Apples, No Apples, Apples: The Sleight of Hand of Obama Inc.'s Elite Economic Corps of Dunderheads

OK. Now I had to read this a couple of times to make sure I got it straight. Now, I thought that I wasn't reading it correctly. I mean, circular logic has some famous adherents. Just look at Descartes' Meditations on First Philosophy...or Sam Harris' justification for torture. But this circle is the most striking for how clearly circular it is. You don't have to dig too deep to see the sleight of hand going on in this one. For the whole article, you'll have to check out this link here.

But the part that floored me was this quote:

""I do think the American people in the past have shown an excellent ability to respond to adversity," Fed Chairman Ben S. Bernanke told members of the Senate Budget Committee. "And I believe it's going to happen this time and that we're going to see a much stronger economy, not that far in the future."

To hasten that day, the Fed and the Treasury launched their long-awaited program to jump-start the market for consumer loans, including financing for small businesses, students and car buyers.

Under the program, known by the acronym TALF, the Fed will provide loans to investors who buy securities backed by newly issued consumer loans. The idea is to revive the market for asset-backed securities, which provides funding for a large portion of consumer lending.

"In our system, banks are important, but typically 40% of lending comes through the securitization markets. And those markets are not functioning well," Treasury Secretary Timothy F. Geithner told the House Ways and Means Committee.

"So we're going around banks . . . by doing something only the government can do, which, on appropriate terms to protect the taxpayer, is to try to get those credit markets opening up again," he said." "

OK. TALF. This is the system as it appears to be presented here. The government will now encourage more lending to groups which are high risk in a recession and which the markets recognize as such: students, small businesses, and car buyers. (It may be for that reason that the banks aren't loaning as much to these groups right now..duh....)

But of course, Obama Inc. and his party of looting neanderthals, think that the answer is to give more money to people who probably won't be able to pay it back. (AIG, GM...etc, etc, etc...)
In this case, they will subsidize the extension of credit to high risk groups by sponsoring securities based on packages of volatile debt. They will use the security of the United States Treasury to guarantee that debt and sell shares in it to investors. Not only that, but it will loan money to investors so that they can buy those securities. So, technically, the government will be making it look like it's selling financial instruments when really it's just handing out taxpayer money again.

If the initial loans go into default, the securities become worthless. That means the government can't collect the money from these loans, which means that the investors also don't get anything from the securities either, except that they have to pay back the loans to the government that they used to buy the now worthless securities. Which means that the government will in effect be paying for it's handouts to high-risk lenders by convincing credit-worthy investors to commit to paying for them over the long-term.

Housing fiasco redux.

What Obama and his geniuses are assuming is that the people who will receive these loans will actually pay them back. Now here's the catch. If any financial institution was reasonably confident that the people who are the potential beneficiaries of these loans could actually pay them back, then the financial institutions would loan them the money in the first place.

Why? Because that's how financial institutions make money. By lending to people who pay them back plus interest. Nobody makes money by lending to people who don't pay back. As the housing fiasco and its consequences have effectively demonstrated.

So what will happen to investors who buy large amounts of these securities, if the securities go into default (as they probably will)? Well, their balance sheets will have a sudden gaping hole where their assets used to be, and an equal amount of now unsupported debt. In short, I think that any investor who takes a heavy interest in these derivatives will be staking a lot on the dependability of the federal government to lend responsibly. And if the federal government doesn't, then we will see even more investors taken down in this thing. That will further damage the economy, destroy even more wealth (or "redistribute it" as Obama likes to say), and almost certainly cripple our nation for decades. (That is, decades more than these kind of policies have already crippled us...)

Now, now, I'll be fair. The current crisis isn't Obama's doing. It was caused by Bernanke, Greenspan, and the hypocrites at the Fed and in Congress on both sides of the aisle who have been supporting centrist government-controlled markets. That was the problem with the Republicans. They talked free markets, but they were busy getting their hands deep into the guts of it, so they could grease their own pockets, and the pockets of their buddies. That and they were spending so much time preaching about God that the secular conservatives out there didn't feel very comfortable supporting them either.

The Democrats are idealogues. I seriously believe that they think that they are helping people by sacrificing us all to the hunger of the disenfranchised mob that has been created by generations of irresponsible governance. (Although I think it's telling, how many of Obama's picks have a problem paying their taxes...)

The answer is to stop this madness, not to keep trying more of the same thing.

Cut spending, cut taxes, cut social programs and privatize them.
Privatize education.
Dissolve the Fed.

Introduce a staged retreat from social security so that we can support those who have already paid their way in, but so that we can phase it out as soon as possible. Phase out medicare and government intervention in insurance premiums.

Stop the senseless bailouts of companies that shovel out lifetime-guaranteed retirement policies to workers who retire at 48?! (Like GM....)

Stop the war on poverty. The supposed enemy in that war is the only group that can even remotely provide what is needed to alleviate the problem, by pursuing that war we intensify the poverty.

Stop the war on drugs. 1 in 32 Americans are in jail. 25% of them are there for drugs. Only 5% of homicides were narcotics related. Educate your children to keep them off drugs. I agree, they suck. They are NOT good things to have around children. But neither is tobacco or alcohol, and we have managed to keep them in control without making them into the dangerously uncontrolled illicit multi-billion dollar global industries that illicit drugs are today. In a way, the war on drugs is paying for the war on terror....paying our enemy's wages. Not unlike Prohibition and the mafia...Remove the profit, make them legal and regulate them like any other drug or intoxicant.

And, no, we don't need the self-inflated pompous rhetoric of Rush Limbaugh to rally around. What we need is a return to fundamental principles, like those advocated by Ron Paul and Barry Goldwater and the generation of conservatives who really lived up to that name. The crisis we are experiencing day by day in our sweat, our fear, our blood, and our lives...this crisis is a moral crisis. The moral superiority of laissez-faire capitalism, the objective moral reality of rational self-interest as a life-generating force, the moral supremacy of reason as opposed to the bulwarks of religion or the frantic paranoia of the social relativist---the denial of these truths is what we are experiencing tangibly, and visibly and undeniably this very moment.

This country is headed in the wrong direction, and we're speeding it up! You can't defend freedom by destroying it. You can't defend liberty by enslaving yourselves. You can't increase prosperity by punishing it. You can't inspire innovation by stifling it in bureaucratic red tape. You can't broaden minds through education by stifling teacher creativity. You can't heal bad debt by creating more of it. You can't have your cake and eat it too.

"Yes, this is an age of moral crisis. Yes, you are bearing punishment for your evil. But it is not man who is now on trial and it is not human nature that will take the blame. It is your moral code that's through, this time. Your moral code has reached its climax, the blind alley at the end of its course. And if you wish to go on living, what you now need is not to return to morality -- you who have never known any -- but to discover it." --Ayn Rand (Atlas Shrugged)