Americanly Yours

If you are a regular reader, you will remember that I wrote earlier that the total amount committed to the bailouts by the government equaled $8,800,000,000,000 [$8.8 trillion].

Thats a ton of money–to put it lightly.  But, unfortunately for your wallet, it didnt end there.

Bloomberg recently reported that “[t]he U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion” over the past 20 months.  “The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.”

This means that in the past 20 months, the government has committed about 90% of our country’s GDP to bailouts and “stimulus.”  [emphasis added by me] Roughly 1/3 of this money has already been spent, while the remaining 2/3 has been committed but not yet spent.

The article breaks the spending by category.  This is pretty scary stuff.  Please pass this along to your friends and family.  Also, get involved.  There are Tea Parties coming up across the country on April 15th.  The Facebook group representing the Tea Parties has over 24,000 members.  We are expecting between 5,000 and 10,000 protesters in Atlanta for next weeks event.  These protests are being held in cities, both large and small all across the country.  Here is a map listing the locations of many of them.  Join the struggle before they spend another $42,105 of your money!

Americanly Yours,

Phred Barnet

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President Obama and Treasury Secretary Tim Geithner have asked Congress to grant the Treasury Secretary the power to “unwind” financial companies that pose systematic risks to our economy.

But, the government already has the power to unwind large insolvent companies which pose systematic risks to our economy.  Large financial–or any other type of companies–can be unwound through bankruptcy proceedings.  Bankruptcy courts can order the liquidation of a company and the sale of its assets.  There is no need to grant this power to the Treasury Secretary, or President Obama, or any one man.

Rather than bailing out companies, and then bailing out our bailouts like we have done with AIG and are about to do with GM and Chrysler, we should send these failed companies to bankruptcy courts and sell of their assets.  Rather than pumping TRILLIONS of dollars into failed enterprises, we should have quickly auctioned off these companies, their properties and assets, and anything else related to them.  Yes, these companies and their assets and receivables may have only sold for pennies on the dollar, but it would have been done without taxpayer money and would have allowed for the quick return to profits (as the purchasing price would have been low enough so that the purchaser could anticipate earning a profit).

You may be saying to yourself that I have said this on previous posts countless times.  You are right.  But, our government is not learning from these recent mistakes.  Instead of learning, we are repeating them over and over again, making things worse and worse and then blaming capitalism for the failures of the government.  For a man who repeatedly criticized President Bush for “staying the course,” Mr. Obama has sure picked a terrible course to stay.  So, for as long as Congress and President Obama continue to repeat their mistakes over and over again, I will continue to repeat myself over and over again, hoping that somehow my words reach their eyes and spark a change of direction.

But, back to the new proposal.  Look at it like this:  the government now controls most of the banking system.  Imagine that it creates new “recommended” lending standards to support an administration program–expansion of loans to increase home ownership for example.   If a company that is not owned by the government were to decide that these new government “recommendations” are too risky and are not a good investment and decided not to participate, the government could effectively force the company to comply by threatening to “wind it down.”

This is a dangerous, undemocratic, and authoritarian proposal which gives the Federal Government way too much control over the financial industry.

Americanly Yours,

Phred Barnet

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In its infinite wisdom, our government has once again decided to bailout AIG by giving them billions more in tax payer money.

The government had already spent $150,000,000,000 [$150 billion] bailing out and nationalizing AIG before this latest bailout was announced.  But, now, the governments newest plan has loaned AIG an additional $30,000,000,000 [$30 billion].  That of course gives us a total of $180,000,000,000 [$180 billion], yet many analysts are saying that AIG will probably “need” another bailout and that total money “loaned” to AIG could top $250,000,000,000 [$250 billion]!

Even if the loans were to stop now, AIG would have immense difficulty ever paying them back.  $180,000,000,000 [$180 billion] even without interest is a substantial sum to have to pay someone back.  Even if AIG’s profits were to return to what they were before this whole mess started, it would take AIG over 20 years to pay back not including interest if they were to take every penny of profit and throw it at their debt.

Joseph Stiglitz, a nobel prize winning economist who has advised both President Clinton and President Obama has spoken out against these bailouts of AIG and the banks–he argues that not only will throwing this kind of money at the banks will create an investment bubble even bigger than the one that just burst, but doing so could also downgrade our standard of living for the next 20 years.

Enough is enough!

We should let this company fail, rather than continue to subsidize its failures and stupidity.

The real free market solution here is not to continue to throw unfathomable sums of money at AIG hoping that this money will eventually stabilize it.  Rather, the real solution here is to let AIG fail.  AIG’s assets should be auctioned off in the open market under the guidence of a bankruptcy court.  No, their assets and businesses wont get anything enar their “book values.”  Investors and business, however, will pay something for AIG’s name, businesses, real estate assets, and receivables.  In a real free market solution, investors would put up their own money and buy these pieces of AIG at a low enough price that they will believe that they have a good chance to make a profit.  This price would probably only be pennies on the dollar, but repricing “bad” or overvalued assets is a very important aspect of the free market system.

Under this solution, AIG’s pieces would probably become parts of other insurance and financial companies, or they would end up being owned by large investors.  With assets and receivables being bought at rock bottom prices, AIG’s new owners would be able to operate with confidence that good decisions will lead to profit, as they wouldnt be saddled with such an enormous debt.

This would also prevent the credit markets from further locking up by allowing AIG and its parts to continue to operate, although most likely as parts of other companies.  And, most importantly, all of this is accomplished without creating a new “bubble” that will inevitably burst in the not so distant future, causing yet another financial crisis and risking our future.

Americanly Yours,

Phred Barnet

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I found this chart at the New York Times.  It totals up all of the money already committed to bailouts by the United States Government.  It also shows the total amount of this money that has already been spent on bailouts of private sector industries by the government.

According to this chart, the US Government has committed $8,800,000,000,000 [$8.8 trillion] to these bailouts.  Of this, the government has already spent about $2,000,000,000,000 [$2 trillion].

This is insane.  The $2,000,000,000,000 [$2 trillion] equals $6,666.66 per American.  $8,800,000,000,000 [$8.8 trillion] in total bailouts adds up to a total of $29,333 per citizen of this country!

But, this money doesnt even include the $152,000,000,000 [$152 billion] “stimulus” last year or the $787,000,000,000 [$787 billion] bailout recently passed.  If you add those two bills to the total, the total swells to $9,739,000,000,000 [$9.739 trillion].

This equals $32,463.33 per American!!!

This amounts to about 3/4 of the annual US GDP and is nearly enough to double the national debt.  And, as Mr. Obama and others have reminded us, there is no guarantee that this will work.

The government just cannot justify spending this much of its citizens’ money on bailouts and “stimulus” that has no guarantee of working.

This is money that has to be paid back.  It will be paid back by Americans in the future.  Including the current national debt and the money that will be added to the debt due to these new bailouts and “stimulus” bills, a child being born today is born saddled with approximately $65,000 in debt.

We are selling our children into slavery for bailouts and “stimulus” bills that may not even work.

Americanly Yours,

Phred Barnet

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The American People do not want the auto industry to be bailed out. According to a poll conducted by CNN, 61% of Americans surveyed are absolutely against any federal bailout of the American auto industry. Additionally, the majority of voters in every single region of the country are opposed to these bailouts, including 53% of people in the Midwest (these are the people most likely to be affected by any auto industry bankruptcies). 70 percent of Democrats, 62 percent of Independents, and 55 percent of Democrats are opposed to these bailouts. Simply put, this is an issue on which there is an overwhelming amount of agreement. The American people do not want to see their money wasted on bailing out failing automakers.

Chrysler is a privately owned company which is 80% owned by Cerberus Capital Management and 20% owned by Diamler AG. Both of these companies have billions of dollars in cash on hand, yet the parent companies of Chrysler have refused to inject more of their own money into their failing subsidiary. If, as the automakers are claiming that they only need money to temporarily get them through an organization process, why wont the owners of these companies temporarily inject the money into the companies? Probably because they know that it is a bad investment and that they are not likely to receive their money back. If the owners of Chrysler are unwilling to put their own money into Chrysler, why should the American people be FORCED AGAINST OUR WILL into spending OUR money on a bailout? Additionally, the Ford family has billions of dollars in personal assets. If they want to save their company, maybe they should use their money.

Speaking of Ford, of the Big 3 Automakers, Ford is the only one not in horrible shape. Since taking over two years ago, CEO Alan Mulally has begun to implement a vast turn around plan called “The Way Forward.” This plan has been relatively successful, and has already resulted in billions of dollars in cost savings, and will continue to help the company. As a result, Ford is the only American automaker not in immediate risk of collapsing. According to company reports, Ford expects to turn a profit in 2011, while GM and Chrysler haven’t bothered to give the American public any timetable for when they will be able to return to profitability. Both GM and Chrysler are said to be within weeks of collapse, and GM has already hired a team of bankruptcy lawyers. By bailing out GM and Chrysler, the government could be hurting Ford’s prospects of recovery.

Congress, President Bush, and President-Elect Obama should respect the wishes of the American People and allow these automakers to fail—or succeed on their own.

Americanly yours,

Phred Barnet