There is No Going Back to a Free Market

I really liked last night's post, and there were quite a few comments on it. One of my rewards for writing this blog is an active comment section and I thank all that participate. I am off from work until next Monday, so it is like a mini vacation for me.

Obama Overload
I congratulate president elect Obama on a good campaign and I thank him for beating a liberal dressed like a conservative in John McCain. Obama won pretty big, and that is what it is. I understand all the glowing news stories and all the excitement. But I am starting to get worried.

Two days and two press conferences into this week I am getting a feeling that Mr. Obama may be much like a Bill Clinton and feel he needs to communicate with the masses on a regular basis. I mean, how many times is Obama going to come out and say "balance the budget after a recovery, etc"? I know one of the gripes about Bush was that he was not in touch with the people, but I do not think I need daily pep talks from our president either.

Another Obama question that I have is why does he not request that Hank Paulson and Ben Bernanke stop shoveling out cash at a record pace? Why not ask that no other monies be handed out until Obama's new team can review programs and see if it is in line with their goals? That would be the first thing I would do. Either Mr. Obama does not want to rock the economic boat, or his team would be doing the same thing. Either way, not inspiring.

Gold Watch
Do not forget that this coming Friday November 28th begins the gold settlements of COMEX that reflect the huge physical vs. spot price differences. This dynamic will be in play through December and bears watching. I found this crazy picture of a gold deposit along a quartz vein on Wikipedia, and I cannot imagine stumbling onto that baby!:


There is No Going Back to a Free Market
I am not going to go into detail with the new bailout programs announced today. More of the same with a focus on the Government buying toxic mortgage debt as well as packaged credit card and student loan securities. Please take particular notice that Hank Paulson did not even attempt the pretend that "The US taxpayer may make money on these purchases" as he left that nugget out. I think it says alot that this line was not used today.

So with the myriad of alphabet lending facilities and other credit programs, the US Government has now become the lender of only resort. While I would have loved a debate about whether this should have happened at all, that ship has sailed a while ago. I want to take a look at the future problems all this intervention will cause.

To me the biggest issue going forward is that there will not be any way for the government to get out of the loan racket. Guaranteed cash and government backed debt is going to be both preferred and demanded going forward. Nobody will go into the private sector for funding when cheap money can be had at the FED. Is there any way the FED/Treasury cannot understand this?

Reinforcing my theorem that the US financial sector and many businesses cannot function unless they are in an ultra low borrowing rate environment, the Government will have to do gymnastics to keep rates at all time lows for the foreseeable future.

What is going on right now is the elimination of the free market and its replacement by a centralized government mega bank. The repercussions of this will not be fully understood for some time. The true power in America will not reside at the White House and Congress, but at the FED and Treasury. The obscene power grab by those institutions did not require a shot to be fired, only a mere threat of "systemic collapse". I can only offer that it is lucky for America that a resurgent Russia or a nuclear armed rogue state has not seen fit to challenge America, because our too easily spooked leaders may have just handed over the country by now.

I feel frustrated because nobody seems to be motivated to yell "STOP RIGHT THERE" to the FED and Treasury. There is no debate, no discussion as to whether any of the actions taken are prudent or for the best. Look they may very well be, but without any intelligent discussion we can never know.

It is not enough that our elected leaders have taken a hands off approach. I understand that economics can be confusing. I do not expect any member of Congress to be a Nobel prize winning economist (it would be better if they were not!) but it is not acceptable for them to just give the FED/Treasury authority to do whatever the hell they want without bounds.

There is a sense that the lead guys, Paulson and Bernanke, have no idea what they are doing and are making things up daily. That is simply not good enough.

Have a good night.