-- Posted Sunday, 23 March 2008 | Digg This Article
| Source: GoldSeek.com
I was not surprised that the International Monetary Fund has come out with its recommendations for the subprime crisis, and with its usual socialist/Marxist/fascist flair says that the government/taxpayers should bail everybody out. Yawn.
What is more surprising is that the idea resonates with Krishna Guha in a Financial Times editorial titled "Why the Financial System Must Tap The Taxpayer." If that was not enough, he astonishingly says that what this country needs is inflation because it will help the Housing Crisis, and indeed "the more inflation, the less nominal house prices will have to fall to deliver a required change in real house prices." Hahahaha! I love it when an equation comes to the rescue!
To that end, perhaps, he says that in order to stop the spiral of the whole de-leveraging process, as losses lead to selling which leads to losses which leads to more selling, we need "one thing above all: additional capital for the financial system to stop the process of balance sheet contraction"! Hahahaha! I love it! Make up for losses by creating enough new debt and money to bid prices of assets back up!
I really wish that this could possibly work, because then you can have continuous booms forever, because if the boom ever started to slow and move into the inevitable bust, it can be prevented by the government buying up all of the losses, which starts the boom all over again! Hahahaha! Wonderful!
At the end of his essay, he is obviously getting peeved at me getting on his case and making humorous farting noises, and he ludicrously challenges "For those who oppose the use of public money, time is running out to prove that the private sector can recapitalize and calm the credit crunch without taxpayer funds - the best solution."
In response, I can only say that I strongly oppose the use of public money to try and bail out the economy because that means that the money supply will expand, and the same idiotic, maladjusted, distorted, Big Government economic system will merely start all over again, but everything will be even more sickly, gangrenous, malformed and twisted.
But I also strongly reject the idea that I have to prove anything as idiotic as saying that the private sector has the wherewithal to "recapitalize and calm the credit crunch", or that there is some salvation "out there" if only someone would do some unknown "right thing", when instead I have always staunchly maintained that there always comes a time when nothing CAN be done, and that the only thing that should be done is to prevent the problem by keeping the damned money supply and debt levels constant, as when they are constrained by gold, so that you don't end up in this damned situation in the first damned place!
Then, in a weird attempt to be "fair", I guess, he says that "advocates of public intervention must determine how much money is needed and how to employ it to greatest effect." Hahaha! It's like it's 1934 again, and I'm reading a speech by FDR! Hahaha!
If you thought inflation is bad now, you ain't seen (as the saying goes) nothin' yet, because the sheer tonnage of money necessary to pay off everybody's debts here at the end of a long economic boom caused by, as usual, the creation of excess money and credit by the banks over a long period of time with lax governmental supervision, is so huge (audience calls out "How huge, Mogambo?") that it probably totals over a quadrillion dollars (a thousand trillions), and if converted into a pile of $100 bills, is so huge and so heavy that not even Superman could lift it, which explains why you never even see him try it.
And even if you COULD pay off everyone's debts, to have another boom with the existing structure left intact would require the same degree of economic stupidity all over again! And nobody is that stupid. Are they?
Not unless my wife is right that I am the only halfwit in the whole world who is stupid enough to make the same mistakes over and over again. Anyway, let's hope!
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Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. Click here to visit the Mogambo archive page.
-- Posted Sunday, 23 March 2008 | Digg This Article | Source: GoldSeek.com
