The Real Price You Are Paying For The Manipulated Recovery – Part 1

Written By Gary Spirer Published April 1st, 2010

Think of your own finances or those of a small business you may open. If you lose money personally, it means you have less money in your pocket. If you lose money in your business, you have less money to run your business.

In your smaller, less significant world, you have to find a way to make up for having less money.

Personally, you either make more money from your job or from some investment after tax to make up for your loss. Or, you borrow the money from someone or some company, most often to pay it back – unless it’s a long lost generous uncle. Or, you inherit the money.

Business-wise, you can borrow money, raise capital if you are lucky but give away some ownership, in the hopes that the business is or will become worth more than its debts, more than any preferred equity positions, if there are any, and still leave you some real value to put in your pocket or believe is there if you needed money.

But, in the new world of political economics, small, like you or me, is a curse. Because not only do we have too-big-to-fail, we have the strategy of the too-big-to-understand and too-big-to-do-anything-even-if-we-do-understand.

Here’s what makes the game so interesting: The government can print money if it loses money or it can tax you if Congress decides it has to make up for its losses.

The current recovery that Bernanke and the administration are taking so much “credit” for is a sham.

The administration supposedly saved us from the brink of financial disaster – and from the prior Bush administration’s folly.

In reality; the current administration has continued the Bush policies – of which the last 2 years were under a Democratic led Congress.

This is a true bipartisan economic absurdity. In effect, the government has with your money:
1. Bailed out the unsuccessful companies.
2. Bashed the successful for being successful.
3. Bailed out people with clunker cars.
4. Changed bankruptcy and creditor protection laws to bail out and pay off auto unions for votes.
5. Condoned bailouts of people who purchased houses using liar loans or just made bad speculative investments, while those who were fiscally prudent and made their payments pay for the dishonest and the losers.
6. Manipulated interest rates down so low that people who actually are financially prudent get almost a zero rate of return on their T-bill investments or savings.
7. The low manipulated rates allow banks and other financial institutions to borrow your money at almost zero and buy higher yielding instruments making the difference or spread, meaning a profit.
8. This low interest rate manipulation has fueled a bonanza for trading companies like Goldman Sachs and other bailed out banks who used your guarantees via the government to bail out their bad investments. In turn, they are picking up money so cheap (at such low interest rates) that they can make so much money on trading profits, that they can pay the government back.
9. The government boasts of how good their policies have been as these financial institutions raise capital based upon indirect subsidized profits from artificial low interest rates.
10. The artificially low interest rates cause investors to speculate to get higher yields – going in junk bonds.
11. the government, instead of competing for funds against the private market, funds its deficits by printing money – writing money out of thin air.
12. Meanwhile, the low interest rates mask the real cost of government debt.
13. The low interest rates manipulate the mortgage rates, incentivize purchases of homes at values propped up still by too low interest rates.
14. Tarp-type bailout money was simply a pork barrel fest where the money really required to create any recovery never was invested – and most of what was invested – will come at a time when the “recovery” will be underway from natural forces, not this artificial bailout.
15. The government continues to guarantee effectively purchases of homes to people that cannot afford them through a totally scandal ridden politically motivated Fannie Mae and Freddie Mac.

In my next article, Part 2, I will discuss the results of the current administration’s manipulated recovery.

Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.