I have been following the efforts of the new sheriff in town’s attempts to “put the country on the right track”. Just what does that mean anyway? Were we on the wrong track when things were going good or did someone at the last second “switch tracks” on us with no official notice?

  It is clear to me that there is always some form of collusion going on when people are trying to either get into or stay in power.  At this time we are being treated to a lesson in “New Socialism”. This is a blending of the socialist principles of the government running everything with a weakened form of capitalism. You see all of the former socialist experiments in the past have failed.   On the other hand, our most recent experiment with capitalism has produced a record level of greed and contempt for anyone but self. Now were are seeing the forces combined. I call it Capitalistic Socialism. This is where the socialist government begins to take over the ownership of capitalist style business. It is important to note that governments have historically never produced anything that could be considered wealth, they appropriate it. They collect taxes from citizens and call it their own. The problem with this is that eventually there are no more wealthy people to go after as everyone has been reduced to the lower class or impoverished class. With out the rich people investing in manufacturing or retail services, there soon is no employment available except that which is created by government. Once there is no private money to tax, the government fails and everything collapses. The new solution to this age old problem is for the government to become a “partner” with the private sector. Thus Socialism meets Capitalism and gets married.

  Look at China and you will see this in action. The Communist Chinese government found out many years ago that if you gave the workers little perks from time to time they would perform better, with a happier attitude. Soon the Chinese people grew more and more expecting of these perks. At the same time the Chinese government started to try to woo the different consumer nations to not only buy Chinese products but to have the western products manufactured in China as well. As time went on a new class of private wealth developed in China.  Today you have  a fairly large capitalist style economy trying to emerge in a still solidly socialist (that’s what communism is) governed country.

  In the US we have a group of idealists who believe in the socialist form of government but need the capitalist society to survive. With out it , all will fail. Bring on the new Stimulus packages. Here you are seeing the government trying to take partial ownership of major industries.

 Here is how it started.   Our congress passed several laws in the early 90’s (under Bill Clinton) that forced many of the largest banks to make loans to people who either couldn’t afford them or shouldn’t have had them due to poor history. At the same time they created an investment vehicle call the “Mortgage Backed Security”. Most of the mortgages made today are packaged up and sold on the stock market as investments. Chances are that the original lender that made your mortgage never saw one of your payments as it had already been paid off by the investment security. You are actually making payments to hedge funds, 401k funds, and other different types of funds. This was all fine while it was under control, but then entered greed. There was more money available to lend than was able to be lent so standards were relaxed. Why- PROFIT. It is simple, the more “investments” that are out there, the more potential for large returns there are. This , of course, attracted several of the world’s largest financial institutions. They all wanted a piece of the pie. As more money flooded the system, more was being lent. This created a false sense of security in the general public. I think it is safe to say that, at some point, we all got caught up in the dream of buying a house and turning it quick to take advantage of the seemingly endless escalation of values.

 Somewhere along the line, the large banks realized that this wasn’t sustainable and pulled the plug on the cash flow to the lenders. Without the free flowof money, the house of cards came tumbling down. With the sudden devaluation of the Mortgage Securities and the inevitable crush of foreclosures that would be forth-coming, the investors ran to gold and oil to try and “keep” their gains safe. This only caused another run up in values, sending oil through the roof. Since greed was the only thing that was important, no one seemed to care if this oil run-up destroyed the already shaky economy. Neither did they expect the international fallout that was about to occur. But with $4+ gas and $145+ oil, the coffin was nailed shut. Soon, the major institutions again realized that it was time to “get out ” of the new sinking boat, so they ran to the stock market. Now keep in mind that much of the money that was being used to invest was itself borrowed. At some time the debt must be re-payed and because it was the sames institutions that stared it all, they were the ones to take the greatest fall, i.e. banks and brokerages.

 Now enter the government. Since it was the very laws that were passed by congress that set the stage for this global catastrophe, Congress decided that it must take action to try and “save” the system it had created. Then an unexpected event happened, the country decided to elect a socialist leaning government to DC. With a decidedly socialist leaning president and no clear obstacle in its way, the new socialist movement was free to take over and “change” things. But is it really change or just the next step in the conspiracy. By the government now taking “ownership” of large portions of voting stock in the nations banks( and possibly in GM and Chrysler), it is setting up that marriage of Socialism and Capitalism. Of course one thing hasn’t changed, and it will be what dooms this marriage to failure as well. That is the basic belief that it is bad to be rich( or at least rich and not in the government).

 All I am hearing is that we must penalize those who dare to gain wealth as if they are some sort of evil. Where is the incentive to invest in a new plant or store that would employ many people. As a new business owner myself, I am not sure that I would ever want to take that risk if all I had to look forward to was someone thinking that I was now some how wrong for actually benefiting from my investment. I do believe that there should be something done about the abject greed that was at the root of many of our current problems. We need to pass laws that require investment money to be actual, not borrowed. We need to hold our elected leaders to the same standard of performance that we hold hired managers to- if you do poorly, you get fired. As for major corporate executives, if they do a good job and the company prospers, pay them well. If the company they lead fails to make a profit or causes its shareholders a loss, then don’t pay them at all, period.

  I hope that it is not to late to see some level of sanity restored to our business and governmental leadership. But mostly, I hope that the American people recover from the drunken stupor that they are in and force the correct change.

   Just a thought, Glenn Smith Jr, author of “The Key of Forgiveness”

Saturday, February 28th, 2009 - 4:27 AM
Category: Business/Economy.

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