When The Dealer's Also The Junkie

I usually have to preface this stuff with "I'm no economist, but..."

This time I won't, if only because I'm starting to believe that the economic "meltdown" has less and less to do with economics as each day goes by.

Here's the latest from the Times (UK):

The Chancellor will move to take control of the Royal Bank of Scotland today by injecting £20 billion of taxpayers’ money.

The Government is also expected to take over HBOS in the most dramatic extension of state ownership in the British economy since the war. The bank’s rescue takeover by Lloyds TSB appeared to be on the brink of collapse last night.

Sounds like a good idea to Democratic Senator Chuck Schumer: "Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, "is gaining steam."

Does anyone remember the Republican and Democratic national conventions in the US? It was a little over five weeks ago. If you go back and look at all the transcripts of those long-winded speeches, you won't find much about the economy. There weren't any bullhorns blaring the words "Fannie Mae" or "Freddie Mac." Sure, you heard the usual political tripe about creating jobs and lowering taxes, but no one said, "It's clear that within 30 days, the entire global economy will be on the brink of collapse."

30 days ago, British PM Gordon Brown wrote a newspaper article talking about American politics. He didn't see fit to write an article warning you that his country's economy was going into the toilet. Must have slipped his mind.

Fast forward 30 days, and here we are. The US is purchasing financial institutions, the British government is buying banks, and taxpayers from all over the world are ponying up dough to keep the financial system alive.

Don't take my word for it. Here's more from the Times: As governments around the world scramble to prevent the collapse of the global financial system, Alistair Darling will unveil plans for a £40 billion “recapitalisation” of the banking sector.

"Recapitalization" is a technical term the government uses instead of saying, "Gimme."

I'd like to believe that no one saw this coming and that once the levee broke, whole countries were caught up in the flood. But isn't this starting to sound a little too pat? First the States, then the UK, then Japan, then the world. Suddenly the G7 (or is it 8 today?) has to have a meeting to save the planet. World leaders are burning up the phone lines in an attempt to make the global market whole again, and all of them agree that the only way to do it is to spend their people's cash and nationalize their financial systems.

I smell a rat.

First, let's say that it's all true. The world economy is going to collapse unless the governments do something about it. Your first question should be, "How do I fire all of these people as quickly as possible?"

None of them saw it coming? Are they for real? With leaders like these, we might as well just call ourselves lemmings and walk off a cliff. If they didn't see this disaster until the moment before it happened, they should all be out of a job. Certainly none of them should be in charge of fixing it.

When a small fishing store goes bankrupt, you can believe that the old guy behind the counter didn't watch the books. When a big company like Enron takes a bath, you discover that someone cooked the numbers and ripped people off. Are we now to believe that whole governments just tiptoed through the tulips and one day went, "Oh my. We're going to collapse in five minutes unless we spend trillions of dollars and take over the entire system."

Something doesn't smell right about the speed of it all. The news in the past three weeks has been full of the words "imminent" and "brink." I am reminded of The Godfather II, where Michael Corleone is cooly planning a hit on Hyman Roth. When told that Roth's dying anyway so what's the point, Michael replies, "The old man's been dying from the same heart attack for the last 20 years."

We're being told that the only way to save the global economy is to have governments immediately do whatever they wish. We simply have to take their word for it, and allow them to seize enormous amounts of power by spending tremendous sums of our money. They want this power now, and they want to spend the cash fast.

First, it was an American problem. Then it was a European problem. Then it was an Asian problem. Now it's the entire world's problem. Something tells me there were a few socialists in several of these countries that walked into their leader's office and said, "You'll never believe what the Yanks are doing. Sounds pretty good, huh?"

I think it should frighten you greatly that many governments can do this without a vote. Even if you're an American, it should give you great pause that a vast majority of US citizens told their representatives that they did not want any bailout bill to be passed, but their representatives passed it anyway. The American bailout bill in its final form went from 4 pages to 450 in a matter of days, which should scare you even more: just how many of these representatives even read the bill before passing it? I'm willing to bet that they only read the fine print: "Crisis equals opportunity."

Maybe I'm feeling a little suspicious because I've been on a few used car lots in my time. Taxpayers are now being treated like the schmoe sitting in the salesman's office, as he convinces you that if you don't take his offer straight away, all will be lost. He keeps the pressure up because he doesn't want you to leave his office and seek a better offer. He knows that if he lets you off the hook, you might cool down and see things differently. They're a con artist's moves, and they work.

These governments are practicing the same hard-sell tactics. Funny thing is, you don't even have to buy what they're selling. They'll do that for you. And once they've bought it, you'll never get it back.