The US Financial Crisis

Should taxpayers have spent $700 billion to keep troubled financial institutions afloat? Perhaps a better question is do we stand by and allow legislation to be passed with the knowledge that it was based on unverifiable information and unethical practice. This editorial is a response to a Charlotte Observer article entitled "Financial sector: Bail it out or let it sink?" with opposing viewpoints from two local economists. I am in an unenviable position in that I disagree with both of them. I have theories that when put into practice could possibly resolve the issue, but they are not seen as practical or perhaps even possible by most and thus not likely to sway the average American taxpaying citizen. But that never stopped me before.

According to Michael L. Walden, economics professor at N.C.StateUniversity, "Money and credit is the lifeblood of our economy - indeed - any economy. The losses and fears plaguing our financial system created the real possibility of hardening of the arteries of credit flows. If this happened, businesses would have shut down and both bankruptcies and unemployment would have soared." This statement is correct in that it is based on projections of an economy based on a system that creates debt slaves to an invisible inarguable creature called credit. Credit has become the lifeblood of our economy because we have become lazy, thoughtless pawns to industry and we consume constantly without a thought of creating. In this way, I would have to at least partially agree with Mike Munger, a DukeUniversity professor of economics and political science, and the Libertarian candidate for governor. "First, we don't know what we are doing, and we are as likely to do harm as help. The desperate hurry comes from electoral politics, and not from any real economic necessity. Second, we aren't creating value. Government can't create value in financial markets." All we are doing is shifting costs from one group (Wall Street bankers, and mortgage sellers who took enormous and unsupportable risks) and transferring them to another group (taxpayers, who don't know any better). This is correct as well, however in typical libertarian fashion; it oversimplifies the issue in favor of an easily digestible sound-bite. In addition, this argument would be a moot point if the principles alluded to in Munger's argument was real instead of theoretical. For example, his statement "Each can't live at the expense of all" in regards to deficits and taxes, however that is exactly what we all do each and every day of our life.

The $700 billion the administration is seeking from Congress as the upper bounds of what it will need to take a mountain of bad loans off the books of financial firms is certainly an eye-popping figure. To get the funds to buy up the bad mortgage loans that have threatened to bring the financial system to its knees, the government will have to borrow. And that borrowing will come at a time when the federal budget deficit is already soaring. These billions of dollars were devoted to keeping a dream alive - the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be false. But they played along with buying and selling packaged mortgage junk because that was where the money was. As Charles Prince of Citibank put it, "As long as they're playing music, you have to get up and dance." Even after markets collapsed, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy's largest financial asset - mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt.

From a wall street perspective, in a bear market - with losses looming for investors, homeowners, financial services executives, homebuilders and the average stretched consumer, the cry for the government to save everyone is reaching a fevered pitch. Even die-hard capitalists who enjoyed the benefits of bull markets are now advocating government intervention. Government officials need little prodding to respond, and so the process of increased regulation has clearly begun. Every day comes news of the increasing creep of the public sector. State governments, frustrated by the impact of the housing crisis on tax rolls, are implementing laws to stall or impede foreclosures. The Federal Housing Administration, granted (along with Fannie Mae and Freddie Mac) a huge increase in its loan limit, is now close to making the increase permanent. Leverage - and the rapid creation of dollars fueled the boom we all seemed to love. But leverage cuts both ways, accentuating the benefits of a bull market and the pain of a bear market. The lesson we all must take away now is that leverage is not a one-way path to wealth with no risk of loss.

My Viewpoint is that while some of the arguments in favor of the bailout are based solely on the principles of a cashless, credit-based playground of consumption; other arguments are based on the knowledge that we have gone too far in the current direction to entertain any alternative. On the other side, those who argue against the bailout see the economy as being self-correcting under ideal circumstances with the wealthy taking on civic responsibility; an idea almost as delusional as a fair tax law. In theory, these arguments are equally logical, but they are based on false assumptions and misinformation. Weather or not there should be a bail-out is just a symptom of a widespread disease. There are several key guidelines that could be easily followed to fight the current crisis and prevent a massive collapse in the future, however it is my opinion that a financial collapse is imminent regardless. But here is the truth.

First, we must learn to share information effectively. Form study groups, start webpages, write e-mails - whatever it takes to inform the public of the problems our ecomic culture is faced with. Most americans have been swindled into keeping every aspect of the credit system a secret due to the false flag of identity theft, which was most likely perpetuated by the banks. Second, we must control our own money. When the banking establishment realized at the turn of the century that most people kept their gold in the bank for safekeeping, they began to loan out that same gold at interest. For every $1000 deposited, the bank would keep only $100 and loan the rest at interest or invest it in banking controlled industries. In the 1950's they utilized the media corporations (which they also controlled) to convice people that they should not save up for things they wanted, but instead buy them on credit. Today we know this as a small plastic card. The deception is that the money you deposit in banks isn't really there. It is part of an electronic system of numbers completely controlled by the Bank.

This is proof that economic crashes do not just happen, they are controlled through loans and interest rates. Their purpose is to destroy our faith in the monetary system and embrace a cashless society. We should withdraw all our money from the corrupt and manipulated stock markets. We should trade in our paper money for commodeties such as gold, silver, precious metals and jewels. (Those "cash for your gold" companies were founded by financial institutions.) Keep a personal safe at your home. You will know where your money is and it will be there if you need it. After the next financial crisis stocks will be worthless, retirement accounts will be looted by corporations and paper money will be worth 10 cents on the dollar. If you think you actually own you car, home or other credit purchases, an economic collapse will remind you of who the real owners are - the Bank. On that same basis, most people belive that their taxes go toward paying for roads, schools, bridges, public works and organizations. In actuality taxes go to the federal reserve bank who in turn loans money to states and the federal government to pay for all of those things. In effect, we are paying them to loan our money back to us at interest. That is wat a credit driven society is about. My opinion is that if the wealthy can find ways to hide their money with out paying taxes, why shouldn't you and I?

The common ground that can be seen in this matter is one of civic and community responsibility. For example, to combat rising food costs, shop locally at small stores and farmers markets - or better yet grow your own food. These ideas are being presented through grass roots organizations that the banks will have to support rather than risk losing public confidence. To fight rising fuesl costs, cut down on unnecesary travel. Plan your personal expenses better. Save up for things you want and purchase them outright to reduce your dependence on credit. Concentrate on local elections rather than National politics. This is where descisions about your tax dollars (or the loans generated by tax revenue) are made. We must all coexist in the economic culture that has developed in this country, but we do not all have to dance to the same tune. By focusing our positive energy on taking resposibilty for ourselves - despite what the rich and powerful take repsonsibilty for, we can effect change in our community and on our economic future.