The Failure of the Bailout

Posted on October 22, 2009

As the political apparatus in this country continues to extol the virtues of the financial bailout, I think it’s important for thinking investors to remind themselves that the bailout orchestrated by the Fed and the Treasury has in reality been a dismal failure. Therefore, extreme caution is still warranted when venturing into the US financial market, which remains a vast ponzi scheme now supported by taxpayer dollars.

The Brilliant Solution: Print Trillions of Dollars

The truth is that the bailout has merely been a financial bailout, rather than an economic bailout. In order to combat what is ultimately a deep economic crisis, which had really been brewing for nearly a decade, our brilliant economists at the Fed, led by Bernanke, devised a truly creative solution: print trillions upon trillions of dollars and give it to scheming bankers with no strings attached. Surely Bernanke will soon win the Nobel Prize in Economics for this ingenious invention. Simultaneously, in order to appease the common folk, the President ordered the printing of a few hundred billion for some part of the production economy, but for which segment nobody really knows.

The Result: Devaluation of the Currency, More Toxic Assets, and Higher Energy Prices

Ultimately, this massive printing of money has, not surprisingly I might add, accomplished absolutely zero, except to sharply devalue the US currency, which in turn has artificially driven up the prices of financial assets. This has in turn emboldened crooked financial institutions, to completely ignore a restructuring of their toxic real estate assets, and simply pay out the government booty as bonuses.

The US residential real estate industry, remains by far the largest part of our real economy, as opposed to the fantasy economy on Wall Street and the bailout economy in Washington. And yet, despite media reports to the contrary, the real estate industry remains in a dismal state, propped up solely by another silly financial innovation, the first-time homebuyer tax credit.

Of course real estate cannot rebound in any meaningful way, if the people who can actually buy the houses have no money or jobs to pay for the houses. But, shh don’t share this brilliant insight with the geniuses running the Treasury. The banks already understand this simple fact, though, which is why they have made it virtually impossible to get decent credit to buy real estate, as they prepare for an avalanche of new distressed properties.

Finally, to make matters worse, the slosh of money has now contributed, once again, to sharp price increases in necessary commodities, especially the price of oil. Ultimately, rapidly rising energy prices, as recent economic history and logic dictates, will completely destroy the still fragile US economy.

In the end, our real economic problems remain unsolved by the bailout and will keep coming back to haunt us. These grave economic issues are of course:

Dependence on non-renewable, costly, and environmentally-harmful energy sources, whose prices are driven by speculation

Upside Down real estate markets, that remain dominated by banks intent on profiting from failure

Continued proliferation of Ponzi Finance supported by taxpayer dollars, and the

Unrelenting Rise in Costs for basic human necessities, such as healthcare.

Unfortunately, though each one of these problems can be addressed simply and quickly by proper legislation, not one intelligent solution has been offered.

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