Thursday, September 11, 2008

Yup, America Is An Economic Mess

"I'll tell you how it works," said a taxi driver. "You're lucky you live overseas, cause this country is a mess..."
We had been taking a snooze in the back seat. Then, we noticed a jerky movement in the car. When we opened our eyes, we found the cab had drifted to the middle of the road. On the long drive from Charlottesville, VA, to Dulles Airport, our driver was falling asleep.
In attempt to revive him before it was too late, we made conversation.
"I'll give you just one little thing I know from personal experience," the cabbie went on, "I had a call to pick a woman up here in Charlottesville.
She's a Medicare customer. Do you know about that? Well, she had lost her car and she had come up here to the hospital. And then she was ready to go home. But she didn't have a car. And I guess she didn't have anyone to pick her up. She called a cab.
"So I drove her home...all the way down to North Carolina! The fare was $1,100 - which is a lot for a taxicab. But then, she didn't have to pay it. She just signed one of these vouchers. (He showed us a simple white
form...) And then I turned it into the government. So you see, you paid $1,100 to drive her down to North Carolina in a cab!"
The feds have dozens, maybe hundreds, of these absurd programs. When the sun shines, they grow like kudzu. Rain falls upon them like Miracle-Gro.
Fannie and Freddie, between them, have assets of $5.4 trillion and debt of
$1.7 trillion. No one knows how much it will cost to keep them in business, but it is bound to be a big number. And the federal deficit is already as big as it has ever been - and growing. Where will the feds get the additional money to support U.S. housing?
We all know where - they have to borrow it. And now another question: We saw what happened when individuals borrowed too much; all of a sudden lenders didn't want to extend them any further credit. Even Wall Street giants - such as Bear Stearns...and now, Lehman Bros. - can go bust if they borrow too much or speculate too wildly.
Can the U.S. government go bust too? Well...there is that printing press... The federal government can't go broke, technically, because it can pay off its debts with money it prints up, just for the occasion. But in the event, the dollar itself would collapse in value. Foreign lenders would cease to extend credit. And then, the only choices open to the United States would be to cut back...or to print up even more money.
We're a long way from the end of this show...but this takeover of Mae and Mac is a big step toward the final curtain. There are other land mines along the about them in the free Financial Survival Library.

*** Our old friend, Michel, is writing a history of the United States.
"Does the U.S. Constitution authorize the federal government to finance mortgage loans?" he asks.
He might have asked a broader question: is there anything that the U.S.
government cannot do? It can arrest people, put them in jail, and torture them - without even charging them with a crime. It can regulate any business. It can takeover any asset. It can tax and spend - as much as it can get away with.
"At the end of 1817," Michel continues, "Congress passed a law authorizing the federal government to finance several canal routes, to which no one took exception. Monroe, who had just been elected for 1818, supported the law. But President Madison, 'Father of the Constitution,' decided that the law was contrary to the Constitution (or that an amendment was needed) so he vetoed it.
"My goal in this book is to show how, contrary to the intentions of the founding fathers, the Constitution has been interpreted, and twisted, in order to permit the federal government to do all it wanted to do, and that the doctrine of limited government, with powers exhaustively enumerated, has been undermined thanks to the use of two unfortunate expressions in the Constitution - 'necessary and proper,' and 'general welfare,' from which flows the statist doctrine of 'implied powers.'
"It began with Hamilton (and a few texts of Madison in the 'Federalist Papers'), who defended the interests of New England merchants, parenthetically, and it was developed by chief justice John Marshall who, although a Virginian, worked for 34 years at the Supreme Court to make it a very effective weapon against constitutional liberties (subject to some nuances).
"I continue my research, but I think it's all there...that all the arguments for or against 'implied powers' were furnished during the period 1790-1800."

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