I look at what has transpired in this stock market and one has got to be amazed. To have the powers to be, rip the stock market thousands of points up in such a short time! And the Nasdaq, while flying under the Dow's shadow , is out shining the Dow and up over 70% from the lows in March. Wow!! How can this be in an economy where jobs are being lost, hours are being cut, and spending is down? Is the Dow Jones to be used as a barometer of how well our country's economy is doing? Apparently that is what the news and media is trying to hammer home. That everything is now hunky dory and the storm has passed. But has it really? At what expense has this "Wall Street Bank Bubble" been reinflated? We are just starting to see the effects. When you see the price of copper up almost 100% in 2009 and gold going through the roof, it is all too evident where the effects are. We also know where the cause lies.
When the Federal Reserve was allowed to not disclose how many new greenbacks they were printing a year, it was all over for the dollar's strength. When I heard that a few years back I immediately got short the Dollar. I didn't want to as I am all for a strong dollar, but the handwriting was on the wall. The Euro once at around 85 cents to the dollar ripped higher to eventually hitting an all time high of $1.60 against the dollar! It's funny that as the Dow tail spun down in this "recession", that the dollar got strong as the Euro, gold, etc, plummeted along with the price of everything else. I did however enjoy the cost of utilities, and gasoline going down. I miss sub $2.00/ gallon gas as everybody is talking now about the sky rocketing energy costs today. Well I am afraid this is all just the beginning folks. This "recovery" is being done courtesy of a sacrificial lamb, (the US Dollar). It is in my opinion that the same entities that created the bubbles are still in charge and creating yet another bubble. The reason that the Glass Stiegel Act was created in the thirties was to prevent another catastrophe like we had in the great depression. So limits of 10-1 leverage were placed on the banks. In 2000 this act was abolished by the same folks calling the shots today, thereby also giving banks 100-1 plus leveraging capabilities. They made huge loans and investments around the globe leveraged to the hilt! How many Americans would play with 100-1 plus leverage with all their investment capital?
Well since the meltdown what has changed for these "too big to fail" institutions? They are still leveraging the bailout funds, and not lending out these funds as they promised. Rather the thousand plus traders, that each one of the large banks has, are trading the markets with these funds, while they are also investing overseas and creating jobs overseas. These banks are also using the same high leverage as before they got bailed out, along with increasing their fees to the very ones that bailed them out, the tax payer. What a great position the "too big to fail" institutions are in. If they make a bad investment they can simply look to the Fed to print more money to give them at everyone else's expense. The problem is that this is creating inflation and soon to create massive inflation. What a corner has Big Ben and the Fed painted themselves in. They can't drop the target fed fund rate lower than they have at .25%, yet if they raise the interest rate to quell inflation they will put further strain on the real estate market. So they have been printing money like no tomorrow to buy our own treasuries, how sad as nobody else wants them,and for the Fed to have to purchase mortgage backed securities with money they print from thin air, and charge the taxpayer interest on. This is the big problem. Problem is that the tax payer is on the hook for it all, as well as the interest applied to the "newly printed" dollars. Nice huh?
I believe in a free trading market. The same smart fools that caused this mess now want more regulation on everything, thereby giving them even more power to control prices. Ya they are crazy! Crazy like a fox. They should be getting less power and not more. If a kid crashes his Honda into a tree by driving too fast do you give him the keys to the Ferrari? I also believe in capitalism. Through massive regulation this "capitalism" is soon becoming a forgotten past time in America. While the rest of the world gets stronger, with their currency getting stronger ie (more buying power), ours continues to decline. So when the price of gas, electric, water, etc., goes up will we all then say, "Ya but at least the Dow is up"? No, rather they might say where are all the jobs and higher wages to pay for all this inflation! Are the powers to be hoping to crush the dollar so that the foreigners can come over and buy real estate, buildings, bridges, parks, etc., in order to "stimulate" our economy and the real estate markets. Because as the dollar erodes against all of the other countries' currencies, as its been doing for years, everything for sale starts to look like a deal for foreigners as they have increased buying power in America. The problem with this is that we may become tenants in our own country some day. By sinking the dollar we are also driving up the price of oil, thereby further strengthening countries rich in oil such as Russia and Saudi Arabia, as well as a host of others. Some of these countries rich in oil don't like us very much if you haven't already noticed. So as oil goes up, all the oil enriched countries strength goes up too.
I guess the point is that I know history repeats itself, but to continue to do the same thing over and over again expecting a different result is the definition of insanity. I believe that free enterprise and capitalism are what made America, and that the markets will eventually take care of themselves if they are left alone to do so. The markets know how to mend themself without constant interference from the same people that put us in this quandry. All the "free trading" markets will mend themselves if given a chance.Again that is if they are left alone to do so! They can start by blowing the dust off the Glass Stiegel Act for starters, and lend money the way the banks promised before they accepted the TARP.
I believe that the constant intervention in these "Ex-Free Trading Markets" is not only dangerous, but it allows for a few to control the prices of everything on a global scale. I may be an old fashion capitalist, but I see nothing good about that scenario playing out. Oh, but I forgot that the economy is great again, the markets are up, jobs are being created. Oops I forgot. This is a jobless recovery. Sorry. Maybe that is why countries abroad that have spent far less in "stimulus", have positive growth and the US does not have "real" job growth currently.
People want to compare this recession recovery to that of the 1970s. Problem is that the recovery in the 70s was led by jobs and not inflation. This recovery is being led by inflation and the falling dollar. The idea is that the Fed can inflate their way out of this thereby running the Dow up as well is all being done at what cost? At the price of higher inflation and higher taxes? This equates to a lower quality of life for all but the richest price controllers. You do not need to be an economist to know that the quality of life goes down as inflation goes up. Just go to any third world country and you'll see that for yourself. America I feel is rapidly following down this same exact path. Its all economics 101. Higher taxes in a recession, plus higher inflation, plus higher un employment, is not recipe for prosperity. But rather the opposite I fear. I hope I am wrong, and pray that I am wrong. I just know that there is going to be a big price to pay for all of this massive spending, and the massive amounts of dollars being put into circulation. I hope it is all worth it. All I know is that the "too big to fail" institutions have benefited by this, and they have been allowed to keep their lifestyle at the tax payer's expense. They will all get their bonuses. They will be issuing their 30 billion dollars plus in Christmas bonuses this year while others loose their jobs and homes.
Bottom line is banks are not lending as they promised before receiving TARP funds, but rather they are out buying out smaller banks. This is also escalating this "out of control" monopoly. Allowing Lehman to fail, and then pumping big bucks into JP Morgan and Goldman Sachs, makes for only two true investment banks on Wall Street today. Monopolies mean less competition, and are Anti Capitalism and Anti Free Enterprise. Also to do it with taxpayer's money is appalling to me. Meanwhile many people and businesses' are suffering do to this credit freeze put on by these same bailed out banks. I hope that many Americans that are in a slumber today wake up as life as we know it in America is being changed forever.
by Scott Johnson
