Diary

If only they knew The Truth

Democrat lies are incredibly damaging. The damage is being demonstrated tonight in the form of a socialist protest on Wall St. The various signs, chants, and tweets from the participants blame Wall St. for crashing the economy and the persistence of the economic shambles our country has become. Upon pondering this for a moment, scenes of the recent past flash by, scenes of various Democrats, including Obama, stating that lack of regulation caused the mess; it’s a crisis of capitalism, and the bankers ruined everything.

But now we have Dodd-Frank. We have the Recovery Act. We’ve had trillions in Cash for Clunkers, omnibus spending, loans for green energy, extended unemployment, loan modifications, food stamps, &c, &c.  We have ObamaCare.

None of it helps. Most of us knew that it wouldn’t, but it isn’t any wonder why these young people are camping out on Wall St. They don’t know that the seeds of the crash were sown in 2001 (while many of these kids were still in elementary school) with a change in the capital reserve ratios because they have not been told. The Recourse Rule was changed in January of 2001 to reduce the amount of reserves required for banks to invest in mortgage-backed securities (MBSs) that came through the Fannie/Freddie securities clearinghouses, in addition to highly rated municipal bonds to zero, making them ultra-competitive investments versus those in the general private sector.

What took place as an effect of this change, rather than the housing bubble which was only a secondary bubble, was an investment bubble in both MBSs and municipal bonds.  For nearly a decade this rule funneled large portions of aggregate productive capital, with heavy emphasis on investment banks as middlemen, into national consumption instead of where it might have otherwise gone – to the general private sector – where it would have been expanding our economic base. The short of it is that the banking regulatory apparatus laid a huge ‘nudge’ at the feet of the markets in the form of opportunity for huge profit margins and ROI for very little perceived risk, sacrificing potentially performing investments elsewhere.  Because the reserve requirement was set to zero, when the actual risk became apparent and the bottom fell out of the MBS market, the banks did not have enough reserves to stay afloat. What normally would have been a mild economic shock turned into a financial sector liquidity crisis. The whole thing was epic fail on the part of central planning with very nearsighted ‘nudges.’

That is now all behind us. The recession from that is over. What we have now is the recession from the hungry government “cure,” as Obama and his cronies unleashed the fury of the mob on the “banksters,” the people who are supposedly destroying the planet, and the health care industry. Average Joe is pinched in the middle while government crowds out lending to the private sector with massive spending and borrowing, and ties the hands of commerce with a roll of red tape so long it could likely wrap the circumference of the earth tenfold. Without a doubt this is the Obama/Democrat Party Depression and these young people should be camping out at the White House instead. Protesting Wall St. isn’t going to help them. If only they knew the truth.