The Great Depression Online

Great Depression Online Archive Issue:

No Looking Back

Great Depression Online
Long Beach, CA
March 24, 2009

Inside This Issue You Will Discover…

*** Let the Failures Fail
*** Bank Closures on the Rise
*** No Looking Back
*** And More

Let the Failures Fail

“You ought to share it, and God will bless you for doing it,” were the words spoken by one Mary Huguley of Hartford, Connecticut, over the weekend.  She, and about 40 other hopeful money grubbers, had taken a bus to the posh Fairfield homes of several AIG executives where they demanded a share of the executives’ $165 million in bailout funded bonuses.

“We think $165 million could be used in a more appropriate way to keep people in their homes, create more jobs and health care,” said Emeline Bravo-Blackport, a gardener.

Yes, everyone’s an expert these days on how other people’s money should be spent.  President Obama, Nancy Pelosi, Ben Bernanke, the gardener…all think they know best how to spend money that’s not theirs to ‘fix’ the economy.  We here at the GDO claim ignorance in the command of such matters.

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No doubt, $165 million is a large sum of money…yet by comparison, it’s a near insignificant fraction of the $170 billion bailout doled out to AIG by the Fed.  In fact, it’s less than one tenth of one percent.  And now, as the economy burns, Congress is dithering away…arguing over a proposed 90-percent tax on bonuses given to such executives of bailed out companies.

To be clear, we don’t endorse bonuses for those who didn’t earn them…but, more to the point, we don’t endorse bailouts of failed corporations.  And if there were no bailout of AIG there would be no bonuses for AIG executives.  You see how it works?

True capitalism let’s the failures fail…an intolerable concept in today’s brand of corporate and government comingling, which socializes the losses of certain – preferred – business failures.

For example, just yesterday U.S. Treasury Secretary Timothy Geithner announced a new acronym in the war to save the economy from itself.  The PPIP, or Public Private Investment Program, plans to comingle government money with institutional investors to buy $1 trillion in toxic mortgages.

For whatever reason, the stock market loved the idea…market bulls doubled down on the current counter trend rally with the DOW launching 497-points to close the day at 7,775.

Bank Closures on the Rise

Bank closures – for the non-preferred – are on the rise in 2009.  Just last Friday FirstCity Bank of Stockbridge, Georgia, Colorado National Bank of Colorado Springs, Colorado, and Teambank of Paola, Kansas, all went belly-up.  Alas, they were all a tad too far from Washington and Wall Street to save.

“The banks with $1.1 billion in total assets and $853 million in deposits were shut by regulators,” reported Bloomberg, “and the Federal Deposit Insurance Corp. was named receiver, according to e-mailed statements yesterday [Friday] from the FDIC.”

Friday’s three bank closures brought the total for the year up to 20.  At this rate, over 80 banks will fail in 2009.  By comparison, just 25 banks failed in 2008.

So far this rate of bank failures seems like a walk in the park compared to the Great Depression where, during the 1930’s, roughly 9,000 banks failed in total.  That’s about 900 banks a year.  Fortunately, we’re in no way approaching such disastrous levels.  Unfortunately, the trend is on the rise…

“The FDIC classified 252 banks as ‘problem’ in the fourth quarter, a 47 percent jump from the previous period and the highest total since June 1995.”

No Looking Back

Last week, while the world was celebrating the luck of the Irish, the U.S. National Debt zipped past the $11 trillion mile marker.  What’s more, with the latest budget projections, it’s not likely the National Debt will ever look back as it accelerates down the road to hell.  The $11 trillion liability amounts to $36,000 for every other man, woman, and child living in the land of the free.

“It took the U.S. government 191 years – from 1791 until 1982 – to run up its first trillion dollars in debt,” reported Mark Knoller for CBS News.  “The second and third trillions got on the scoreboard much more quickly – each in just four years.

“By the time George W. Bush was inaugurated in 2001, the National Debt stood at $5.7-trillion.  He ran up more debt faster than nearly all of his predecessors combined: just under $4.9-trillion.

“The National Debt stood at $10.6-trillon on the day Barack Obama took office.  But if his budget projections are accurate, he’ll run up nearly as much government debt in four years as President Bush did in eight.”

Knoller also added that over $400-billion in debt was accrued in President Obama’s first 57 days in office.  By our back of the napkin calculations that amounts to over $7 billion per day…nearly $300 million per hour…$4.8 million per minute…and over $81,000 per second.  Is there a soul on earth that still believes this debt will ever be repaid?

It will be reckoned in the end, of course.  Maybe not in the traditional sense…but when a nation spends into the abyss with such enthusiasm, ultimately and without exception, its people pay the price as their civilization disintegrates around them.


M.N. Gordon
Great Depression Online

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