I want to explain a straightforward concept that is at the heart of the current economic crisis. It is the most basic reason that all the tomfoolery of the Obama administration and other G20 countries have succumbed to will do no good. It is as simple as this: they are pretending there is a liquidity crisis and refusing to deal with the real-life solvency crisis.
To illustrate let me ask you a question. If you earn $4,000 a month and owe $700,000 on your mortgage, $60,000 for cars, and $120,000 on credit cards, how many new credit cards do you need to be in good financial condition? One? Two? Five? Really, how much more credit would it take to make your finances make sense?
Say your monthly payments were $10,000 per month. You'd be short $6,000 this month. The Obama administration's solution would be to give you $6,000 this month, $6,000 next month, then a final payment of $6,000 the next month. Problem solved, right? Right? These nitwits think a little liquidity, a little cash will help, while the basic situation gets worse.
When a bank owns mortgages worth $100 million, but the actual houses are only worth $65 million, and they have reserves of $1 million, that's a problem. giving them a million dollars this month doesn't solve a blessed thing.
When a government owes $107 TRILLION and takes in $1.5 trillion per year, that's a problem. You can say pretty things and read a teleprompter like crazy but look at this. In 2005 the total owed was $67 trillion. See a problem? It's going in the wrong direction at 90 miles an hour.
When a government in that situation takes over banks in that situation, where's the solution? A little extra cash this month does absolutely ZERO. ZERO. That is why I say our government has done nothing about the crisis they created except to bring it back next year but bigger.
Is there any way they don't realize that is what they have done? I doubt it. Really doubt it.
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