13 March 2008 - 10:00Market Commentary 3/13/08

What analogy should I use to describe our current economic situation in the U.S.? How about it’s our wedding day and we are the bride. Or perhaps Alan Stang said it best in Tax Scam when he said “we are being serviced in the way a bull services a cow” he used the IRS in that analogy and I can just replace that with the Federal Reserve system although I also agree with him about the illegal direct tax on labor. This is another key reason for our economic woes today and the demise of the middle class in this country. Today’s retail sales not surprisingly were weaker than last months and there is no reason to expect this trend to reverse itself any time soon.

Meanwhile “Hank” Paulson is speaking and actually points out that “every 6 to 8 years” our economy seems to go into the toilet. Hmm I wonder if that could be the result of the Federal Reserve’s manipulation of the markets and their penchant for bubble building. Those powerful and extremely greedy souls who run our economic system would rather suck the money out of the little guy’s pocket by manipulating investment prices so that the “end-user” of the investment product ends up paying a ridiculously high price for it and realizes it after the fact when it’s too late. Some of these poor souls actually borrow money to “get in” on the action and the bankers and other market manipulators use the greed of the little guy against them. The whole con is to convince the people that the worthless stock or other “asset” in question is solid gold and sell it to them at ten times what the banks and profiteers paid for it. Sadly the people who pull the strings at the Federal Reserve are part of and indeed are the perpetrators of this monumental con. The fact is the booms and busts have become MUCH WORSE since “the Fed” took power. Anyone remember the Great Depression? Which was caused in large part due to the irrational buying of stocks on margin and the buying of products on installment plans? The twist this time is that their own strategy bit them in the behind, and it is the banks that have been conned in this go round by the mortgage brokers and by defrauding each other. I don’t expect them to learn their lesson however; all they have learned is not to trust each other. This is why there is the liquidity crisis that we are hearing so much about. Sadly the Federal Reserve has taken it upon themselves to bail out the banks and players who own the Fed (go figure) and these institutions which by all rights in a truly free market would be out of business and with good reason will continue to thrive. They will continue to employ these same shady tactics in the future, but aim them squarely at the populace next time. So in essence their predation on greed led them to prey upon each other (whose greedier than a banker?) and when it blew up in their faces the Fed bailed them out. So I ask you, what good is the Federal Reserve at all if they only intensify the oscillation of economic cycles instead of muting the volatility as is their mandate and claim? If they only prop up companies which have no business staying in business and do not deserve too based upon their actions instead of letting someone else fill the void and possibly do a better job? If these institutions and everyone else knows that they can get away will all kinds of nonsense then what incentive do they or anyone else have to do things the right way? On the other hand when small banks took notice of why their large competitors collapsed they would hopefully have the wisdom to do things differently when they grew to fill the void. Indeed smaller and more competitive banks who were free to set their own rates would be good for the economy and would offer consumers more options and through increased competition better rates and service. That is the essence of free markets. Instead we see increased regulation and the blatant disregard of the Federal Reserve in favor of the large and monopolistic banks which set it up in the first place. This is a sad day to be an American and makes me ashamed to see our country come to this and to be a part of it by banking with a large bank. Maybe the people can make a difference if we all shift our holdings out of these corrupted behemoths and into small local banks that actually deserve our business.

Paulson is prescribing additional regulation as the answer to the current economic problems. Sadly this is the mentality of the government and in large part also the people. We have been brainwashed into believing the government intervention in free markets is the answer when history has shown this not to be the case.  In fact it was because of free markets that our economy was strong and we were the envy of the world. Paulson just said the economic fundamentals are strong in America and the dollar should strengthen as a result!? What bubble does he live in? I think I will actually start calling him bubble boy. What economy is he looking at? Certainly not the same one that currency traders around the world are looking at, otherwise the dollar really would be strong not poised to set all time lows.