The Continuing Economic Collapse

While the US economy collapses, the congress, president Bush, and the Federal Reserve continue to believe that their persistent policy of dollar devaluation, wall street bailouts, and exploding deficits will somehow pull us out of it. Today, Reuters reports that the Federal Reserve's portfolio of Bear Stearns assets has lost 1.1 billion since it collapsed... but I though JPMorgan Chase acquired Bear Stearns you might be wondering... while sort of, they actually got a pretty sweet deal from the Fed and US taxpayers... they got to acquire most of the good Bear Stearn assets, while the Fed (aka US Taxpayers) took on the responsibility of over $30 billion of some of the most risky parts of their portfolio (the stuff that JPMorgan did not want to touch). So essentially, each American (all 300 million of us) could potentially be on the hook for $100 each if the Bear Stearns assets were to completely fail. Good job Fed, way to protect the economy and the dollar.

You also gotta love the Senator Dodd (the guy that got the "Friend of Mozilo" discount on his Countrywide mortage) sponsored foreclosure bill at a cost of 300 billion to US taxpayers ($1000 per citizen). This incredible piece of crap bill really smells foul. It will basically allow the FHA to purchase loans that are heading for foreclosure from banks whereby the terms can be modified to supposedly keep the homeowners out of foreclosure. What it really amounts to, however, is US taxpayers footing a huge portion of the bill for banks that made bad lending decisions and home buyers who bought too much home (often fraudulently by lying about their income). Last time I checked, I thought the US economy was based on free market principles... but I guess not. I say let all speculators, investors, families, whoever, who aren't smart enough to understand that buying a home that costs 10x your annual income is a bad financial decision, lose their homes. They will rent for a while, the banks will take a loss, and we will never be in this predicament again.

And on to inflation... $4.12 for a gallon of gas, groceries up 5-25%, home prices still up 50% from 2000, and much more... all while average wages have remained mostly stagnant this decade. These costs are hitting low-mid income Americans hard because they are necessities. Yet, if you ask Bernanke if inflation is getting out of control he'll tell you its not a problem... it's all the darn speculators driving commodity prices higher, not his intentional devaluation of the dollar.

But with all this, and the continued job losses (60,000 for June), have no fear, for Bush and his crony US treasurer Henry Paulsen tell us everything is going to be alright! The economy is coming back. Oh, how very wrong they are!