Why The Economy Still Stinks.

Isn't it funny that after months of endless talk of improving employment trends we get a horrible payroll number to end last week? So contrived. It smells of a set up only because Big Mouth Joe Biden alerted all of us that the administration underestimated how bad the economy really was. At least he is honest enough to say they don't know whats going on. When will we get similar missives from Messengers Geithner and Bernanke? I am thinking, probably when there are bogus Congressional testimonies when the banks do get nationalized. Its only a time of when not if.

For all practical purposes Citigroup is a goner. The administration will come to this sad truth pretty soon and break up/liquidate this sorry excuse for a bank. I am thinking by the end of the year Citigroup will just be a memory.

Going back to Big Mouth Biden, was it a slip of the tongue what he said was all to evident? Was he just speaking off the cuff? Did he have 3 to many Mojito's at the Biden Family BBQ? Or was he just speaking out because he like many Americans have had enough of this endless "positive" talk about a sick economy. The vast number of Americans don't believe what the administration is spewing about the state of Housing and Unemployment.

Where is the straight talk? Why is the Denial Method the preferred way for the Obama Administration to tackle any problem with regards to the Economy. Obama talks a good game, saying all of the right and correct things, but his actions and enabling of Geithner/Bernanke is ludicrous and really belies the administrations stance on many issues.

Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. I am quite sympathetic to the extraordinary challenge the president faces, but what we have learned the last 2 years of living through this recession and credit crisis is that the way the capital markets system is currently set up is not at all lined up to the benefits of the tax payer. Depending upon the public's confidence is an absurdly ridiculous foundation to rest the future of our economy.

So the ground work is being laid for Stimulus 2. More of the same. Business as usual. How much more money needs to be funneled to Bank Of America and other failed institutions before the administration realizes the Ponzy Scheme they are inflicting on the US Tax Payer?

Why the need for Stimulus 2? Because Stimulus 1 was a joke!

Nothing was really fixed. No real regulations have been passed. The credit card regulations are like calling 911 in a bad neighborhood - Its a JOKE!

The worst part of this is the administrations about face, didn't they tell us things are getting better? Was not TARP paid back from select institutions? Didn't Obama's foreclosure plan halt the housing skid? Didn't Geithner's Public/Private Partnership rid the banks of all Toxic Paper? Didn't Bernanke's grand plan to buy Treasuries and Agency paper to lower long term mortgage yields so that people can re finance their under water mortgages even with no job to actually pay for the house they are living in? Weren't the Stress Tests going to finally find out what actually ails the banks?

What happened?

The simple answer....is that nothing happened, because nothing was accomplished!
The only thing that was done was more bank losses were socialized. More money to prop up insolvent/failed institutions. More enabling of Goldman Sachs to do what ever they want to do.

The storm is not over, not by a long shot. Huge structural flaws remain in the architecture of our financial system, and many of the fixes that the Obama administration has proposed will do little to address them and may make them worse.

What needs to be done to actually fix the economy.

-Like I said in yesterdays post. 6 Months ago, everyone including the powers that be were convinced that our banking system was busted, not designed well, and not properly regulated.

So why then are Obama/Bernanke/Geithner so desperately anxious to restore this particular model as the de-facto standard model? Nearly every new program thought of these days from the Treasury Department, the Term Asset-Backed Securities Loan Facility, TLGP, TAF, TARP, Public Private Investment Program, and the bogus “stress tests” of major banks, all appear to have been designed only to prop up failed banks.

Instead of glazing over the picture, the whole system needs to be gutted and ripped apart. A new structure that promotes prudent risk taking needs to be put in place. A system where complex derivative instruments are no longer created just so that Goldman Sachs can become rich.

A new system that allows investors to get accurate and timely financial information needs to started.

A new compensation system needs to be put in place where executive pay is based off of stock price not day to day trading profits.

The only confidence that Obama has restored is the confidence of Wall Street that they can do what ever they want to do without any recourse. When will he realize that when during a period of deflation like the one we are in, any recovery will come only by restoring the confidence of the people down at the bottom of the pyramid?

Confidence will return only when jobs can be found and mortgage payments are made. Otherwise its all noise only to divert peoples attention to what seriosuly ails the economy.