Are Economic Smoke and Mirrors the Best Strategy?

I contend that the powers of our country are employing smoke and mirrors.
There seem to be two distinct groups, at odds over whether things are really good or bad, though. By this, I mean that the bears can’t believe that the market continues to climb, with the S&P continuing to claw back over 1000. Bulls keep investing, giving the impression that some really believe in this; and they got the S&P over 1000.

So, the government and Wall St hype work. After all, the fundamentals of our economy are terrible, and no educated economic student could argue that point. A few of the problem signs are the skyrocketing national debt, huge unemployment (far in excess of the touted 9.4%), residential real estate rout, an impending commercial real estate bust, absurdly rising health care (that threatens to be 100% of GNP in our lifetimes), the death of American autos, and we all could pile on innumerable other crises we face in our economy.

There is not one sign that recovery is under way. The story is that the leveling out means growth is coming. How idiotic is that? It will grow from smoke and mirrors, but it will not grow from fundamentals.

So, why could the smoke and mirrors be seen as beneficial? Certainly, we would all give credence to the fact that it is really consumer optimism that turns the economy around. About 70% of GNP is just consumer spending. If people drink the government kool aid, they will go back in debt and make the current economy look healthy, then. It has a cumulative effect that multiplies.

I guess that begs the question whether you believe this is really a philanthropic effort to make the economy better or some way for Wall St to garner more of the public’s money.

Here is my take on that. I believe that this is a planned initiative to take as much of our money as we will allow and put it in the hands/pockets of Wall St. After all, that is their mission, being as they are just businesses. If we allow them to do it, then that is exactly what their shareholders expect them to do.

Here is how. People buy assets like houses to feel that they are saving. Say someone puts down $10,000 on a $100,000 house because they believe it is a good investment. That happened by the millions prior to the current recession. When the home got foreclosed on, the bank kept the $10,000, plus all the payments. Then, they put it on the books for $100,000.
The government allegedly felt sorry for the bank which already had say $20,000 ($10,000 in down payment and $10,000 in payments), and the house.All of that ws freely agreed to in advance. Then the government gave them $20,000 to “purge the toxic asset”. Now, the bank has $40,000 and the house. Of course, we realize that that is business, too. If a bank makes a dumb investment, they should eat the loss. We gave them money so they allegedly would loan it. They won’t loan it because smart people know not to go in debt. They won’t loan it to bad credit risks because that is just stupid business.

Of course, the bank wants to sell the house for as much as possible, so they just keep it rather than sell it for $80,000. They need to use the smoke and mirrors to bring back confidence and sell the house for $100,000 again.
Then, they can just repeat the cycle, ultimately putting all the money the Fed prints in their pocket. People are ruined by this process, and Wall St. takes more and more. Ultimately, the American middle class is robbed of most everything through taxes and inflation.

Sure there is a period of deflation, but again the bank can hold the assets if the government prints enough money to keep them solvent through the alleged stock market downturn.

The same effect of the transfer of wealth from the people to Wall St. occurs in the stock market as in the housing market, as they manipulate the market through the ups and downs of bubbles. I sense almost everyone here sees these bubbles and rides the ups and sits out the downs. Currently, we are just watching and waiting for the next down cycle where people will be robbed again by Wall St (who seems to be manipulating these bubbles against all logic).

So while the smoke and mirrors give America a feeling of hope in the short term, the only way for Americans to win is to fight back against this. It seems like an impossible undertaking, at this point. My hope does not lie in economic security for me or anyone like me. My hope lies in the type of outrage that I see against the current government takeover. I think they have pushed the people too far, now. Yet, the signs make me wonder who is keeping the bottom from falling out. Either people are drinking the kool aid or Wall St. is just taking the newly printed money and investing it in the stock market. Either way, a bust is inevitable.

I advise that you take the approach that cash is king. Guard your savings by knowing how to invest. Resist the temptation to buy things you do not need. I feel that the myth of consumerism is just part of the smoke and mirrors.

GBY – o/


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