What’s the difference between a pigeon and a Wall Street banker?
The pigeon can still make a deposit on a Porsche!
Meanwhile, in what looks like a stunning display of stupidity, the Federal Reserve recently hired someone to “assess the safety and soundness of domestic banking institutions.” The new employee is none other than Former Bear Stearns chief risk officer (from 2006 to 2008) Michael Alix. Unbelievable! The Fed hired the guy who let Bear go bust.
Regular readers know that I’ve been saying the US government is broke for a while now. As if our national debt and unfunded future debt obligations weren’t enough, Henry Paulson proposed spending $700 billion to buy mortgages and other toxic “assets” from banks. Well, not only does the Treasury now want to spend bailout cash on all kinds of financial companies (from banks to bond insurers to specialty-finance firms like GE Capital) it’s becoming more and more obvious that the government didn’t actually have $700 billion lying around. The Treasury has borrowed $600 billion since mid-September, and it wants to borrow a record total of $550 billion during the fourth quarter of 2008 to help stabilize the financial sector.
In July, the Treasury estimated third-quarter borrowing would be $171 billion. It actually borrowed $530 billion, $300 billion of which was for its Supplementary Financing Program, launched in September, to keep Wall Street from melting down.
While people may argue that this was the best thing to do (of course you should bail out your buddies on Wall Street!), the fact is that this level of government borrowing and spending will have an inflationary affect. It’s still not too late to buy some gold coins and hedge against it.