“He’s dead, Jim.” Dr. Leonard H. McCoy uttered those immortal words to Captain James T. Kirk dozens of times over as many episodes of Star Trek. Each time, Jim registered shock and then stumbled on, ignorant of what the future would hold.
Over the past two decades, the U.S. Congress has similarly been warned dozens of times about their disastrous economic policies. Each time, they expressed shock and demonstrate incomprehension of the absolute and inviolate laws of economics they were messing with. Onward they stumbled, ignorant of the collapse the future would hold.
What collapse, you say? Aren’t the green shoots of happiness springing forth all around us? Isn’t the recession finally over? Haven’t we just avoided the worst economic collapse since the Great Depression?
No, no and hell no.
Hold onto your hats, and especially your wallets. 2010 has the makings of being a blow-out year — downward.
Back in the good old days of, say, 1991, the world was in a relatively good place. The first attack on the World Trade Center was still in the future, the Twin Towers collapse a decade later. U.S. manufacturers were still making consumer electronics, both north and south of the Mexican border.
“Global warming” was a distant concern, and California’s legislature had not yet destroyed their closed gasoline and electricity markets, driving these costs through the roof and poisoning their water supply with MTBE’s along the way. The green’s reasonable interest in clean air hadn’t yet metastasized into a crazed obsession for anti-human CO2 “cap and trade” controls based on Al Gore’s fantasy data.
The U.S. dollar was respected worldwide, and China’s rise to economic superpower status was a distant dream. The U.S. had the makings of possibly balancing the Federal Budget (ignoring that pesky $50 trillion “off balance sheet” Social Security elephant bumping into things in the waiting room).
Then, somehow, it all began to unravel. What went wrong — and who’s to blame? And where does this take us all into the brave new Star Trek future?
First, under pressure from both Wall Street and the banking industry, a number of massively foolish laws were passed. Intrastate banking was stripped from state control. Big state banks like New York’s Citibank and Bank of America in California were allowed to cross borders, invade each other’s territory, and restructure themselves into large national banking conglomerates, creating the basis of the future “too big to fail” problem.
Next, legislation enacted during the Great Depression was repealed to enable the giant stodgy banks (“your money is safe and sound with us”) to merge with the gambling casino mentality of the stock brokers (the so-called “investment banks”). And guess who wound up on top?
Then, more laws were passed by an activist Congress to “encourage” the banks into making doggy “liar loans” — lest they not be permitted to merge or expand even further. Optionally, the banks could “do penance” by donating money to local community activist groups like ACORN in lieu of making these reckless loans. Many banks did, and continue to do, both.
To keep the dodgy loan sales going, the banks were further encouraged by Congress to turn to the old government-created mortgage-issuing entities Freddie Mac and Fannie Mae. Wall Street wizards mixed a toxic brew of risky one-off loans into an elixir sold as rock-solid blue-chip triple A-rated “collateralized securities,” pitched by the banks’ newly created Wall Street sales divisions. These newly-minted stocks were promptly sold to unsuspecting investors, overseas governments & commercial banks, and Freddie-Fannie.
Observant readers will by now no doubt have spotted a trend here…
The present mess wasn’t created by envious bankers, greedy stock brokers, lying homeowners, or community activists. These were interested players who prodded and pushed (and sometimes legally and illegally bribed) successive mostly-Democratic-controlled Congresses into enacting special interest legislation.
The resulting laws corrupted the free market, bailed out bankrupt suppliers, tossed around “free” money, and destroyed most checks-and-balances — including the separation of banks and stock brokers. The latter were sound economic protections that had been put into place from the experience of a previous generation who had painfully lived through the Great Depression and had witnessed the era of a previous “irrational exuberance” 60 years prior.
So, just as the Great Depression was caused by previous government action (and inaction) Congress did it again. The smoking gun lies in their hand — and the trigger was pulled by the Presidents of the day: Clinton and Bush.
It was Congress, in their personal desire to be loved by everyone — and to win re-election by their constituents, which caused them collectively to ignore the fundamental laws of economics in favor of their own personal greed. The message here for future lawmakers: manipulate the marketplace at your own peril. Of course, it’s we the taxpayers who are then saddled with the new debt & new taxes that are the fallout.
But wait, it gets worse.
The last Congress rubber-stamped flash legislation to bail out the “too big to fail” investment banks both directly and indirectly. They did this through re-nationalization of Freddie-Fannie, and cash “loans” to the banks & AIG. The latter bankrupt firm was then able to make good its insurance payouts on failed “credit default swaps” that were designed to protect the banks against the toxic brew of stinky loans they had cooked up. And who benefited the most? Goldman Sacks, the former employer of the then-Treasury Secretary Hank Paulson. Just a coincidence, to be sure.
Back to the future, the current 111th Congress is now passing a raft of follow-on legislation which flies in the face of capitalism — although it surely would make sense to any living Marxist. First, to replace the massive debts of the individual citizens, Congress took on even more massive debts of the nation, the collective citizenry. (“Debt is bad for you, so let’s all take on lots more debt!)
Then, under Obama, it has created a trillion dollar Bail-Out II, a first-time home buyer credit, a “cash for clunkers” program, the extension of unemployment benefits to many months, and for good measure it has nationalized the failed unionized car industry. Now it’s scheming to create new multi-trillion dollar “health care” legislation, and new trillion dollar “global warming” legislation. The federal government deficit is approaching $2 Trillion per year!
By 2017, just to pay the interest on this debt will cost the taxpayers $700 billion — the equivalent to a new Bail Out — each and every year — forever.
Finally, the government is proposing to give super-powers to the already audit-proof Federal Reserve, expand the national debt to $13 trillion, and carry on a whole raft of economic “reform” measures which will bleed the free market system, and cripple the GDP. In the meanwhile the fed is further emasculating our nearly impotent state governments, destined to become mere vassal states to an omnipotent central government running recklessly out of control. All this is being written up as new “enabling” legislation in Congress.
So, how do we pay for all of it? “More money, please”. The cry has not been heard so loudly since the German Weimer Republic began printing trillion Mark notes — to pay for a loaf of bread. It might look good in the short term. In the longer term, it’s a disaster.
Is all of this intentional? Some say it’s the result of the left-wing “Progressive” strategy to destroy the last vestiges of the nearly dead America of our grandparents: hard work, little debt, honesty, courage, strength and personal morality. Others say it’s the result of dumbing down our schools, graduating people who think good economics is synonymous with the failed ideas of John Maynard Keynes.
Whichever view one might take, the results are the same for the “United States” of America. Perhaps the time has finally come to delete that last “s” from the name. The bottom-up limited-government classical-liberal country our Founding Fathers created has been nearly forgotten now. Washington and Jefferson who? Just unimportant old fogies who lived a long time ago. “I want my Obama money, dude, and if grandma has to die, well, so what? She’s lived too long anyway. Like Lenin taught, the pie is limited and I want my piece — now!”
But perhaps I speak too gently.
Let me be clear. Just as the laws of physics are inviolate, and an action always begets a reaction, the laws of economics work the same way. The process of corrupting the free market, running up massive unfunded debts, printing funny money to pay the bills, and passing laws to destroy cheap energy, drive up farming costs, and penalize the small business backbone of the economy will surely carry us into an unwanted and unhappy future. This will hit each and every one of us — but especially the mostly-conservative middle class.
And this is the direct result of an ignorant and fearful Congress passing economic laws — to try to repeal the laws of economics which cannot be changed by man.
No wonder Vladimir Putin warned the U.S. not to go down this unhappy route in early January, and the Chinese warned us a few days ago that they would not be a party to the Congress’ head-long rush into bankruptcy. If we can’t listen to our friends in our dash to political madness, surely we can listen to our former enemies…?
It’s as if Captain Kirk, having landed on Capitol Hill, flicking open his Tricorder and scanning the Congress building, said to his ship’s engineer: “Beam me up, Scotty, there’s no intelligent life form here.”
Hayek warned us too, in his classic work, The Road to Serfdom. Here’s the Readers’ Guide edition which includes the classic comic book version printed up by General Motors and read by millions of workers throughout the U.S. during the time of another great crisis: World War II.
So where are we all headed? To financial disaster, or to a political revolution come November 2010? The Tricorder is still scanning.