You Play, You Pay ...

Post 35

Weeks of training complete: 23 weeks, 2 days

Time remaining until Ironman: 8 weeks, 5 days

Miles swam: 96.816

Miles biked: 1,578.91

Miles run: 393.08

Goal: $5,000

Total raised: $1,615

"The time has come to save capitalism from the capitalists." – Luigi Zingales, Robert C. McCormmach Professor of Entrepreneurship and Finance, University of Chicago

I have tried to stay out of politics on this blog, but the financial and economic situation has been weighing on my mind and the minds of lots of other people. Every weekday this week, and most of the weekdays last week, I have learned of another person who has lost their job. Every day it seems, I hear some other tale from some other person, or perceived or real woes within their own business, or their companies.

For those of you who feel the need to ignore the realities, please feel free to say (with a mocking voice, of course): "What recession? People are still driving cars. I still see people buying stuff." Let me say in advance, thank you for those astute observations.

And then, let me tell you this: When the federal government's leaders are attempting in a single week to take the US financial system and turn it from something akin to the Wild West into something that reeks of the kind of nepotistic socialism favoried by the cronies of the old Soviet Union, something is wrong. Something is very, very wrong.

And for those of you who wish to stick your head in the sand - and declare (in the mocking voice, of course) that there is no recession, well, I'm sure the feds and the banking industry would like to tell you: "Thank you very much." They're quite happy to take their $2,300 from every man, woman and child in the US under the Paulson (that's Treasury Secreatry Henry Paulson) Plan and go on their way – nice, fat and profitable, these people who have put us all in grave danger.

The titans of Wall Street – let's face it, they are an evil, evil, ruthless bunch. In the past 15 years, they have found new and ever more ruthless ways to make money. Look at the carnage you can directly or indirectly tie to these people: there's Enron, Adelphia and the tech stock crashes; there was the massive run-up in the price of electricity as a result of the degregulation of the energy market (and the destruction of numerous power companies and their pensioned workers that resulted), there was the housing boom and bust, the massive run up in commodity prices and now this. Each one of these crisis – as the facts always show months or years down the road – was created, exacerbated, and manipulated for disgusting levels of profit only ultimately to result in the screwing over of millions of regular people just like you and me.

It's a disgusting abuse of power, ignored and allowed because the very people who manipulated these markets are close friends of the people who run our country. These people dine with Senators, Congressmen and Treasury Secretaries. Hell, many treasury secretaries are these people. Paulson, a Goldman Sachs alum, is a case in point.

So, why then, why, are we so ready to bail these people out?

Well, to put it quite simply – they have lobbyists up and down Capitol Hill – and they've asked Congress to do it. The banks, the financial institutions want this, because it's the easiest thing for them. Imagine you went on a $250,000 shopping spree and the bills came due. If you're choices were: a) have mom and dad pay it or b) sell the rest of what you owned and work out a debt payment plan based on garnished future earnings, which would use choose? I'd choose "a" and that's basically the way the Wall Streets are looking at.

The Paulson plan strikes me as incredibly dangerous and even though Congressional leaders are questioning it, they're questioning it for the wrong reasons. They want "middle class" relief, too. Essentially they want to spend even MORE money on this plan! Money they don't have! The American political leadership are like the worst examples of the $30,000 millionaire. This group loves to throw money at everything. They show no responsibility.

They also love scare tactics. All yesterday, Paulson ranted and raved on Capitol Hill about impending doom and recession if immediate action wasn't taken to bail (read: help his friends)these troubled financial institutions out.

We all need to step back and think about this. These scare tactics - these sweeping reforms in times of impending crisis - have been a benchmark of the Bush administration; think the Patriot Act after 9/11; the case for the Iraq War (weapons of mass destruction, anyone?), and now the Paulson bailout.

I don't buy Paulson's schtick, anymore. I knew Paulson was full of it the day I heard him proclaim that the run up in oil prices had nothing to do with market speculators. There are few people who follow the commodities market who buy that argument anymore. Paulson said that because he had friends to protect and an agenda to push - the expansion of drilling rights. The run up in oil prices was due totally to speculators; they were speculating there were problems in the stock market and they were looking for safe havens for their money. That's not a bad thing. That's speculation.

There is an interesting article here from which my opening quote is taken from. Read it if you have the time. Try to understand what is happening here.

Your life is about to change in ways you can't fathom if things continue to slip. The idea of credit the way you though of credit is about to change. The less educated are about to be marginalized. Those who made bad credit decisions are about to be pushed out of the system in a way they could never have expected 10 years ago – and maybe in a later blog I'll try to explain why. Basically, you're about to be looked at and analyzed as a risk every time you ask for money – for a car, for a student loan, for a credit card, for a mortgage, to rent an apartment. Heck, for a student loan, everything will be looked, including the major you want to go into it. The days of the $35,000 loan for the starving art student are gone, baby, gone, especially if that art student was a C student. Too much risk in that puppy.

We're not very good at accepting consequences, but we need to accept the consequences here of the lifestyle, the freewheeling debt-fueled frenzy we engaged in. The companies need to suffer, to take their losses, to go through expedited bankruptcy procedures, to flush the bad debt from the system and start over. It will be tough, but I suspect Paulson's plan could be worse.

We should not be made to pay for this mess. We'll be paying for years - and while I suspect the short-term benefits of this plan are better; the long-term effects of Paulson's plan seem much worse the way I see them. This is something we will pay for for decades. It will cost more than Social Security in 2009! Wasn't Social Security the item that was going to bankrupt the government?

I fear his plan will wreck the dollar, fueling a nasty cycle where the price of commodities explodes. The exploding price of everything – gas, food, clothes – coupled with increasing layoffs will only make things harder, fueling an ever more vicious cycle.

It is said that many of the banks in need of a bail out – particularly Lehman – have more assets than they do liabilities. Why are we bailing them out? Why are we letting this government decide our future? They've made enough mistakes as it is. Even though it will be painful, I would urge our leaders to give some careful thought to what they are about to do and for once, do what is right and kick the lobbyists and financial execs out of the hall and go do their own research, seek out independent expperts and try to craft and thoughtful comprehensive plan that will work.

Like I said, I'm afraid. I'm watching all this go down and thinking: doesn't anybody in Washington have a clue – Democratic or Republican? Where are the real leaders when we need them? Why, in a time when we're on the verge of a major crisis, are the peope in charge still driven by greed and self interests?

God save us all ...

- Ed