U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will trim its weekly gain, after President Barack Obama’s $447 billion plan to boost jobs failed to bolster confidence in the world’s largest economy.
President Obama channeled the national frustration with the economy that threatens his political standing and challenged the U.S. Congress to pass a $447 billion jobs plan tilted heavily toward the Republican prescription of tax cuts.
The president, speaking before a joint session of Congress, demanded six times that lawmakers act “right away” on a plan that would boost spending on infrastructure, stem teacher layoffs and cut in half the payroll taxes paid by workers and small business owners.
Riiight. Let’s turn Social Security into even more of a Ponzi scheme (can we stop with the “prepaid” lie when the movement is to cut the payroll tax that you allegedly pay in?) and start talking about how we got here and how we fix the structural problems that led us into this rathole in the first place.
Bloomberg, amazingly, is starting to figure it out and actually put it in print. In a stunning editorial they said:
Would you give money to a compulsive gambler who refused to kick the habit? In essence, that’s what the world’s biggest banks are asking taxpayers to do.
At the same time, bankers are campaigning against regulators’ efforts to address a root cause of the problem: Big banks’ addiction to excessive leverage, or to using borrowed money to boost their shareholders’ returns. In a recent flurry of letters to the Basel Committee on Banking Supervision, which is in the process of setting new rules for the largest global institutions, various banking groups warn that higher capital requirements — tantamount to putting limits on leverage — will reduce credit availability and stunt the economy’s growth.
Did I actually read that? In Bloomberg?
Remember, I’ve been pounding the table on one dollar of capital for years. It’s the only way to stop this crap, because it forces banks to hold one dollar of actual capital against any unsecured lending, no matter how it’s done. It does not differentiate between a credit card (unsecured) and an OTC derivative (unsecured); if the position is not secured by a marked-to-market asset that can be seized and liquidated (that is, demonstrably provable value with a clean chain of title) every night, it’s an unsecured loan and must be funded in cash by an investor or through retained earnings.
That ends all systemic risk and it also ends all the threats from the banksters. It prevents arbitraging (and extorting) governments and citizens, in short.
But what it does not do is prevent the market intermediation function, it does not prevent lending for any purpose (although it will make speculative lending expensive) and it does not prevent the essential payment-clearing process that banks engage in every day – and which is, in fact, essential to modern society.
There is no job growth in America, as I’ve noted, because there is no reason for an entrepreneur to grab for the brass ring. Capital formation has been destroyed by the banksters and Bernanke. Until this distortion is ended, and it is clear that doing so will require that Bernanke be removed from office and the banksters stripped of their political power through whatever means are necessary there will be no meaningful entrepreneurship funded with capital formation because there is no capital formation happening.
Borrowing is not the same thing as saving, and funds from borrowing are much less efficient at building sustainable businesses than that formed from capital.
Capital must always come from economic surplus – that is, what you produce in excess of what you consume. It cannot come from any other place. Attempting to replace capital formation with lending always fails – not only is there a mathematical problem that precludes this strategy working on a durable basis (the basic law of exponents) such a replacement causes gross misallocations of capital. Until the people of this nation and indeed all nations tell the banksters to stuff it up their behinds and refuse to accede to their demands and threats, forcing the insolvent out of business as we should have years ago, the economy will not recover.
Not here, not over in Europe, not anywhere.
Wake up America.