The Wholesale Destruction of the American Economy

There is only one organization in the world with the power to destroy the American economy. Throughout 2008, it has waged a terrible war that has severely damaged -- likely beyond quick repair -- the very foundations of that economy. If left unchecked, the pain we're feeling now will seem minor in comparison to the devastation yet to come.

And no, this brazen cabal isn't based in radical shrines in the Middle East or the mountainous border of Afghanistan and Pakistan. Its headquarters is a hundred square mile plot of swampland between Virginia and Maryland. Regardless of the intent of the U.S. government's economic interventions, the consequences of all that help are shaping up at minimum to rival the Great Depression in depth and scale. The ultimate cost may be far larger: the complete loss of our country.

You're being killed with kindness
The weapons of economic destruction have been forced marriages through bailouts, coerced investments in banks, and cash infusions into utter failures. Every time the government steps in, it crowds out private capital, distorts the signaling value of prices, and impedes the market's ability to cleanse itself by sweeping away its failures. Rather than helping the economy and markets recover, all this "help" is prolonging the agony.

Oh sure -- the stock market has shown some signs of life recently, and interbank lending rates have come back down from their peaks. Yet with over $8.5 trillion "invested" in this nonsense, the real question is why do things still feel so lousy? After all, unemployment keeps rising, Thanksgiving travel was down, and online sales are slipping.

Economic homicide 101
What's happening is an object lesson in the most powerful financial law known to humanity – the Law of Unintended Consequences. In virtually every aspect of the economy that the Fed bails out, its help brings toxic consequences that end up making things worse. Here are just a few examples:

Free money: The Federal Reserve keeps handing out limitless cash at rates below what any lender without a printing press would charge. As a result, private capital is getting squeezed out of the market -- leading to ever more Federal interventions and further weakening of the private lending market.

The consequence of this destructive policy is that even cash flow positive companies like General Growth Properties (NYSE: GGP  ) can't easily roll-over existing debts. The longer this keeps up, the more healthy companies will be forced into bankruptcy due to the government's "help."

Free houses: It started with IndyMac, and now it has moved on to Freddie Mac (NYSE: FRE  ) and Fannie Mae (NYSE: FNM  ) . As the government seizes control of mortgage firms, it stops foreclosures. As kindhearted as that may sound, it's doing little more than telling everyone who's struggling but able to make their mortgage payments that it's OK to stop paying. That, of course, leads to higher delinquency rates and an even larger reluctance among banks to loan money to prospective home buyers, no matter how creditworthy.

As this Fool pointed out a year ago, the housing market cannot recover if lenders lose their ability to foreclose. Thanks to all this "help," the housing market is still getting worse. It's so bad now that even homebuilders like Toll Brothers (NYSE: TOL  ) and Pulte Homes (NYSE: PHM  ) are begging for their own bailout.

State of permanent failure: Perhaps the best vision of the long-term consequences of these bailouts comes from looking at the state of America's automakers. Lobbying for a bailout that is now up to $34 billion, automakers General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and Chrysler are lunging for the trough. In truth, their problems date back decades and are largely due to issues they caused themselves.

Yet this isn't the first round of bailouts for the industry. Lee Iacocca went hat-in-hand to Congress in the late 1970s to beg for loan guarantees cash to keep Chrysler afloat. Yet rather than learning the painful lessons and making the permanent fixes they needed for their long term survival, the auto industry learned how much cash it could access by begging. As a result, the entire industry's problems deepened to the point where it's on the verge of collapse, in spite of very healthy foreign rivals.

Is it over?
The French historian Alexis de Tocqueville once warned that "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." Unless sanity returns to Washington soon, the multi-trillion dollar handouts of 2008 may well go down in history as the precipitating factor that led to our country's collapse.

What a pity -- and how easily it would have been prevented just by letting failures fail and the market cleanse itself when it had the chance.

At the time of publication, Fool contributor Chuck Saletta owned shares of General Motors and his wife owned shares of General Growth Properties. The Fool's disclosure policy has never asked for a multi-trillion dollar handout, but it is pretty sure it could invest one better than the bozos that are getting all that cash.


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Comments from our Foolish Readers

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  • Report this Comment On December 03, 2008, at 1:34 PM, bigkansasfool wrote:

    So you're advocating a 1929, hands-off approach?

  • Report this Comment On December 03, 2008, at 1:47 PM, stcrusipher wrote:

    "Yet with over $8.5 trillion "invested" in this nonsense, the real question is why do things still feel so lousy? After all, unemployment keeps rising, Thanksgiving travel was down, and online sales are slipping."

    This is ridiculous. Are you suggesting that if we didn't do anything and the entire banking system died back in september, unemployment wouldn't have spiked, thanksgiving travel would have boomed, and online sales would have surged? You act like bailing out wall street caused a recession that's been forming for years.

  • Report this Comment On December 03, 2008, at 2:26 PM, macbeth76 wrote:

    Bravo to the author for telling the truth. All the government intervention will only make matters worse. The government has NO MONEY, the only thing they have is a printing press. These businesses NEED to fail so that productive, sound, well managed, profitable businesses can emerge from the vacuum. The longer we delay the inevitable, the longer we have to suffer.

  • Report this Comment On December 03, 2008, at 2:33 PM, sddingman wrote:

    Doing nothing may not be a perfect approach, but why does "doing something" always include bloating the size of government, burdening the responsible taxpayer, nationalization of inefficient and broken firms, and rewarding failing business models with big cash roll-outs, and saddling our next generation with debt?

    Saletta is right on with the auto industry. Iococa just proved that you could convince a bunch of people to throw money at a business model whose time has come so it can limp a long past its lifetime.

    What has been the return on the taxpayer’s investment for that deal? Did it create jobs; did it maintain the integrity of the auto industry?

    Given the two extremes; failure of these business models would at least allow lessons to be learned and opportunities to be created. We do not know what would happen long term with a hands off approach, we do know what will happen if we do the "somethings" we have been doing. Chrysler is proof in the pudding.

  • Report this Comment On December 03, 2008, at 2:34 PM, jbhedgehog wrote:

    We already let the market do what it wanted to. See where that got us?

    Also, there's nothing worse than a family being booted out of it's home (not just a house). Perhaps Ebeneezer Scrooge might agree with that bottom line approach, but those of us with a pulse realize that there is more to life than just heartless business.

    The real engine of the economy is the common consumer (you and me) and there would be no business, big or small, without that engine. Therefore, I submit that you be a big larger (and kinder) in your thoughts. Big BIDNESS is not the one who needs saving; it's people who need a hand when times get tough.

  • Report this Comment On December 03, 2008, at 4:01 PM, TiltnSpill wrote:

    BooFreakingHoo..... It's so unfair that I as a consumer bought a house I couldn't afford with credit terms I didn't read....

    I love how short-sighted some of you "fools" are. We are mortgaging our children's future (and my freaking retirement) by handing out trillions of dollars.

    "jbhedgehog" says

    "those of us with a pulse realize that there is more to life than just heartless business."

    Yea there is more to life than just heartless business. I volunteer during the holidays at local shelters for the less fortunate... but it doesn't mean I have to agree with bailing out multi-billion dollar companies that made BAD DECISIONS. Yes i know not bailing them out affects blue-collar workers as well... but life isn't always a bed of F@#(*$ roses.

    We have a national deficit that is growing at an exponential rate.... what happens when we can't even cover the interest payments on our debt? You think China is going to bail us out? How much longer can our country continue on this path?

  • Report this Comment On December 03, 2008, at 4:49 PM, Bootluver wrote:

    Forget all this FOOLISH BS, we have head enough..short version,, super rich are stealing all our money. They run the country so nothing will change except the middle class getting poorer. Wake the eff up and FOOLS, please stop with all the bull crap, its so insulting.

    Boots, DE

  • Report this Comment On December 03, 2008, at 5:26 PM, gordonzoo wrote:

    Government saving the big 3 is a terrible idea. Restoring in confidence in banks is, however, a must. The bailout and it's "big hurry before the election comes" timing reinforces the point of this article. Both political parties covering their tushes with no real plan. Two words would help fix this, Term Limits. Get the career politicians that are beholden to their big money constituents out of office.

    I don't trust a government that can't manage our tax dollars (witness the debt) to fix what ails business. Stop playing politics and let market forces work. It will be tragic to watch the big 3 fail, but THEY have failed to compete, be innovative, and learn from their mistakes.

  • Report this Comment On December 03, 2008, at 6:50 PM, MKArch wrote:

    What country will you be moving to in order to avoid this impending disaster Chuck? By the way didn't Chrysler repay their loans? Somehow I doubt that if the government just sat on their hands and let panicked runs on banks all over the country and world do their thing I'd be feeling much better right now.

    If you saw a car speeding by you on a wet road and thought this guys asking for trouble and then a little while later you see him crawling out of the mangled wreckage of his car would you leave him there to learn a lesson?

    By the way I do a agree with half of your argument "home owners" yeah right are getting away scott free in this mess. You've got the government bending over backwards trying to give gamblers and proven irresponsible borrowers houses they never should have been allowed to buy in the first place.

    If you look at it from the lenders side this has been an unmitigated disaster even with the government's aid what ever upside they had in the bubble years is eclipsed by the damage from the bursting of the bubble. From the gamblers and irresponsible borrowers perspective this is freakin awesome, the government says they are just victims and is going to do everything in their power to try to give them a house they never deserved in the first place. Luckily the ultimate outcome will be no more lending to gamblers and irresponsible borrowers after this free ride.

  • Report this Comment On December 03, 2008, at 8:21 PM, DanPowersccim wrote:

    You said(my notes in parens) : "Free(?) money: The Federal Reserve keeps handing out limitless(?) cash at rates below what any lender without a printing press would charge (this is the Fed after all). As a result, private capital is getting squeezed out of the market (how so?) -- leading to ever more Federal interventions and further weakening of the private lending market.

    The consequence of this destructive policy is that even cash flow positive companies like General Growth Properties (NYSE: GGP) can't easily roll-over existing debts. The longer this keeps up, the more healthy companies will be forced into bankruptcy due to the government's 'help.' "

    My question: Aside from the hyperbole, how does adding liquidity at low rates make it harder for a REIT to roll over debt? Shouldn’t financial intermediaries be in a better position to make loans when they have more cheap cash to lend? Please explain the mechanics of this obstacle to refinancing, I plead ignorant.

    Isn’t the problem GGP is having involve the uncertainty of the value of the underlying collateral, i.e. maybe they have just plain overleveraged their shopping centers? Maybe they are cash-flowing now, but what happens when 10-20% of their tenants stop paying rent?

    Does Morgan Stanley feel squeezed out?

  • Report this Comment On December 03, 2008, at 9:38 PM, TMFBigFrog wrote:

    Hi Fools,

    I appreciate the passionate discussion this article has generated. There are a few things I'd like to set straight, though.

    First, I believe that it's a false dichotomy to claim that the only options were "massive bailouts" or "do nothing." There's a third option that was just about completely ignored but would have been a far more sensible way to go. That option was:

    * Assure the rule of law was maintained.

    * Allow ordered, structured, bankruptcy reorganizations to take place for the investment and retail banks that truly failed.

    * Within those bankruptcies, allow the "Absolute Priority" of bankruptcy to take affect. The customers (think "depositors" to IndyMac), not the investor classes (and that includes bond investors), should be the only group protected with taxpayer dollars if the worst really came to pass.

    The truth is, most of the time, those bankruptcies wouldn't mean liquidation. They'd mean the shareholders get wiped out, the subordinate bond holders get wiped out, and the senior bondholders would take control of a recapitalized company. From that painful lesson, the market would re-learn to price risk appropriately and put restrictive covenants on lending.

    In large part, this crisis was precipitated by shoddy lending standards. You don't solve that kind of

  • Report this Comment On December 03, 2008, at 10:00 PM, TMFBigFrog wrote:

    Oops -- sorry...

    ..."In large part, this crisis was precipitated by shoddy lending standards. You don't solve that kind of" problem by throwing even more money around at even laxer standards.

    .....

    Second, I don't want to leave the USA -- I want to restore its greatness. Right now, I can't tell if we're going into an economic crisis that looks more like Germany's Weimar Republic, Japan's Lost Decade, The Fall of the Roman Empire, or modern day Zimbabwe. The one thing that's for certain is that economic policy coming out of DC is an unmitigated disaster for people who played by the rules, lived within their means, and followed basic principles of financial prudence.

    Overleveraged investment bankers got in over their heads. So why is the solution to bankrupt everyone else in real (vs. nominal) terms to assure they're protected?

    .....

    Third, there are two interconnected reasons the private lending market is getting crowded out by government intervention. The first reason is the very simple Law of Supply and Demand. Everything has a price, including money. By handing out Federal cash so cheaply, the Federal Reserve is severely underpricing the private supply of cash. As a result, if you're not privvy to drink from the Federal Tap, you're not finding capital available at reasonable rates because the "going price" is below what would be the market clearing price. It's kind of like how oil exporting countries that put price caps on gasoline often find themselves with gasoline shortages.

    The second reason is that in some of its interventions, the Government has destroyed the Absolute Priority of bankruptcy, thus taking away rights and property otherwise due to bondholders. See this article for an example: http://www.fool.com/investing/dividends-income/2008/10/02/qu... . People with money to lend quickly learned that the government would appropriate their otherwise due interests in companies to "bail them out", and simply refused to lend to any company that needed money.

    Best regards,

    -Chuck

  • Report this Comment On December 03, 2008, at 10:07 PM, RonB2 wrote:

    Dear fellow taxpayers:

    We got into this mess because our politicians in the past 10+ years mismanaged financial law which lead Greenspan and others to mismanage the money supply and fail to act responsabily in their oversight of the banking system. Furthermore, it did not help that the politicians and the American public were focussed on economic growth and increased real estate values - such that no politician who really wanted to be re-elected could ever have done so by saying "Our real estate market is over inflated, and our banking laws too lax. Let's do something to slow down the artificial real estate appreciation and let's make it harder for Americans to take equity out of the home - or to buy a home that is beyond their financial means". A political candidate preaching these views and ideas would never have been elected over the past few years - decades?

    So we can blame the politicians - we can blame management in the central banking system and we can blame the wall street guys - but we also need to blame the American consumer and the voters - who only voted in candidates who talked about strong growth and prosperity for all. So now, it's time to pay the piper - our economy will take a hit in the next years as it readjusts to the new realities of wall street and the financial markets - as the banking system readjust to investors who focus as much or more on a banks financial statements and leverage as they do on the banks recent rate of returns. Unfortunately, its the working man today and our children who are going to pay the (tax) bill for rescuing our economy - and to pay for the over exubrience of the past two decades. As a results, our children will probably live in a country with a less economic growth and opportunity in the coming years! And - they will not inherit the American dream.

    RonB New York

  • Report this Comment On December 03, 2008, at 10:29 PM, Dart65GTConv wrote:

    Your told who to give your tax money to now. Next when its used to buy dept, you may be told who will live in what house. Far fetched?

  • Report this Comment On December 04, 2008, at 2:16 AM, GoNuke wrote:

    Yawn

    Regulate the derivatives market and put the boots to credit default swaps. You don't need to ban them, you just need to pay them no heed. Change regulations and accounting rules such that cds's don't affect how dodgy assets are reported.

    I agree that the US was really foolish in letting this mess happen. Up here in Canada automobile sales fell 10% last month. Bank stock values have fallen a little and our unemployment is only rising slowly.

    The US is a victim of its own dogma. The Fed, the Treasury, the next President are all firing from the hip without putting adequate thought into their actions.

    Slow down. Stop being so cowardly. Remember that fiscal stimulus packages usually start to kick in after the recession is over. Your own fear is your greatest enemy. By the way -if President Obama raises income tax on dividends then all you dividend investors are going to see the value of your portfolios tank.

    Canada has already put a taxation scheme in place to encourage dividend income. We also have cool new savings accounts where you can shelter dividends and capital gains. Each year you can put $5,000 into one of these accounts. You can't deduct the deposits from your income but you pay no tax on any of the money you take out. If your $5,000 investment grows to $1,000,000 you can take out the $1,000,000 and not pay any tax on it.

    I know we are seen as a bunch of commies with interfering governments and socialized medicine (we don't actually have socialized medicine, we have nationalized health insurance) but my American friends you should study our system to understand why your current economic situation is so much worse than ours. The great Depression was much greater in the US than it was in Canada. Lose the dogma and study Keynes and fix your problems.

    How did you manage to turn $900 billion in subprime mortgage debt into a global economic cataclysm?

    By not paying attention. Regulation is good. Oversight is good. People should be rewarded for generating wealth not gambling. Given how opaque the financial world became due to deregulation buying US securities was more akin to gambling than investing.

  • Report this Comment On December 04, 2008, at 2:28 AM, kamuirei wrote:

    "Canada has already put a taxation scheme in place to encourage dividend income. We also have cool new savings accounts where you can shelter dividends and capital gains. Each year you can put $5,000 into one of these accounts. You can't deduct the deposits from your income but you pay no tax on any of the money you take out. If your $5,000 investment grows to $1,000,000 you can take out the $1,000,000 and not pay any tax on it."

    See: ROTH IRA

    I blame Canada!

  • Report this Comment On December 04, 2008, at 2:46 AM, PoliticalStray wrote:

    An astonishing rant from a finance fan..a member of the free trade group no doubt. The group parasite so foolish that it kills the host it occupies. Go back to Business 1A and check: "ethics". Then "repeat businesss" and "satisfied customer".

    I'm surprised the American people didn't level Wall Street.

    FYI: public opinion was 91% to 9% against the bailout.

    I'd say the general public is sick of both the corrupt congress and the financial sector.

  • Report this Comment On December 04, 2008, at 1:50 PM, jesj69 wrote:

    Perhaps there were many factors contributing to the downturn. But one does stand out. Government intervention. Back when the public was getting hysterical over Enron, the governement decided to help keep us "safe" by... You guessed it, enacting more laws. Boils down to companies having to update information on their assets on a daily basis. No company that is traded publicly can take this kind of scrutiny. One thing led to another( i.e. Merryl Lynch)..the government then had to "save" us from that mistake by forcing a sale. They took advantage of a scared public and enacted laws that basically enable them to take over a company at will. Does that sound like a "free" market to you. Only a free market is going to worf folks.

  • Report this Comment On December 04, 2008, at 3:26 PM, jimojeff wrote:

    Let me say this, TODAY THERE ARE MORE BILLIONAIRES THEN THERE USED TO BE MILLIONAIRES, greed is what dried up the money supply! you want a salution? Get the money back into circulation! Restore the middle class or we will all be in the bread line and the rich will take there Jets and Yatch's to France.

  • Report this Comment On December 04, 2008, at 7:14 PM, PoliticalStray wrote:

    You can't buy a refridgerator today without a contract. Is it possible that Congress and The Treasury Department approved giving the lenders the money without requiring them to sign an agreement to LEND the money out?

    Is there any ordinary businessman that would do this? How much are we paying these people?

  • Report this Comment On December 07, 2008, at 3:41 AM, utahbengoshi wrote:

    Thank you! You would think our new national motto is: Punish the Prudent and Reward the Reckless.

    One constructive avenue may be www.ourcaucus.com - a non-partisan accountability mechanism for both the demorats and republidumbs who have mortgage the future of our children and grandchildren.

  • Report this Comment On December 08, 2008, at 10:54 PM, matttheboatman wrote:

    Very well said.

    I think It is a terrible thing for people to loose their jobs and to loose their houses, but it is far worse to loose your country and freedoms. - Matt

  • Report this Comment On December 09, 2008, at 12:39 PM, ssidd wrote:

    Yes, Very well said.

    Cruel as it may sound, we have to bite the bullet now for long term posperty. Otherwise we will be in a much deeper hole a few years later, recovery from which may be impossible. We got into this mess because of unrealistic and outright obscene lending, as well as borrowing. What we are proposing now is more lending and more borrowing (using bailout funds) to once again artificially increase values and create jobs. So we will be back to square one, more in debt than ever before. If we do not change the way we live fundamentally, government and people alike, we may have to sell the country just to put food on the table. Think of this prospect.

  • Report this Comment On December 09, 2008, at 3:02 PM, halftide wrote:

    I would like to offer an analogy, call it a parable. The starting point is the New York Times article on September 30, 1999. Google it. Let’s call it chumming…

    Asu is a fisherman. His poor village depends upon him to supply protein.

    After some time of meager results, Asu decided that he wasn’t catching enough fish and to increase his catch he would have to do something to attract more fish to his hooks. Asu decided to invest, he would grind up part of his catch and use the few fishes he had already caught to attract more fish. Grinding up his catch he began feeding the very school of fish he was catching with its brethren….. chumming. The fish reacted. The blood and flesh in the water did attract more fish and Asu thrilled with the success, redoubled his efforts as the fish fed on themselves in frenzy in the chum. As he pulled the fish in Asu rejoiced “Good fish, come to Asu. I will be powerful in the village. I am the great provider.”

    Eventually the slick from the chumming spread far and wide and a sharks known for being opportunistic feeders were attracted. Asu was annoyed. More sharks arrived and joined the feeding frenzy. Asu kept chumming even though the sharks became thick enough to start feeding upon each other. The school of fish that Asu was trying to catch stopped taking the hooks and Asu became irritated at the sharks. “BAD SHARKS” he said as he beat the water and continued to grind up his catch, redoubling his chumming efforts to bring fish back to his hooks. The sharks were thick, the water dark red, the fish few yet he kept chumming and angrily spearing sharks in the hope of reestablishing what he had lost.. He complained that some of the sharks were even stuffed and fat!

    It wasn’t long before Asu had ground up most of the fish he had earlier caught. “Bad Sharks” he screamed as he reached for more gurry to cast into the water! This plan that appeared so effective initially wasn’t working anymore and Asu was panicked. His catch was gone! The fish were gone! fed back to themselves and the sharks. The village had nothing. He had invested so much of the catch in the chum that he didn’t dare stop and the sharks were thicker than ever. “It is the fault of the bad sharks that are interfering with the chumming. Bad sharks! Bad Sharks!

    He was exhausted; he was out of chum; the catch was gone. He didn’t know what to do. He cast about for a solution and a brilliant idea came to him. In the village there was a single plump milking cow … he would chum with her until…well… until the sharks went away and the fish came back.

    Bad sharks! Bad sharks!

  • Report this Comment On December 09, 2008, at 11:32 PM, PoliticalStray wrote:

    Executive decisions:

    Put Abu in a place for people that get lots of "nervous headaches".

    Send word to the village that it is open-season on fat sharks.

    Oh. And hide the poor cow.

  • Report this Comment On December 10, 2008, at 12:11 PM, SkyWestNM wrote:

    In the main I agree with Chuck. But my spin goes back to who WE are.

    We continue to use technical short term panic analysis and reaction to "fix" our immediate economic crisis. In the stampede to avert company and individual suffering we seem to miss the hardly visible endemic problems in our own social structures that led to this mess. We tend to run from this crisis or sit back and blame someone else. We look for our own individual path to survival. In short, we want quick cures to years of erosion in our own social habits like integrity, saving, earning, good financial habits and training. I believe we will have to own this economic crisis as citizens, take the hits and understand that blaming the politcos and the business types alone is to overlook where THEY came from. They came from US......from our own shared and decaying habits in spending, saving, ethics and earning that have been percolating for years.

    For years now we have been teaching our children, by example, the supposed virtues of expediency over truth. Lying now, to avert pain, money spending, pride or embarrassment has become a strong national norm. Is it so uncommon for a child to observe Mommy lie to the insurance company to get the car fixed for free or Daddy cheat on his taxes he feels are abusive? Or for a single parent to be overwhelmed by expenses, without hope, that they succumb to whatever path will relieve the pressure. I am not trying to shame our behaviors…many are understandable…but to avert our gaze from them is not productive if we are to address their results.

    In my lifetime, our land has shifted greatly in agreeing about what is important. We spend more curriculum hours currently on teaching a youngster how to drive a car than on how to pick a mate or how to responsibly treat money. We leave the teaching of life skills to the family who largely isn’t there or if it is, often teaches dysfunctional ideas that become generationally imprinted.

    And within such a culture that promotes humans honoring extreme self-interest over truth-telling is it any wonder that our human leader pool produces business and political leaders that replicate that behavior as well? In an all too competitive marketplace, the incentive to cheat and engage in less than responsible behavior is large. Without a firm moral compass, its easy to choose the deriviative solution to keep my bank's head above water, to compete more fully or simply to polish my own apple. Last month’s report on high school ethics is a firm directional indicator of our country's future. We are on a highway to national ruin, if left in present trends.

    Today's America has lost the values formerly perpetuated by the nuclear family as well as cultural anchors which gave us the depth of value garnered by the painful experiences of past generations. This is not to say that the conservatism of the right of hanging on to tradition at all costs is a complete answer. Liberalism has brought us to appreciate compassion and the analytic examination of how to identify what serves us best. WE have an opportunity to blend the best of each.

    But to decry the value inherent in discarding some traditional values and structures has fueled where we are right now. The blatant and unbridled exploitation that now occurs frequently towards people who are vulnerable because of lack of financial education (can you say 30% credit card APRs) is a result of an unbridled capitalism......a democracy that sometimes falters by treating the resultant damage to the underdog and not addressing the pandemic ill that led to such explotiation. This threatens to divide us into the exploiters and the exploited.

    With the advent of credit card financing we have lost the financial security proffered by the necessity to save first to purchase, the necessity of having created nesteggs to fall back on in times like these. Even many wealthier middle class Americans have succombed to the paycheck to paycheck mentality. Medium wealth is no longer an indicator of individual financial stability. Hence our invention of the term, “working poor”.

    The world’s economic crisis, in part, is the result of our nation leading the way there……..international interdependence on America's leadership. That includes our headlong, mechanized flight into class war between wealthy and poor and extreme self interest over teamwork.. It’s time for us, as Americans to wake up and lead again. With firm reliance on proven values that will once again unite us to each other. The time for national negotiation and bridge building augurs a healing path to a negotiation between conservatives and liberals of where they can agree and build instead of destroy, obstruct and attack each other. The time has arrived for our well known American innovation and brain trust to construct a non-consumptive, self-renewing financial water wheel that uses the river of our American abundance to unburden our taxpayers, reward, not punish, wealth accumulation and instead yield an always renewable bounty to paydown our national debt and fund our poor, our military and our people. To show other countries the limitless boundaries of our own energy, resilience and ability to stand behind our own national currency. To give our currency, once again, the value imparted by the redemption that only responsibility can give.

    President Elect Obama, gives me some hope that he sees some of this. But I fear his "save us from pain" approach won't fully correct our direction. And one man alone cannot correct years of systemic disrepair and bureaucratic buildup that hampers meaningful action. Where Congress gets locked up by the gamesmanship of a handful of the few. It really up to us to shoulder the weight of repair…as a united team even within our disagreements…. with commitment to truth, integrity, compassion and teamwork, even in the face of these disagreements. It’s time to allow old structures to collapse, shoulder together the pain inherent in that and build anew and afresh.

    To allow the American citizen to lose their home while bailing out larger financial institutions in the interest of retaining some jobs is a losing proposition. It sets up disparate rules for different Americans/structures which defy our ultimate understanding of fairness. It will not unite us. We will survive any collapse, if we bind together. We need to let the crisis happen and reinvent America. It’s a tough pill to swallow, but our forefathers gave us the gene pool to accomplish it.

    SkyWestNM

  • Report this Comment On December 13, 2008, at 10:45 PM, markwarden wrote:

    Great article/post. Our last, best chance to reverse the demise of our economy was Ron Paul. But the ignorant voters blew it, so we're stuck with 536 idiots and their minions in Washington deciding how you are going to live your life and how every single company is going to run its business. We're in deep trouble.

    So how do we game this situation? How to we increase the few, paltry, devalued dollars we have left?

    Kudos to John Mackey. It's his company. He built it. Let him spend money to defend against the tyrants that want to overthrow him. I'd take a thousand dollar loss on this position to put a stick in the eye of the Soviet-style central planners.

  • Report this Comment On December 13, 2008, at 11:21 PM, kerg01 wrote:

    Its amazing that people really think the Govt did nothing in the aftermath of the stock market crash of 1929.....In fact for the first time in history they DID DO MANY SOMETHINGS and they were all bad.

    1) Hoover convinced business to "maintain the status quo" ie not to lay anyone off and not to cut wages. Keep spending as if nothing were wrong with the economy. The result eventually was mass bankruptcies and unemployment higher than it had ever been before. The price fixing in wages in particular prevented the macro economy from "adjusting"

    2) Raised tarriffs to the highest point ever, this started the worlds worst trade war.

    3) Massive (especially when inflation adjusted) public works programs. The Govt was different then and tried to actually pay for these expeditures through taxation. This was a disaster as it took money right out of private enterprise and put it in the hands of a very inefficient govt.

    This poor understanding of history is exactly why we are likely to have a protracted recession instead of the sharp V shaped recession we used to see before 1929....

    Instead we will have a long L shaped recession because govt will prevent the economy from adjusting again.

    Things the govt is guaranteed to interfere with in the next several years or have already interfered in..

    1) Housing prices. The govt will do everything in their power to maintain housing prices high. This will prevent the necessary adjustment and delay recovery

    2) The fraudulent banking system will be subsidized. This will prevent real trust from entering into the market and perpetuate the liquidity freeze. A quick cleansing of the banking system of all bad actors will restore trust, allow the competent to take over, and lending to begin again.

    3) A massive public works program funded by public debt will make debt scarcer to obtain (crowded out by Govt) and crowd out private enterprise. Unless the Govt prints the money in which case we will have much larger problems......

    So dont give me any more of this crap about a 1929 style solution. It is precisely what is being employed by govt and it will be a disaster.

  • Report this Comment On December 14, 2008, at 3:50 AM, JLIG wrote:

    Ridiculously low interest rates helped get us here. Everybody thought they should buy a house because the rates were too low to pass up. Because consumers and lenders now operate on the basis of what monthly maximum payment a consumer can afford vice the actual value of the item being purchased, the “value” of houses increased greatly to account for the stupidly low interest rates.

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