

Wearing a Harley-Davidson cap, a bittersweet reminder of crushed dreams, he recently described how astonished and betrayed he felt when the plant was shut down in August after a labor dispute. Despite sporadic construction work, Mr. Evans has seen his income reduced by half.

So he was astonished yet again to find himself, at age 49, selling off his cherished Harley and most of his apartment furniture and moving in with his mother.

Thus are we introduced to Jeff Evans in Erik Eckholm’s New York Times article. He calls it "Blue-Collar Jobs Disappear, Taking Families’ Way of Life Along" and the final ‘along’ strikes me as superfluous and possibly anti-Strunk’s Elements of Style.

But you damn sure can’t argue with the premise that thirty years to less than fifteen bucks an hour isn’t a journey for which you need a Harley.

Astonished indeed. There’s a lot of that going around these days. Living in Europe, I find myself astonished that the American dollar (upon which I depend) has dropped by half in value as well. While the financial pages debate whether or if a recession may or may not be on the horizon and what that means or doesn’t mean, Jeff and I are hip-deep in it.

Middle-aged men moving in with parents, wives taking two jobs, veteran workers taking overnight shifts at half their former pay, families moving West — these are signs of the turmoil and stresses emerging in the little towns and backwoods mobile homes of southeast Ohio, where dozens of factories and several coal mines have closed over the last decade, and small businesses are giving way to big-box retailers and fast-food outlets.

Tom Joad’s sharecropped land simply dried up and blew away in Steinbeck’s Grapes of Wrath. Jeff Evans’ sharecropped employment fell to the planned, methodical, Harvard-bred maximization of quarterly profits. That fool's errand has wrought as much havoc on the American working environment as the dust-bowl thirties did, drying up and blowing away a fertile Oklahoma agricultural environment.

Two sides of the same short-sighted nickel.

Here, where the northern swells of the Appalachians lap the southern fringe of the Rust Belt, thousands of people who long had tough but sustainable lives are being wrenched into the working poor.

The region presents an acute example of trends affecting many parts of Ohio, Michigan and other pockets of the Midwest.
Slammed by the continued decline in the automobile and steel businesses, Ohio never recovered from the recession of 2001-2, and blue-collar families who had made it partway up the economic ladder find themselves slipping back, with chaotic effects on families and dreams.

Poetic language, swells lapping fringes.

It would come as a further shock to an already wounded Jeff Evans, that America’s ‘continued decline in the automobile and steel businesses’ was a put-up job. Mainstream media, including newspapers in Ohio and Michigan that owe it to their readers to look deeper, simply accept the clap-trap of continued declines as if they were seasons of the year.

The demise of Ohio truck parts production was engineered at a time when automobile and steel production were thriving in a country six and a half thousand miles away. A country with high wages and benefits, a nation with no natural resources such as iron and coal.

That country, of course, is Japan and it continues to kick our American ass in auto and steel production, even as Jeff Evans moves in with his mom.

What Japan does not lead America in, is the destruction of its industrial base by the weapon of quarterly profit. The Japanese were found during the fifties, cameras hanging from necks, at American industrial trade shows. They took our engineering expertise home with them and honed it, polished the product and called it Komatsu, Mitsubishi, Toyota and Honda.

Then they gave it back, while Detroit looked the other way.

(Business Week) Nandra Barnes knows about dead-end jobs. For seven years, the single mother of three labored as a welder at an air-conditioning factory in Grenada, Miss., a gritty job that, at $11.50 an hour, left her living paycheck to paycheck. Job security? Forget it. With every dip in orders, the factory would lay off more workers. "It seemed like there were always cutbacks," she recalls. Barnes was fearful of the day she would get the tap on the shoulder.

So when Nissan Motor Co. (NSANY ) opened a sprawling $1.4 billion assembly plant in nearby Canton, Barnes jumped at the opportunity and was lucky enough to snare one of the 4,200 jobs at the plant. Today, Barnes makes bumpers for Quest minivans and the four other models Nissan produces at the factory, where she earns more than $20 an hour -- a princely sum not just for rural Mississippi but for almost any U.S. blue-collar worker these days without a union card or a college degree. Barnes, 39, even has enough money left over after paying the bills to give her three kids things that she never had -- including, she hopes, a college education.

"With this job I finally feel secure that I can take care of my family," she says. "I plan on retiring from here."

Not only has the Harvard Business School model failed us, but the very companies who kicked us out of our own industries are now coming back over to give Nandra Barnes the job American business schools took away from Jeff Evans.

Nissan, Toyota and Honda don’t pay their senior executives to bet against the firm. You won’t see a Japanese CEO baited with stock options that reward the destruction of jobs in order to to juice a quarterly dividend. The $100 million bonus for off-shoring jobs, downsizing payroll and eliminating R&D (research and development) does not exist outside of the American business template.

Modesty does not prevent me from naming the murderer of America’s industrial and business base; it is without the slightest doubt the Harvard Business School and other university business schools who copy and promote that same viral infection. Of what possible benefit has it been to

• Create a business elite at the cost of a ravaged middle class?
• Trade Main Street for fourteen billionaires in Bentonville, Arkansas?
• Fast-food our mom and pop restaurants out of existence?
• Destroy the energy of small and mid-town America?
• Become a nation of consumers instead of producers?
• Concentrate our wealth and decimate our grandeur?

The benefit is only at the top and, even there, the Ted Turners and Warren Buffetts of the country are uneasy with what has been thrust upon them. We are better than hedge-fund managers earning $100 million yearly and complaining about their tax bracket. As once we were shamed by our uncaring attitude toward migrant workers, so we have become the shamed, victims of a capitalism gone nuts.

What worked when it was nourished by long-term investment, has been ravished by the winner-take-all race to quarterly profit. What thrived under owner-managership is destroyed by the hired-gun CEO, thirsty for personal gain. What was once the envy of the world as an entrepreneurial model, has declined to the loss-leader status of third-world economies. The planet’s leading producer nation, Marshall Plan savior of post-war Europe, is reduced to beggary and the combined goodwill of those who pity our credit-card mentality.

We have no dreams left, merely variations on self indulgence. None can afford the business schools that tear us down, save the rich who profit from the destruction. Reading of the Jeffrey Evanses, forced to move in with their mothers, our collective reaction is “loser.”

We are the losers. We, who had it all and, like Tom Joad, watched helplessly as it blew away.
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Media comment;

• New York Times-Blue-Collar Jobs Disappear, Taking Families’ Way of Life Along
• Atlanta Journal Constitution-State officials travel to China to sell Georgia
• MSNBC-HUCKABEE TRUMPETS BLUE-COLLAR APPROACH
• Herald-Tribune-For Clinton, Government as Economic Prod
• Detroit Free Press-Fix economy with manufacturing jobs

Welcome to the Ever-Changing, Ever-Same Face of America

As America becomes more diverse, there are edgy calls from talk-show-radio hosts to save the country for white, Christian (mostly) males . . . as though they had done something (other than kill off the natives) to deserve preservation. It’s interesting, to me anyway, that these Limbaughs and Coulters are a couple generations in from Ellis Island themselves and want almost desperately to slam the door on anyone and everyone else.

Drawn and Quartered--Destroying American Business, Quarter by Quarter

We are not so much a fault-finding nation as we are a fault-requiring one. Somebody has to take the heat. In the matter of where our manufacturing base has gone and why, I have a nominee.

The Year of the Naomis--Wolf and Klein--Both with Great Messages

If you read two books this entire year before election day, make them books by the Naomis—Wolf with The End of America and Klein’s The Shock Doctrine.

We’ll Take the Money and Run

I can’t help but wonder what Steve Mufson over at the Washington Post has been smoking. Somehow or another, he seems to think that the overpowering and financially secure Big Coal interests in the nation are on the run.

A Hundred Thousand Dead Because of Carelessness

These hundred thousand Americans that friends and family bury every year were not killed in auto accidents. A home fire, tornado or other unexpected disaster didn’t do them in. For one reason or another, some as simple as a minor checkup and others as complicated as surgery, they came home from the hospital in a coffin.