Idaho's Weekly Journal of Local & National Commentary Week 2815


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by Free Market Duck

President Bush, Sec of Treasury Paulson save America's subprime home bet...
Just Call Hotline to Mortgage Heaven: 1-888-995-HOPE

(Dec 07, 2007)

Oh-oh.  A recent rise in Auto-Loan Delinquencies spurs President Bush and Treasury Sec Paulson to plan for new government bail-out of subprime car buyers.  Just call Hotline to Classic Car Heaven: 1-888-995-VROOM-VROOM to keep your re-possessed Porsche, Corvette, or Volkswagen.

Students, bankrupt?  For a govt bail-out, please call Hotline to College Loan Heaven: 1-888-995-THANKS-4-FINANCING-MY-COSTLY-STATE-WORK-PERMIT-DUDES.

Don't want to pay any of your contractual debts or bets?  For a free govt bail-out, just call Hotline to Screw Everybody Heaven: 1-888-995-IOU-NOTHING-SO-JUST-BITE-IT.

Washington, DC Whoa, fo-fo-two choo-choo, humble servants of America.  Frick and Frack -- Prez Bush and his faithful side-kick Secretary Tonto Paulson at the U.S. Empty Treasury, showed up on national TV yesterday and gave all Americans the secret phone number to Bush's Hotline to Mortgage Heaven: Ya-yesss, girl friends, it's 1-888-995-HOPE.  Or is that 1-888-995-DOPE?  For some of you who waited too long, it's 1-888-995-NOPE.

   In one fell swoop, Prez Bush and Treasury Secretary Paulson are trying to wipe out:

1. The entire philosophical basis for free market economics, and

2.  The basis for objective contract law in America.

   For those of you who still think we are living in a free market, that a Federal Reserve Note obtains value by virtue of being printed by Big Brother, and that President Bush's and Treasury Secretary Paulson's objective yesterday was to bail out the 1.2 million subprime slime borrowers, welcome to Alice in Wonderland.  Make that Karl in Marxist Land.

   The real purpose for Bush and Paulson's actions was to (1) camouflage the fact that the U.S. is now entering what will evolve into a huge, huge recession, the likes of which most Americans have never experienced, and (2) to point Americans away from the real culprits who caused the recession, the central bankers, and toward the Wall Street investment bankers' manufactured victims, the subprime borrowers.  Yahoo, smoke and mirrors.

   The chocolate crumbs around the govt's lips that reveal the truth include:

1.  Why such drastic action?  What's really going on?  If 93% of Americans are paying their mortgages on time, what's the big problem with 7% defaulting on their loans?  That would be peanuts in the economy but that is not what the govt is concerned about.  It's not the subprime mortgages per se they're worried about but rather the trillions and trillions of new, highly-leveraged -- as in "loaned on margin" and can't be paid back -- Federal Reserve Notes that our central bank provided to their member banks to "BUNDLE" with the subprime mortgage loans so the member bankers, through their subsidiary "off the books" investment corporations, could sell them as SIVs (Structured Investment Vehicles) to anybody and everybody here and abroad (which includes, ironically, state govt pension funds such as the Florida Investment Pool whose members, teachers and others, may well be subprime borrowers themselves AS WELL AS 401k investors for their retirement).  Investors in the Florida Investment Pool withdrew another $1.2 billion yesterday after previously pulling over $17 billion from the $27 billion Fund since Sep 2007.  Withdrawals were frozen for 1 week to stop the first run on the fund and those who withdrew were penalized if they withdrew over a certain amount of their money.  This is just the tip of the iceberg and the point is that it is not the subprime mortgage money that Prez Bush and Treasury Secretary Paulson are worried about.  It's the trillions and trillions of hyperinflated money that was "BUNDLED" with it, which nobody can trace or value, and can't be paid back.

2.  There is no way for the holders of the "BUNDLED" subprime mortgage loans, bundled with trillions and trillions of new highly-leveraged Federal Reserve Notes, to provide a "mark to market" -- a market valuation -- for the SIVs they are holding.  What's worse is that the holders of the SIVs do not know which mortgages or fractions of mortgages they are holding and thus cannot service anybody's subprime mortgage loans. And even if they could, a district court in Detroit already ruled that Deutsche Bank cannot foreclose on a handful of subprime borrowers who have defaulted because, the court ruled, Deutsche Bank's SIVs are not direct mortgages but rather investment vehicles, a format which does not allow the bank to call in the loan.  This ruling is just one of the many future contract and legal problems that Bush and Paulson don't want you to know about because it was their buddies at the Fed, the member bankers, who created the concept of "BUNDLING" subprimes with new hyperinflated Federal Reserve Notes which they obtained from the Fed Reserve on big time margin, as in 3200% leverage.

   The recession is already here and it was not caused by the subprime mortgage borrowers. The recession was caused by the Federal Reserve and their easy money policies and the bankers and their investment houses who used the mortgage industry to inject trillions and trillions of non-backed paper into their pockets by "BUNDLING," or hiding it between the mortgages as they sold the mortgages to all the unsuspecting investors.

   In short, the cause of the current recession was:  going off the gold standard and allowing fractional reserve banking with fiat paper money.  (Note:  99% of all our economic ills can be directly traced to:  going off the gold standard and allowing a fractional reserve banking system.  A 100% gold-backed monetary standard does not create (1) deficit financing (2) Congressional earmarks (3) redistributive welfare states (4) subprime mortgages (5) trade surpluses or deficits (6) central bank dictators attempting to manage, thus negating the concept of, the free market (7) nation-building wars, or (8) a stripping of every individual's inherent rights by implementing governmental interventions into every facet of everybody's lives to purportedly "save" the people from the government's previous interventions.)

   The solution is to return to a 100% gold backed currency.  Until the U.S. returns to a 100% gold standard, Americans will suffer many economic consequences, including loss of most of their basic freedoms -- and the implementation of lots more hotline phone numbers from our Tweedle-Dee Secretary of the Empty Treasury and Tweedle-Dum President.

   The worse possible thing that those in power in the U.S. could do is pour more non-collateralized money, more non-backed "liquidity," into what's left of the hyperinflated non-existent free market.  It is not more fake money we need.  It is real capital and capital goods and true free market capitalism -- not corporate special privileges -- that we require to pull out of the recession.

   Fake money -- i.e., not backed by a hard commodity -- cannot produce capital goods.  And that is where today's Keynesian and "mixed" economists have gone wrong.  Fake paper money does not stimulate production.  Only a gold monetary standard and real capital goods coupled with time and labor saving ideas can produce capital.  But we don't live in a capitalist society.  We live in a fascist state-collectivist economy with central bankers manipulating Funny Money, churning half a quadrillion dollars of non-secured fake money for their own greed.

   Time to return to gold and a true free market.  Otherwise, I hope you're invested in precious metals and own an electric car. -- FM Duck 

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