President Bush in the last couple of days has continued the mantra of how strong the American economy truly is and that we are not in a recession, at least not technically. Now Secretary of the Treasury, Henry Paulson, has been trotted out to keep up the delusion. I guess they figure if they say it enough it will either be true or we’ll believe it. I watched Henry Paulson’s visit with Chris Wallace on Fox News Sunday and I give credit to Wallace for asking the tough questions.
First of all, one must understand who Henry Paulson is to understand why President Bush nominated this guy back in 2006. Henry Paulson came to the Treasury from his job as President and CEO of Goldman Sachs. He gained that position in 1999, but had been with the bank for many years before that. I’ve previously posted that Goldman Sachs New York is one of the owners of the Federal Reserve. Paulson is also the Governor for us in the International Monetary Fund/World Bank Group (IMF). Ben Bernanke, the Chairman of the Federal Reserve, is the alternate to Paulson with the IMF. As one can see, there is a lot of interplay here within these groups.
Henry Paulson told Chris Wallace that the stimulus checks that some of us will be receiving will bring a “meaningful difference”. I don’t know about you, but now that I pay over $100 more in gas a month, $600 isn’t going to make any meaningful difference to me. I plan to put the money in savings anyway for a little extra cushion when the economy does finally burst. Wallace then pointed out that America has lost 85,000 jobs in the last two months and that 70% of economists say we are in a recession. Wallace asked if the administration is “out ahead or always behind the curve” in regards to economic crisis-es. Paulson claimed that the Administration, beginning in August, had been putting programs in place that are helping. (That must be why each new day brings a new crisis.) He also thinks they “were early” with the stimulus package.
Chris Wallace then brought up the Bear Stearns banking problem that just happened and that the government bailed out and wondered if we should expect more of these bank crumb-lings. Paulson continued the old, “I have confidence in the market.” Was that before or after Countrywide, Bear Sterns, and the countless others that have fallen in the past three months I ask? Paulson said we “have strong financial institutions that are the envy of the world”. Maybe the third world… He said that our focus and priority is stabilizing the economy and that the “GOVERNMENT IS PREPARED TO DO WHAT IT TAKES”. I emphasize that because everything that they have done thus far without the consent of the people is place the burden on the taxpayer. All these bailouts are from us. Wallace asked, “Why should US taxpayers bail out these lenders?” Paulson asked, “What is right for markets?” He told Wallace that he was jumping to conclusions on how this would effect taxpayers.
This FED bailout of Bear Stearns was a Depression-era procedure. That would lead some to believe that we might be looking at something worse than a recession soon. Some economists believe the FED must cut even deeper than the projected one half of a percentage point likely to take place on Tuesday, March 18th. In fact, some economists predict rates will drop to at least 2% by early summer. In case Paulson and Bernanke haven’t noticed – rate cuts are not working. They are a band-aid that only lasts for a day or two. The wild roller coaster of the stock market in the past couple of weeks is proof of that. And now that the dollar is the lowest ever as of Friday, I can’t say I have any confidence in anything other than the fact we will get more bad news this next week, and then the next week, and then the next week…