Wednesday, June 17, 2009

Nothing smells like a dead horse and beating it doesn't help

Obama has just proposed a long list of banking regulations and the new regulation of companies that have been acting as banks without oversight of any kind. This is all very well and good, a new coat of paint on the buggy and a snazzy fringe around the top. The small problem is that Obama hasn’t dealt with the fact that the horse is dead. Even if he fixes the banking system, there is no economy to support it. In Reagonomics the banking system is the economy. Financial services have gone from 8% of the economy to 40% in thirty years.

The tracking of key indicators such as world industrial output and international trade activity show we are moving toward another Great Depression at the same pace as 1930 and some things are collapsing at an even faster rate. Without real reforms to the insane trade policies the Republicans left behind there can be no recovery.

The rest of the world is getting tired of this arrangement. The countries that still produce the wealth are starting to simply leave the US and its increasingly worthless currency out of the equation. The Europeans tried to keep a lid on things last year by buying back currency from Asian countries using up most of their gold reserves to do it. China now has over a hundred tons of gold on hand, even countries like Vietnam now have large gold reserves.

The Federal Reserve has tried to keep a lid on things by passing out nine trillion dollars with no accounting as to where it went. The money would have been better spent on oats for the horse while it was still swatting flies and not just attracting them.