Or at least, I would have if I'd had the time in the last 9 days. Those of you know me know I've had a handful to deal with in the last couple of weeks. Ever since I got back from Peru, it's been conference calls at 5am for the pre-market, and lots of CNBC on the weekends.
I'll break it down for you. We're damned if we do and damned if we don't. The bailout, I mean. If we don't, you see how Wall Street is going to act--like a spoiled child with its favorite toy (government funds, natch!) taken away. Down 777 points is a prelude to a kiss. And let me tell you, it won't be pretty from here if there isn't a bailout.
Let's talk about "bailout." Who exactly is being bailed out? Wall Street? Wealthy bankers? NO.
Who's been irresponsible? I'd argue that the greed, avarice, and wanton spending has been happening in lots of places, including Wall Street. But the bulk of it has happened on Main Street, with US Americans who are willing to mortgage themselves to the hilt with their own greed, charge up their credit cards beyond what they can pay, and generally expect that they shouldn't take responsibility for their own actions. Blame, these days, seems to belong on pretty much everyone but the guilty parties.
So today's failed plan? I'd wager that the yokels in the House got lots of calls from their yokel constituents, who threatened not to reelect their representatives if the bill passed. I can just hear those calls now: "Don't bail out wealthy bankers! I need that money! Give us a tax break!" F.
Let's talk about that for a moment. I saw an asinine email circulated where some clever idiot calculated $87 Billion as being $400,000 per person (with 200 Million people). Really? It's math like that which got us into this mess. It's actually about $400 per person, and it doesn't come from the sky. It comes from taxes, or from deficit spending, which is a little like a cash advance on a credit card, only without as much regulation and disclosure. You want more regulation? Regulate the Federal Reserve (their low interest rates--thanks Greenspan--fueled the credit storm to Katrina proportions) and the government ("tax rebates" when you're running a trillion dollar deficit are a fallacy--they move consumption into current periods with an outsize cost to the future).
And (as they say on NPR's Marketplace) now let's do the numbers:
$11,000,000,000,000 (that's $11 Trillion) = Our Nation's Debt
4% = our cost of borrowing (roughly equivalent to the 30 year T bill)
$440,000,000,000 ($440 Billion) = Annual INTEREST costs. Only interest folks. No principal.
But how much do we make? Surely we make a LOT more than that!
$2,400,000,000,000 ($2.4 Trillion in 2006, according to the Congressional Budget Office)
But wait a minute, Vern! You mean to tell me that we spend nearly 20% of our INCOME on interest alone?
Folks, I'll make this very simple. We have said with our wasteful spending that we're spending our children's futures. Well, we've been saying that for about two generations now, so it shouldn't really come as a great surprise that, at some point, the bill comes due.
It is due. Taxes will rise. Services will decline. If not, the credit quality of the US will suffer, and we will soon be faced by a situation like this:
In 1956, we engaged in quite a scuffle with Britain and France (who were allied with Israel) over the Suez Canal, Europe's key link to the Far and Middle East. Britain and France decided that they could act unilaterally in their own self interest (sound familiar?) to prevent what they saw as a clear military and economic risk (sound familiar again?). While their attack on Egypt was successful, it was a fatal mistake.
The United States, flush with a powerful trade surplus, national savings and vast foreign reserves (this should also sound familiar--China, anyone?), said something very simple to Britain: Do what we want, or we will unload our holdings of your debt, devalue your currency, and send you into a Depression. Britian relented, without a shot fired. Their military strength was irrelevant. Many consider that to be the exact end of the British Empire, and the beginning of America's hegemony.
Folks, let's be clear. China has $770,000,000,000 of our debt, and could easily engage in the same strategy if we ever pissed them off. We would be helpless. Our military would be irrelevant. We would bend to their will.
This is not the fault of our government, necessarily. The Average American keeps a credit card balance of about $7500, and average household debt is about $19,000. "Sable Crow, that's not so bad," you say? You're probably making too much money. According to one statistic I found, about 50% of those that owe $10,000 in non-mortgage debt make less than $50K/ann.
This tolerance for debt has corrupted our nation. Don't get me wrong--I love banking and I love lending for a profit--but our willingness to borrow beyond our means and never pay it off is what's allowed our politicians to justify it on a scale that is frankly criminal. So who can we look to for help? Sadly, nobody.
The Republicans--despite their business-friendly retoric--are intellectually bankrupt when it comes to finances. Just check this chart. F. And that's as a percentage of GDP. As a percentage of our actual national income, it's MUCH worse.
The Democrats are more honest--they'll be clear they're going to raise taxes on a few people. But they need to admit that their nationalization projects just aren't economically feasible. We have to raise taxes, alright. But it's not to add services. It's to pay for what we already spent.
My dear Reader, I don't mean to depress you on a day when your stock portfolio has been so hammered. I believe, however, that it's important that we keep our collective eyes on the relevant ball. Save your pennies. Reduce your spending. Sell your bags, and invest. Stop consuming. Hold people accountable. And wear sunscreen.