Saturday, June 25, 2011

The Recession Wolves

Our economy is at the peak of the third economic bubble in 12 years as we are desperately mortgaging our country's productive resources to reward reckless speculation and to fight the free market.

This new bubble is driven by borrowing and then wastefully spending $6 trillion over the past 4 years to prop up false prices. Compounding this tsunami of waste, the Federal Reserve has destroyed free market interest rates by pushing the Federal Funds Rate more than 3,000% below the 10 year Treasury bond yield.

Our country and the world are ablaze in the intoxicating glow of easy money. Just like in 1999. Just like in 2005.

The government and The Fed have again poured gasoline on our campfire to keep The Wolves of Recession at bay.

Can this continue?

We can temporarily sustain the debt portion of the bubble if we decide to continue our financial child abuse and borrow another $10 trillion dollars that we have no intention of paying back. Surprisingly financial child abuse is not a crime in our society and being drunk, especially on debt, seems an adequate excuse.

But there is no way that nature will allow us to abuse our free markets much longer. Even if Chairman Bernanke wanted to keep the Fed Funds rate 3,000% below the 10 year Treasury bond yield for an extended period, it is not possible. As phony rates turn real, they will become a drag on the economy.

The government’s bond fire that keeps the predators outside will eventually dim. This will allow the Three Wolves into our camp.

The first to enter will be the Wolf of Free Markets. It will mercilessly attach the artificial interest rates and kill them dead.

Then and only then will the second and fiercest preditor be allowed to enter. Its bloodthirsty eyes will spy the surroundings as it looks for the focus of its rage. It will spot the children cowering, lying in the smoke and soot from the government’s smoldering bond fire. With lightning speed it will jump to their side. The Debt Wolf will stand bristling and snarling in between us and the children.

The third Wolf will then be allowed entry. Every ounce of its being will be focused on us. We have attempted to live far above our means by robbing resources from future generations in a vain attempt to manipulate asset values. The Wolf of Fair Prices will allow none of this. As the Debt Wolf and the Free Market Wolf protect the children, the Wolf of Fair Prices will tear our manipulated and bloated asset valuations to shreds.

The Three Wolves will lie next to the children and for the first time in their lives they will get economic warmth, protection and love. Nothing shows more love than blessing children with a sound government, free markets, fair prices and low debt. Our forefathers wished it for us many years ago, before we had our first taste of the drug of easy money.

They will fall to sleep, finally free from our greed and abuse of power. As the children wake to the safety of the economic sunrise the Wolves will be gone. The previous night will be a vague memory that is forgotten with time.

As sure as corrupt and abusive government policy nurtures unsustainable debt, false markets and unfair prices, The Recession Wolves will be there to protect the future generations.

Thursday, June 2, 2011

Daddy and Maddie Ride the Bubble Coaster

“This is going to be fun Maddie. First we will ride Cinderella’s Fairy Boat. Then maybe we can work our way up to Fannie Mae’s Teacups.”

“Daddy, those are baby rides. I want to go on the Bubble Coaster.”

“Madison, the Bubble Coaster is only for grownups.”

“No, Daddy you’re wrong. The Bubble Coaster is best for kids or people that think like kids.”

“Well, Maddie we will give it a try. What do we have to lose?”

“Daddy, I want to spend the whole day on the Bubble Coaster.”

“The car is moving now, and we are climbing to the top of the first Bubble. Hang on tight and get ready for the big fall.”

“No, Daddy, the man behind me, Mr. Greenspan just said that the coaster only goes in the air and levels off. He said it was just like Cinderella’s Fairy Boat, only higher. He guaranteed that there would be no big drops.”

“But Maddie, Mr. Greenspan is wrong. Look ahead. Can’t you see that the tracks go way up and then go way down? That’s why it’s called a roller coaster.”

“No Silly Daddy, Mr. Greenspan said it, so we must believe it.”

“Hang on tight Maddie, the coaster is ready to descend.


“Wasn’t that fun … hey, what’s wrong Maddie?”

“Daddy, I didn’t expect that to happen! I was so scared. I want out now.”

“Sorry, Maddie, there is no way to stop the ride now.”

“Wait, Daddy, Mr. Greenspan just told me that if we give him enough money he will be able flatten out the dips and make it a smoother ride. It will only cost $1,000.”

“Maddie, don’t you remember that Mr. Greenspan was wrong before, and what on earth is the $1,000 for?”

“It’s nothing for you to worry about Daddy. Mr. Greenspan has a friend that owns a big bank. He said I was highly qualified for a $1,000 loan. Isn’t that great? Now we are safe and we don’t have to worry about the dips anymore.”

“Maddie, quit talking to strangers and hang on! This is real estate; it is the biggest drop on the coaster.


“Daddy, I didn’t expect that at all. We need to get out of this now.”

“Poor Maddie, the ride will be over after one more dip. Then I will have a talk with the carnival security about Mr. Greenspan.”

“No Daddy it’s not a problem anymore. I talked to the driver of the coaster, Mr. Bernanke and he said he can transport us over to Cinderella’s Fairy Boat to avoid any more drops. All he has to do is call the helicopter.”

“What! Maddie, look around, we are five hundred feet in the air. Cinderella’s Fairy Boat is on the other side of the carnival. Mr. Bernanke cannot magically transport us there. It’s not possible.”

“Mr. Bernanke says he can do it and we have to believe him Daddy. He says the helicopter will only cost $10,000.”

“ I am not sure if Mr. Bernanke is a thief or if this is part of the ride but I am not going to give him $10,000. Now get ready for the next fall, it is the Last Bubble and it’s the sharpest drop on the coaster.”

“Daddy, it’s no problem. Mr. Bernanke’s Chinese friend said he would loan us the $10,000. They say that the helicopter is on the way.”

“Madison, I am not going to borrow $10,000 from Mr. Bernanke’s Chinese friend. It doesn’t make sense. None of this makes any sense. It’s like a freak show.”

“Mr. Bernanke said he would help, Daddy. So we have to let him help.”

“Maddie, shouldn’t Mr. Bernanke be focused on driving the coaster safely instead of filling little children’s heads with thoughts of magic helicopters and large amounts of money?”

“No Daddy, you’re wrong.”

“Maddie, this is absolutely insane!”

“Daddy, you don’t understand. You have to give Mr. Bernanke the money! Please Daddy say it, for me, PLEASE!”

“OK Maddie. I want to borrow the money now.”

“Daddy, look really hard. See the helicopter coming to rescue us.”

“Maddie, I think I see it. We are going to be rescued!”


“Maddie, I was not expecting that at all. I have never been so scared in all of my life. Get me out of this!”

“Do you understand how to play the game now Daddy?”

“Wow Maddie! I never would have figured that out in a million years.”

“Daddy, that’s because you were acting like a grownup. This is a make believe game for kids or people that think like kids.”

“Do you want to ride again Maddie? I think I might like this game.”

“Daddy, I told you, I want to spend the whole day on the Bubble Coaster.”