By Marilyn M. Barnewall
July 11, 2009
It was interesting to watch Vice
President Joe Biden comment about bullet trains and electric grid development
on ABC's This Week with George Stephanopoulos on Sunday, July 5th.
Conservatives can accuse Joe Biden of many things, but being dull is not one of
It always puzzles me when, after
writing an article, other articles on that topic suddenly appear. For instance,
my high speed/bullet rail article
appeared on the NewsWithViews.com site on June 29th. Days later, several
articles on the same subject appeared in major newspapers. Then Vice President
Biden commented on it. I wonder if he read my article.
Too often, I think, the polarization
of conservative versus liberal/progressive prevents us from appreciating when
the other side supports something right.
I believe Biden did the right thing
when he admitted "We misread the economy." I also believe he was
right, when he pointed to the development of high speed bullet trains as part
of the solution to unemployment and sagging state and local treasuries. It
takes courage to make such an admission. I think most people appreciate it when
politicians dare to tell the truth. If we want to hear more of it, we need to
tell them we appreciate it when it happens. (I could say the Vice President so
seldom faces truth squarely, it makes the occasion especially warming. but, of
course, I would never say such a thing.)
From my perspective as a former
banker, there are two major ways in which the Obama Administration is still
misreading the economy. I see no hint of change - no pun intended. Well, maybe
First, their behavior suggests they
believe the economy is going to return to one driven by consumer spending and
credit. It may, but if it does it will take many years. It is impossible to
have an unemployment rate close to 10 percent or more (and rising) and have
consumer spending sufficiently strong to drive the world's largest economy.
It's a nice dream, but has little to do with reality.
When the real gross domestic product
(goods and services, located in the U.S., produced from labor and property)
decreases at an annual rate of 5.5 percent in the first quarter of 2009, and
decreased 6.3 percent during the final quarter of 2008, people are not going to
rush to Macy's or Bloomie's or Nordie's - or even J.C. Penny's or Wal-Mart - to
spend money. Those kinds of decreases in GDP shout "job losses!"
People don't spend or go into debt when they are concerned about their source
I believe the biggest negative
currently impacting the American economy is lost trust. Americans no longer
trust their government. That, in my opinion, is the most under-estimated
problem we have today!
Liberals strongly support the
non-productive at the cost of the productive. The non-productive are a major
portion of the liberal voter base and must be supported… maintained. They don’t
understand that when taxes become too burdensome on the productive, lifestyle
costs are cut. It’s easier to cut consumer lifestyle than run like a rodent in
a metal exercise ring. When that happens, spending comes to a halt. The GDP
falters when sales tumble. Manufacturing tumbles when sales go down. More jobs
are lost. Add a still unstable real estate market and you see the picture.
This Administration places too
little emphasis on and gives too few rewards for productivity. In fact, in
today's environment, to be rewarded by government one must become a drain on
society. Then, you get help with your mortgage, your credit card, your car
payment. You'll soon get free health care, too. It won't be good, but it will
be free - at least it will be free for those who do not pay taxes into the
system. It will be a terrible burden for productive people who do pay taxes.
And, consumer spending and credit usage then decrease even more.
Why do we mistrust government? Let
me count the ways. It starts with traditional banking regulations written after
the Great Depression to protect Americans from another economic holocaust. It
continues onward in history to re-written financial services regulations that
benefit Goldman Sachs, et al. We need Glass Steagall back. Commercial banks
need to be commercial banks again. Investment banks need to stay in their own
ballpark and leave credit to commercial bankers. The commercial banking
industry needs to earn its profits from credit, not from investing depositor
money in derivatives - or, anything else. The practice of creating fiat
currency by making bank loans - fractional reserve banking - needs to be stopped.
We need to downsize the Federal
Reserve, not give it more responsibility or make it bigger.
privately-owned organization. Bankers own a large part of the Fed. The bigger
the bank is, the bigger the ownership position. The Fed is a vendor, selling
its services to government.
It is not owned or controlled by the government!
However, a good argument can be made that precisely the reverse is true.
Thus, those that are regulated
(banks and brokers) will be overseen by the Fed (owned by bankers and brokers)
and, thus, bankers and brokers will be regulating themselves. Boy! Does that
sound like a convenient way to avoid discovering the fraudulent behavior that
caused the crisis? In fact, it doesn't even sound like a good way to avoid
We mistrust government because most
of us know that the "too big to fail" banks should never have been
allowed to get so big. We know that if people had been doing their jobs, they
would not have been allowed to get so fat. "Too big" banks have
become so complex it’s extremely difficult to unwind the complexities. It's
"too complex," not "too big", that causes the problems. It
isn't asset size. It's the impossibility of figuring out what these behemoths
do with their assets and how they do it. That’s why they can’t fail.
If regulators had been doing their
jobs, this mess would have been caught long before reaching crisis proportions.
If ratings agencies knew how to do or had been doing their jobs, derivatives
leveraged by investment banks so many times it makes one dizzy figuring out how
they did it, would never have been sold. Trillions of dollars of losses would
have been avoided.
Those who do not understand the
importance of something as simple as the "uptick" rule and did not
oppose its demise don't know enough to regulate the financial services
industry. It may have been the SEC's responsibility, but the Fed could have
said "stop" any time.
It appears that the Fed lost control
of the currency and money supply several years ago. If it cannot properly
oversee traditional, defined responsibilities - currency and money supply - why
is the Fed's authority being expanded? Most people - who don't know the first
thing about banks other than that's where you go to get a car loan, a checking
account and a credit card - realize this is not just bad, it's stupid. Everyone
knows President Obama isn't stupid - every newspaper in the world has told them
so. Even Glenn Beck says he’s brilliant.
Unreasoned, illogical behavior
People are suddenly aware that
Constitutional rights granted by our American Republic - we are not a democracy
- are being badly abused. These people haven't thought about their
Constitutional rights in years. They just assumed they would always "be
there." They are learning freedom isn't free.
It is true that most current
economic problems were inherited by the Obama Administration. However, his
proffered solutions are not inherited. They represent the administration making
them. The recommended solutions belong solely to this administration. And,
large stimulus packages utilized to pay the costs of illegal aliens and to
reward the behavior of the willingly non-productive do not motivate trust.
There are some projects that return
more to an economy than others. Projects like high speed rail stimulate the
economy, especially when no tax dollars are used to develop it. Joe Biden was
right about the bullet trains being a priority. The question Vice President
Biden didn't answer is whether taxpayer dollars or private capital should fund the
It's meaningful in more than a
dollar sense. It's meaningful to consumers, too. When private capital builds
something, it goes where consumers who will pay to use it are found. When
government builds something, it goes where government wants to go which may, or
may not, be where it will receive the greatest usage or support. That's a giant
reason why government projects so often fail.
The question is not: How can
government spend money to create jobs (the effort for which now appears it will
require yet another stimulus package)? The question is: What can government do
to create an environment that motivates private industry to invest dollars
rebuilding America's infrastructure?
Until Americans once again have
reason to trust their government, the economy is going nowhere.
(c) 2009 Marilyn M. Barnewall - All