On the Road to Nowhere

Robert Holt ~ 6/29/2011

This weekend I heard an old ‘80s song by the Talking Heads called "Road to nowhere.” Not only did the song bring me back to my high school days, it got me thinking about the last few years and how it seems like we have all been on a road to nowhere. Yes, despite nearly $4 trillion dollars thrown at the economy (down the drain), we are right back to square one. In fact, we might find that we are in an even worse position now than we were 3 years ago.
If you recall, it was in 2008 when we saw the U.S. economy coming to a grinding halt as the housing market began the biggest descent of all time. In fact, since 2008, we have witnessed the worst economy since the Great Depression resulting in the largest decline in home sales and the most foreclosures in our nation’s history.
It was also back in ‘08 that those in charge swore on a stack of Bibles that the debt crisis was limited to subprime mortgages. Yet, as we know now the crisis rapidly spread to all kinds of mortgages, which resulted in the demise of giant mortgage lenders like Countrywide, Indy Mac and of course, Fannie Mae, and Freddie Mac.
As the housing market and stock market crashed and consumer confidence fell into a black hole, our fearless leaders finally admitted that we had a problem, but they swore on even more Bibles that it was strictly contained to the housing and mortgage sector.
We all know how that movie ended, as it was just a few short months later that the crisis had taken over nearly all of Wall Street. And, by mid 2009, virtually every one of America's largest banks either failed or came very close to being taken over by the FDIC. Of course, because of crony capitalism, none of the ‘Too Big to Fail Banks’ were ever going down despite how insolvent they were (are).
Plus, by the end of 2009, the government had devised a plan that would save us all. They would throw a (TARP) (pun intended) over the problem by bailing out the same banks and mortgage lenders that caused the problem. Yes, our government would reward the incredibly bad behavior of Wall Street by taking $700 billion of taxpayer dollars and giving it to the Big Banks, with nothing more than a hope that they would lend it out to “We the people.”
It was also during this time that our over-indebted government had to take over Freddie Mac and Fannie Mae as they went bankrupt resulting in the U.S. government (or if you prefer, the taxpayer) becoming liable for trillions of dollars worth of mortgages and other bank obligations.
As we walk down memory lane, keep in mind that during the last three years, our government has spent more than $4 trillion dollars bailing out Wall Street. Sadly, this has not helped the average American, but instead it has created an even bigger potential disaster that will ultimately be paid for by Main Street. Meanwhile, Big Ben Bernanke has done everything in his power to destroy the U.S. dollar and your standard of living. Now, after printing trillions of dollars Ole Ben looks like a 13-year-old boy on his first date, clueless.
Now, fast forward to today and once again, the economy is slowing despite the largest injection of money in the history of the world, and the housing market (nationally) has double dipped (in Phoenix we saw that happen 9 months ago). Even with an uptick in buying, home prices are falling as banks continue to flood the market with foreclosures, which in turn will create more foreclosures. In the broader economy, consumers are closing their wallets as consumer confidence and retail sales are falling again. Despite massive amounts of money injected by the Fed, the stock market is fracturing. Falling six out of the last seven weeks, the Dow is more susceptible to a crash than at any time since 2008.
And, if you don’t think that the problems in Europe will affect us, think again. Because the governments of the U.S., Europe and Asia have tied their collective financial markets together like a string of boats, when one goes down they all get dragged to the bottom. Believe me, our very fragile banking system, which is in even worse condition than 2008, is scared to death of the pending Greece defaults.
While much of the financial scene looks like 2008 all over again, there are some significant differences between today and ‘08. Namely the fact that the U. S. is dead broke. Thanks to massive bank bailouts (at least $700 billion), and Obama's colossal stimulus program (nearly $800 billion), and Ben’s money printing (about $2.6 trillion), we are now trillions of dollars closer to being bankrupt.
And, despite all the tough talk out of D.C, I will bet you dollars to donuts that there is more money printing by Ole Ben and somehow Obama is going to try to spend more tax payer monies to stimulate the economy.
All told, this bailout-stimulus-money-printing experiment has cost the U.S. taxpayer over $4 trillion. And, all we have to show for it is more debt. If I am not mistaken, there was a pretty smart guy, who went by the name Einstein, which once described insanity as doing the same thing over and over again, but expecting a different result.
Now as rating agencies like Moody’s and S&P warn D.C. about its massive deficits and as Big Ben floods the world with more dollars, investors around the world are growing tired of our politicians’ lack of leadership and more importantly their fiscal irresponsibility.
What does that matter – you may ask. Well, when they get to the point that they refuse to buy, or worse, they actually start to sell U.S. bonds (this is happening now), then the U.S. can no longer borrow cheaply. This means that interest rates will move much higher as they have done in Greece, Portugal and Spain. Pair this reality with a falling dollar and you get a very ugly situation for us commoners.
There is only one force strong enough to turn this problem around before it is too late. And, what is the power? It is you! It is up to the voting public to demand that our elected officials stop the games and get serious about the real issues. Every single member of Congress should clearly understand that the American people are going to “throw the bums out” if they do not stop throwing good money after bad in a desperate attempt to spend our way out of the crisis. Robert Holt, CDPE/SFR of The [HOLT] Group, RE/MAX Sonoran Hills. For info, visit TheHoltGroupAZ.com or call 623-748-9583 and tell us your thoughts.