The Crisis in Investor and Consumer Confidence.
Many have asked what is exacerbating the current crisis in investor confidence. There are many contributing factors to the current crisis. This crisis cannot be attributed to a single problem and no matter what is done with spending bills and other political contrivances, no set of solutions other than a complete change of direction will fix it.
I am from the school that the elimination of Glass-Steagal was the beginning of the breakdown of our system to a level where it is so broken, it can’t be fixed.
Dovetailed into this was a decision to let entitlement programs spin out of control, while at the same time the Government and our Congress chose to absorb the dedicated trust funds that were to protect our General Expenditures from these liabilities.
Our politicians are trying to address the restart of the economy without addressing the core problems. Consumers and Investors don’t trust our markets, and they don’t trust our Government. Until that is righted, no amount of stimulus, spending or printing of cash will do anything material for our current economic crisis, nor will it be successful in re-inflating our markets.
Smart investors have long memories, and they pay attention to history and the lessons it has taught us. One of the current spins on the failures of the stimulus acts of Hoover and FDR is that their stimulus spending wasn’t big enough or fast enough to stop the Depression when it could have been affected. On what historical precedent elsewhere is this fantasy based? There is no such precedent, just opinion.
The specter of a Japan type of deflationary recession has been one common reference point of the talking heads, but they have no real perspective on the frauds involved or the dynamics of the Japanese banking and economic systems. The remote possibility of us going this direction is based on presumed parallels between the US and Japan that are flatly flawed.
One thing Japan didn’t do was to turn on their currency presses at the unprecedented levels we are experiencing now. They would not act to force their banks to write down bad real estate loans made to a corrupt and hyper-inflated market, not for over 18 years. Organized crime penetration of the Construction Industry there was historic, and catastrophic.
As Japanese investors re-invested gains from their stock markets into real estate, which has many ultra-corrupt aspects not seen even here, they triggered a teeter-totter set of actions, where paper real estate profits were then re-invested in the stock market, until both balloons burst at the same time. The result was the Nikkei dropped from 37,000 to 7,500 over a 20 year period where prime real estate dropped by two-thirds.
Job creation in Japan went into an unprecedented period, one where for the first time in this modern post war period, Japanese companies actually laid off workers, while new job creation effectively ceased. The only thing that saved them briefly was foreign consumption of their durable goods.
Those of us who have followed our crisis saw this whole cycle be repeated here, but on a much more complex level. We saw the development of the housing bubble driven by the fraudulent sub-prime lending scandals triggered by un-regulated origination fraud perpetuated by our own Government in the name of the Community Re-investment Act.
A group of us who followed this for personal and professional reasons traced this modern “Fountain Pen Conspiracy” such as described by former WSJ Front Page Editor Jonathan Kwitny in his now legendary book of the early 1970’s. But rather this current day conspiracy used computers and algorithms to create counterfeit securities and assets of every form. Our systems broke down as sellers were able to sell something they never owned and never delivered, but who were able to get paid anyway.
They added a special element to these new forms of counterfeit securities and assets, by assuring they were so complex that no one could understand them, except particle and mathematical physicists.
This corruption is now so pervasive that it has become ingrained in major elements of our society. Lying, Cheating and Stealing are now a collective life style, one where integrity is without meaning or value. This swing will eventually come back the other way through either, evolution or, far worse, revolution.
What started for me as a simple attempt to end the counterfeiting of stock certificates has ended up in a place I could not have imagined in 1994. I have watched the total polarization of American society, to a point now where I don’t believe the difference can be reconciled except by a divorce. There are those who live for the Constitution. And now, there are those who think those principles are outdated. I can only come up with one solution, and it is the Constitutional break-up of this Country. Knowing how much the left needs the work of the right to pay for their social welfare agenda, I can’t see this being an amicable divorce, but one that is pretty much “In Your Face”.
I know this too. No one will get to hide in the weeds to find out which side they are on. If you support rationed medical care for the aged, you are not my friend, you are my enemy. If our Left wants to have this particular little ditty their way, then so do I. Self-interest will out.
The number of Government employees, Federal, State and Local along with those who make their living serving the Government and its agencies, along with those on welfare now gives them the majority of our gross population. The only way to correct this is to change the game.
The break-up will have to be negotiated, giving every American a choice on how he will live under what kind of Government. I will go with those who want to stick with the Constitution, Capitalism and Democracy, along with those who don’t disdain the Military and Police. My country will get the best doctors and medical care, and the best security protection, along with no impairment of the right to pursue happiness.
We will have cycles in Consumer and Investor confidence, but not the ones we face now.