Expect nothing, live frugally on surprise.

Thursday, November 13, 2008

US Economic Meltdown - Part 4 Preventions

Three important truths must never be forgotten.
All governments lie
All governments debase their national currency
All political leaders promulgate policies to perpetuate their power

The lies of the current UPA government of India regarding the civilian nuclear deal and the changing lies of the current US president regarding the elective preemptive Iraq war are perfect examples. The Indian Constitution unfortunately has no clause for ratification of treaties by parliament. The US Constitution was framed by a wiser Madison who foresaw the benefits of war for the president and thus gave the power to the Congress which over the last hundred years has mostly been composed of rubber stamping morons and sycophants without integrity, honesty or intelligence.
“War is in fact the true nurse of executive aggrandizement. In war, a physical force is to be created; and it is the executive will, which is to direct it. In war, the public treasures are to be unlocked; and it is the executive hand which is to dispense them. In war, the honors and emoluments of office are to be multiplied; and it is the executive patronage under which they are to be enjoyed. It is in war, finally, that laurels are to be gathered, and it is the executive brow they are to encircle.’‘
Thus spake and wrote Madison, but in the hope of adding Canada to the Union while the British were occupied with the threat of Napoleon of France, he went to war in 1812 with disastrous consequences.There is little hope of America having a decent and responsible Congress or President, so like Plato’s draconian prescription for “The Guardians”, the people of the US need to pass a national referendum by which, those presidents and Congress who authorize an elective, unprovoked, preemptive and offensive war must immediately go for active combat duty on the front line as soon as the war starts, instead of sending the children of the common or poor people to become cannon fodder. A second referendum needed to pass is that the salaries of all elected officials be decreased every year by the rate of inflation and omitted altogether including their perks, privileges and pension benefits, every year that the budget is in a deficit. The leaders with all their cries of patriotism should loudly proclaim that they regret that they have but one life and one salary to offer in the service of their nation. Their failure to do so would make the truth obvious that patriotism is the last refuge of scoundrels.Let me illustrate why the above are essential. A foolish Bush by his burning desire for war has raised the price of oil from $25 to $110 thus raising our oil import bill to nearly 500 billion dollars which go to some OPEC members who are not our friends and may even be financing terrorists. The war, according to Nobel Prize winning economist Joseph Stiglitz, will cost us an additional three trillion dollars. As I predicted in “Federal Reserve has a Sophie’s Choice” and my previous part 3 of this article, Bernanke like Greenspan has flooded the markets with money, shunned transparency and used his position to buy junk mortgage bonds to keep the crooked banks afloat and on Friday gave a non-recourse (not required to be repaid) loan to JP Morgan Chase Bank to pass the money on to Bear Stearns to rescue it. Bear Stearns was one of the offending culprits that securitized, packaged and sold this weapon of mass destruction to other banks, insurance companies, pension funds and individuals blinded by greed and ignorance. The securities were created by duping naive, ignorant people desperate to own a home. One might as well give the Nobel Prize for Medicine to Typhoid Mary who began an epidemic of typhoid in America a century or so ago.The facile argument used is that the collapse of Bear Stearns would be contagious and other big avaricious institutions with highly leveraged bets would be sucked in to the whirlpool of counter-party credit default risk, leading to a cascade of defaults. Nobody mentions the fact that lack of due diligence by the rating agencies (Moddy’s, S&P, Fitch etc.), unthinking greed and absence of caution and prudence by the mono-line insurers (MBIA, Ambac, FGIC etc.) and absent supervision and regulation by the Fed, Bank examiners etc. led to the burgeoning 500+ trillion dollar unregulated derivative market that will ruin the US economy. Greenspan encouraged irresponsible behavior by consumers by recommending the use of adjustable rate mortgages, without prohibiting the institutions from luring home buyers with teaser ARM rates that jumped exponentially on resetting in a year or two. The gullible sub-prime borrowers never read the fine print and the Fed’s job is only to protect the big boys, not common folk. No such grand plan has been put into effect for the payment delinquent home buyers. The taxpayer will foot the bill just like in the S&L debacle of the Reagan era and the institutions will do their mea culpa like Reagan, by saying “mistakes were made”, but we are not responsible.History and geography bear witness to governments’ debasement of currency. The Roman emperors reduced the gold and silver content of their coins and replaced them with lead. The US government and the Fed are sinking the dollar by deficits and making the dollar a fiat currency. From Argentina to Zimbabwe hyperinflation devalued the national currency. One needed billions of Reichsmarks to buy a pack of cigarettes in Weimar Germany. The lust for bigger kingdoms of tyrants and CEOs leads to economically destructive wars and takeovers, and the lust for re-election to power in democracies leads to earmarks, COLA increases in Social Security and deficit spending to please voters. They eventually lead to national ruin.Look at the nation destroying policies of puppet Manmohan Singh and his fiscally irresponsible Finance Minister Chidambaram. To avoid losing in state elections, the central government did not raise the price of gasoline, continued the cooking gas subsidy causing severe losses to PSEs (to be subsidized from the national exchequer), started a rural employment program laden with corruption to enrich crooked and corrupt local party leaders and bureaucrats and caused heavy losses to nationalized banks by forgiving farmer loans. This last bribe for votes will be ineffective as most poor farmers do not qualify for bank loans and borrow from moneylenders at exorbitant rates. They will not be saved and nor will the US sub-prime borrowers. The profligate deficit spending increases the national debt, a burden to be borne by future generations. It is this same malfeasance that allows Bernanke and Blunder Bush to make whole the fat cats who finance the latter’s election and the political parties, while leaving a staggering burden on future generations. The previous nation destroyer Greenspan now travels from state to state and country to country giving speeches at I don’t know how many thousands of bucks a speech and gets handsome advances for his memoirs like Bush Sr., Clintons (Bill & Hillary)The life of politicians is like the passage of food through the human alimentary canal. No matter how appealing to taste, smell and vision, the food maybe at the beginning prior to intake and passage (winning elected office), politicians ultimately (after winning elected office) become visually disgusting, foul smelling waste of little use and possibly great hazard. At best they can only be used as fertilizer and that also after appropriate treatment, so as not to be a threat to public health.


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