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Posted by on Aug 10, 2010 in Economy, Markets, TG Roundup

Feds to Continue their War on Savers

With current financial turmoil entering its fourth year, it is time to reflect on things that got us here. Today Ben’s bandits at the Fed announced that they will buy US debt (“in small quantities”, yeah – right!) to stimulate the weakening economy. Call this quantitative easing 2 or plain old printing, it only means one thing if you are a saver and/or retiree who did not want to be a part of this ‘spend-it-today-and-mortgage-your-tomorrow’ economy: you are an idiot. In other words, the Federal Reserve Board has once again told the savers: screw you!

What Greenspan’s reign of free money meant to this economy is that for every economic malaise, the solution is lower interest rates. This Ayn Rand’s disciple who believed in unfettered free markets as an economic utopia has himself meddled with financial markets. He has ignored, or even encouraged fraud in the form of bailouts.

Lest we forget that Greenspan was appointed by none other than the Conservative God, President Reagan. Reagan felt that Volker’s tight money policies and his tendency to regulate fraud would hamper economic growth. In Greenspan, Reagan saw a ‘free market’ champion. These are the foundations of an unprecedented cycles of boom-and-bust for over 25 years. Every boom in this period was a bit bigger than the previous one and every bust is much more painful than the previous bust.

One of the most despicable outcomes of Reaganomics is the obliteration of the so called middle class in this country. Stephen Colbert has a perfect illustration of  Regan’s trickle down economics, which the right in this country came to take for Gospel Truth.

The Colbert Report Mon – Thurs 11:30pm / 10:30c
The Word – Ownership Society
Colbert Report Full Episodes 2010 Election Fox News

The assault on investor trust started with the bailout of S&L by Bush Sr., which is then followed on a larger scale by Clinton-Rubin’s bailout of Mexico in 1994. That followed even bigger bailout of LTCM in 1998. Despite these huge warning shots, Summers and Senator Grahm championed the dismantling of Glass-Steagall act in 1999. That opened the gates for Foxes to guard the hen houses. That is, since 1999 Wall Street got even more creative in fleecing the main street and we all know what happened when they ran out of suckers.

I have been investing in this country for nearly 20 years. In the last 18 months, I have nearly cut-down my participation in the market to near zero. I have never been so skeptical about the financial markets, the Wall Street interests, the Feds, and the US Treasury than I am now. This whole game is a giant fraud. I have a feeling that I am not alone with this mistrust in the system. Zero Hedge weighs in (Main Street’s Boycott Of Capital Markets Succeeding):

For the longest time it was consensus thought that only Wall Street could f**k Main Street. The ride is now turning. After what the FT reports was a 16% decline in fixed income, currencies and commodities trading revenues for Q2, coupled with advisory revenues down 17%, the bank is now “planning to cut up to several hundred employees following a sharp fall in market activity in the second quarter. Sources close to the bank say that the job losses, which could be announced as early as Wednesday, will be spread across BarCap’s sales and trading staff as well as its back office support functions.” Too bad the SEC has not, and will not realize that its only function is to restore the faith of the retail investors in the credibility of the capital markets. Yes, the same retail investor who both on margin and in total has always been the primary driver of stocks. Alas that has not happened and tens of thousands of Wall Streets will soon feel the wrath of Main Street as the boycott of stocks by the broader population comes to fruition, allowing the former “strategists” to experience just how real the difference between the U-3 and U-6 rate is first hand.

I don’t wish anybody ill. But, when the best and brightest minds gravitate to making fast buck with computer trading and exotic derivatives which add absolutely no value to the economy or to the society, it is time to shake the imbalances to the core. It is time to say good bye to an economy where paper products are created and sold ad-infinitum and return to an economy where useful goods are made and sold.

I will feel safe to return to the market when I see tens of thousands more layoffs are announced at Wall Street firms.