Chris Tomaras / Straight Talk / April 4, 2009

21.9B dollars later President Obama now feels the best resort for GM and Chrysler is bankruptcy. How many months ago did we talk about GM and Chrysler and say that bankruptcy was inevitable? So what political scheme and agenda is being pulled over our eyes this time? Suddenly the President gets rid of the head of GM and is talking tough.

Is the President satisfying just another multi-billion dollar behind the scenes campaign promise to the unions by giving them billions of taxpayers’ dollars, and oh by the way guys, it’s now time to declare bankruptcy. Do you think it might have been better to talk tough and spend less earlier on, expecting the inevitability of the automakers demise?

So here we go again. We give the banks billions and they don’t lend out the money and then Washington acts dumbfounded.

We give AIG 80B and that bill has now grown to 170B with I’m sure more to come, while their employees threw lavish parties and are receiving huge bonuses which were known to Treasury Secretary Geithner in an agreement decided upon, before giving them the bailout money. Acting shocked, Congress then wants to tax the employees 90% to get the bonus money back. Another seat of the pants unwise decision threatening the strength and viability of our constitution.

We give the auto industry billions knowing full well that they are eventually going to go bust and in a matter of a few months GM and Chrysler are very close to having to close their doors.

Now suddenly, we relax the mark to market rules on the banks…. after giving them billions ….. and the stock market rallies. Do we not realize that they could have relaxed the mark to market requirements on the Wall Street firms and the banks in the very beginning before blowing through several hundred billion.

They could have forced GM and Chrysler into bankruptcy before giving them billions and we would have ended up  in the same place as we are today.

We could have let AIG go down and saved 170B and been in the same place as we are today.
We continually have Congressional hearings on things gone wrong. Why don’t we have congressional hearings on the billions of dollars of debt that have been wasted that we will never be able to afford to repay. And then the President protects himself by saying that we are taking a calculated risk in a time of crisis to save the country’s financial system. However when it doesn’t work, the problem will have been inherited from George Bush. Maybe we need to set up a demerit system for dumb moves? They are making mistake after mistake. Multi-billion dollar mistakes.

My question is what has this enormous irresponsible spending splurge done to help anything? Yesterday’s unemployment number was the worst we have seen in 25 years and the President’s campaign promise of saving and creating 3.5mm jobs is a pipedream.

We’re throwing all of this money at the problem but it’s not helping the millions of Americans that are truly in need.
I say again this is a smoke screen for the President and his liberal democratic cronies to get their hands on trillions of dollars to reshape the country from capitalism to global socialism.

Imagine if the banks were forced to stop acting like loan sharks and reduce their 30% credit card rates to 4% what would that do for consumers? We’ve given the banks billions and what have they done for the average consumer. The answer is nothing.

Imagine if our government dramatically reduced income taxes? Something that would directly affect every American immediately.

The reason that the government and congress have not cut taxes is they have their own special agendas and printing trillions of dollars gives them ……. just a wee bit of control and four years to figure out how to spend it.
We’re told the stock market will signal the bottom of the recession and moves up 6 months ahead of the economic recovery.

Well I’m not quite sure how a stock market rally is going to create the number of jobs and sell the number of homes necessary to help the millions of Americans who are in trouble.

As the number of automakers decreases, the price of cars will eventually increase based upon less supply. The airlines now fill their seats with fewer planes, fewer flights, fewer airlines and higher prices. And we didn’t have to give them billions of dollars in the process.

The government is taking over the banks, AIG, FNMA, Freddie Mac, the Auto industry, Wall Street and in the process since Barack Obama’s presidency (2 months ago) it has run up a debt larger than our entire aggregate debt in the history of our country from our inception through George Bush’s presidency and he is still spending. Soon our healthcare will be run by the government and our country will be part of a globalized socialistic network.
Private sector jobs will become a luxury and job growth if any will be in the government sector. Forty percent  of the world’s wealth has been lost and the debt is increasing to levels beyond imagination.

Last week I said that I felt we would start seeing some of the economic statistics begin to improve which happened this week.

The government is taking credit for the improvement based upon all of their spending. When housing values drop to enormous extremes there are going to be buyers taking advantage of the situation and it has nothing to do with our so-called stimulus. All of their spending did not stop the housing market from crashing but what it will do is eventually cause huge inflation and high interest rates. If you haven’t noticed, oil prices and interest rates are going up. Oh yes and another $300B boondoggle. The Fed prints money and buys back long treasury bonds to lower interest rates but interest rates go up. Whoops! Looks like another demerit.

When there is a massive fire sale going on, you would expect to see buyers start to take advantage and as a result see the numbers improve at least temporarily.

I would compare the improvement in our economic statistics this week to a critically ill patient who’s fever has dropped from 106 degrees to 105.9.

I’ve talked for months about the housing market and jobs and to me those remain the critical factors for a broad based and healthy recovery and we remain in trouble on both counts. And when we come out on the other side the complexion of our country will be totally different.

When we have millions unemployed, no jobs on the horizon, the average American’s credit rating much lower, banks unwilling to lend and consumer confidence shaken to a point that it will take years for people being able to afford or willing to spend.

Big government has taken control of the country with the unemployment lines growing longer and food stamps becoming commonplace.

And those who are fortunate enough to secure high paying jobs are going to be paying substantially  higher taxes.
The experts keep saying that something must be done to slow down job losses. Well if there is no demand for the products companies are producing, why would there be jobs? The auto industry is a prime example but our government gives them several billion to keep people employed to manufacture and sell us something we don’t want.
This week, according to PMI, the second largest U.S. mortgage insurer, 21 of the 50 largest U.S. metropolitan areas have more than a 75 percent chance of lower home prices in two years and six others have more than a 50 percent chance.

Economists go back to the great depression and try and compare what the country went through then versus what it’s going through today. Many of them encourage the President to keep spending in order to get private enterprise interested in taking chances on investing.

However, the difference  between then and now is that Public debt is much higher as a percentage of the economy. The failing banks are global institutions, not the smaller local lenders that went bust during the Depression. And the root causes of this crisis -- complex financial instruments such as derivatives – which didn’t exist in the 1930s. In general, because of the leverage involved, the numbers are staggeringly larger.

The other difference is that back then, the country was in a wartime economy.

The question is, can we spend enough with peacetime spending to get us out of the mess? Well so far we are creating a level of indebtedness that equals our GDP for an entire year. And most everything that has happened would have happened even if government wasn’t incurring all of this debt.

Another lesson from the Great Depression is that the nation’s mental state is almost as important as its policies. During World War II, Americans pulled together and supported the country. Today Americans are deeply depressed and angry with consumer confidence at its lows because they have had the rug pulled out from under them.
It’s one thing to be positive and supportive during war but when we are faced with the long term repercussions of greed and over-indulgence to the tune of trillions of dollars, it does little to make you feel positive.

The theory is to just keep borrowing and keep spending until we can dig ourselves out regardless of the size of the debt.

And I keep going back to fewer jobs, higher taxes, declining housing prices, long welfare lines, high interest rates, huge inflation and big government.

As I remember, I think the President’s terminology was spreading the wealth. Since there is not going to be enough jobs, the few who are wealthy will have to support the many who are not.

And that’s this week’s straight talk!