Will the commercial paper facility work? Just google “pushing on a string.”

You can’t (shouldn’t) fight gravity.

The damage to the economy was done in the boom. The bust is simply the market’s way of taking account of what was wasted. This process cannot be stopped, but it can be twisted from something healthy into something perverse, and Bernanke and Paulson are wringing the guts out of what is left of the US economy. What is even more perverse is that everyone except the Austrian School, who saw this coming (Rogers, Prechter, Mish, Schiff, Tice, Faber, Grant, Bonner, and Ron Paul, take a bow), keep crying out “More! Harder!”

Nobody who is worthy of debt wants a loan in this environment. Where can you invest the money to generate a positive return? The commercial paper market will continue to shrink as corporations scale down with layoffs and asset sales. The Fed can’t print up a renewed appetite for debt and risk.

“To believe, to obey, to combat”

So how will we eventually reflate? Government will spend the money into circulation, not lend it, as it takes over enormous sections of the economy, more on the scale of Mussolini’s programs than FDR’s. What little wealth and savings are left will be taxed and inflated away to support the Great Common Effort, until the Effort and War have hollowed out the nation unto utter collapse.

Poor America. It is clamoring for change, and as Mencken put it: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

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4 thoughts on “Will the commercial paper facility work? Just google “pushing on a string.”

  1. Expanding on the theme of the government taxing and spending what little wealth and savings are left: I’ve been contemplating something that I’ve yet to see anyone comment on or suggest: How long will it be before the government starts to tax IRAs, 401-Ks, and Keogh plans, etc? For some time, sensible, thrifty, and hardworking Americans have been ferreting away fairly sizeable sums of money into these tax-exempt or tax-deferred vehicles. I would imagine that as the state drains the blood out of every other potential source of revenue, these pools of wealth will begin to look more and more appealing. And I imagine it would be a simple affair to actually convince the boader public (i.e. all of the spendthrifts and layabouts who have not made use of these retirement instruments) that the people who have are somehow greedy, uncaring SOBs who refuse to contribute their fair share to the common cause. Thoughts?

    Kind regards,

    Brian

  2. Brian — You’re ahead of the curve. Who knows what new confiscatory schemes and post-hoc rule changes they will come up with? These tax-free accounts will probably be compromised at some point, possibly starting with the mandate that some or all of the assets be invested in Treasury debt, just as that market starts to tank. Or how about PC asset allocation schemes: 20% must go to green energy, or no investing in Chinese companies?

    Personally, I decided to take the tax hit and cash out.

  3. RE: the long-term security of IRA’s, etc:

    If you read RGE Monitor, you might notice that today they had a bullet-point list of various articles and commentary on the government of Argentina’s potential plans to take over private pension funds and roll them over into the national “Pay-as-you-go” pension scheme. Seems like a likely scenario here too. Good old Uncle Sam (or rather, the vermin who are basically animating his corpse for their own profit) would seize pension funds, IRAs, 401-Ks, Keoghs, etc – roll their assets into Social Security – and of course just burn through the actual assets and replace them (as they’ve essentially done with the funds that are supposed to be in the social security system) with a big post-it note with “IOU $$$$$$$$$$$$$” written on it”.

    Kind regards,

    Brian

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