(Before It's News)
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 them.
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 a little.
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 of income.
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.
It’s a 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 another crisis!
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 motivates distrust.
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 project.
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 Rights Reserved
High Speed Rail Information
Ambassador Leo/Lee E. Wanta Revelations