stress tests

Let's all rejoice now that our financial system has passed the stress test. Sure the bigger banks need some more money, but fundamentally -whatever that means in this context- they are fine. Unlike the auto-industry, my friends, our banks are essentially well-run businesses led by the best and the brightest our country (aka the world) has to offer. That is why we keep on paying them these huge bonuses. Because, god forbid, what would happen if they ran away? Where would that leave us?

Let me make two observations: the banks and financial institutions caused this crisis. It wasn't the government that said the banks were wrong, it was the market. The "free" market, in case you wonder. Fraud, misbehavior and in general irresponsible management practices got us in this mess. All the while, those same bankers paid themselves huge salaries and bonuses and they threw lavish parties. They still do.

Yet for all their bad behavior the banks were hardly chastised. Even when they continued to pay themselves exorbitant bonuses, the government did not intervene. The Obama camp continued to give them funds and they are planning to give them more. The Obama camp even sat down with them to prepare a stress test. Just like your teacher sat down with you in high school and told you the answers to your exams? Oops got that wrong!

Now take the car makers. The car makers were badly run for sure. They were in trouble. Yet look at how the government responded to them. Obama fired the CEO of GM. He is prepared to let the auto makers go bankrupt. He is withholding funds and beating up auto makers and their unions to renegotiate contracts. The UAW, unlike the Wall Street Bankers has to make concessions. And in this case we are not talking about paying back some undeserved bonuses. We are talking about people forgoing cost of living increases, health care and their retirement benefits. Of course these people are not the geniuses that we need to keep around to run our economy!

You think this is fair? You think this shows leadership in Washington?

Take a look at the donor lists for the presidential campaign. Look at the donor list for Congressional campaigns. Who paid for the lavish parties and the "historic" inauguration of our new president? Are you surprised at what is happening?

Unfortunately it doesn't stop there. By failing to intervene and fix the banking system, our government has all but assured that the crisis will continue. Maybe not immediately so, as the financial wizards can surely cook up another bubble of prosperity. But it won't last. At some point we will have to pay the piper. And the longer we wait the more we will have to pay.

Right now we are seeing the money bubble. Instead of building, we are printing.

The government is printing money at an ever increasing rate. Money that is essentially promissory notes. Ever wonder what will happen when people no longer want all that paper? When people suddenly lose trust? You think it can't happen? Remember how housing prices could never go down either? Think again (and buy some gold. You may need it to buy food one day).