Geithner just reaffirmed this, though not in so many words, in an interview with Charlie Rose.

Asked about the possibility of letting a major bank fail, he said, “I’ll say again, they play a critical role in our markets, in our financial system. We want to continue to make sure they play that role. Now, where they need temporary assistance through the government to get through that, we’re going to make sure it comes with appropriately tough conditions so that they emerge stronger and that we’re providing a level of conditions and accountability that’s appropriate in this context.”

Translation:  They can continue screwing up indefinitely, and we’ll still come to their rescue.

The “stress tests”?  That’s just a sham to make it look as if the banks are being held to some sort of standard.

Working from the same playbook, Fed chief Ben Bernanke said yesterday, “We have reiterated the U.S. government’s determination to ensure that systemically important financial institutions continue to be able to meet their commitments.”  And if it that means the Fed has to buy up Treasuries (and print money for that purpose), so be it.

Consider yourself warned.

Consider also that the Zombie Policy isn’t even achieving its stated aims.  Weren’t we promised that if the Fed and Treasury kept pumping money into these banks, the banks would lend more freely, and businesses could borrow more easily, and so businesses could create more jobs?

Well, not so much.  “Banks that have received billions of federal dollars to encourage them to make loans — JPMorgan Chase & Co., Goldman Sachs Group, Citigroup Inc. and Bank of America Corp. — are lending money to Pfizer and Merck” so they can buy out Big Pharma competitors, according to the Los Angeles Times.  The mergers could result in 35,000 jobs lost.

Heckuva job, Timmy.  Heckuva job, Benny.

Zombie Policy Reaffirmed originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

But minefields abound.  For starters, the derivatives exposure of the biggest banks exploded during the last quarter of 2008.

“Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their ‘current’ net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31,” according to McClatchy Newspapers. “Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.”

Oh, and those numbers don’t yet account for the derivatives risk that BofA took on by acquiring Merrill Lynch, because that deal closed January 1.

“Because of the trading in derivatives,” says McClatchy, “corporate bankruptcies could cause a chain reaction that deprives the banks of hundreds of billions of dollars in insurance they bought on risky debt or forces them to shell out huge sums to cover debt they guaranteed.”

In other words, the credit-default swap monster still looms large out there.  “Trading in credit-default contracts has sparked investor fears because they are bought and sold in a murky, private market that is largely out of the reach of federal regulators. No one, except those holding the instruments, knows who owes what to whom. Not even banks and insurers can accurately calculate their risks.”

Doesn’t exactly inspire confidence, does it?

Which brings us to the matter of credit-default swap king AIG.  We now learn that AIG scored its fourth bailout “by telling regulators the company’s collapse could cripple money-market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers’ stake in the firm,” according to a memo dated February 26 and obtained by Bloomberg.

Knowing this, what are we to make of Ben Bernanke’s statement to Congress last week — after he no doubt read the memo — that, “If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG.  AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”

Of course, Bernanke himself had oversight of the banks that lent money to AIG’s financial products division.  But he was MIA.  And as long as he wants to draw the hedge fund comparison, it’s worth pointing out that hedge funds are likewise unregulated, but Bernanke has oversight of the banks that lent them money too.  And again he was MIA.

Doesn’t exactly inspire confidence, does it?

And on top of all that, Tim Geithner says it’ll be a few more weeks before we know more details about his bank “rescue” plan.  During which time there will endless leaks and trial balloons to see what might stick to the wall and what might not.

No matter.  The Dow’s up 122 points as I write, and we might well be at the start of a rally.  A bear-market rally, but a rally nonetheless.

More telling of the longer term picture is a forecast from UBS that sees $2500 gold “as some hedge fund investors who made money last year by betting against investment banks are now buying gold as a way of betting against central banks,” according to the Financial Times.

Yup, that sounds more like it.

Inspiring Confidence originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

"What if the crisis of 2008 represents something much more fundamental than a deep recession?" he asks.

So he’s just now figuring this out.  Well, when the family fortune you marry into shrinks from $3.6 billion to a mere $25 million, I guess it’s natural to start wondering such things.

But since it’s Tom Friedman we’re talking about, it’s also natural to reach the wrong conclusions.

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …

We can’t do this anymore.

Yeah, I know — I too had to read it a couple of times so I could follow the logic, such as it is.

Is Friedman saying the whole globalization model as he’s portrayed it for the last couple of decades is falling apart?  Not that he would admit that, of course — "We’ve always been at war with Eastasia!"

Note too how he writes with the conviction of the converted.  I suppose if the family fortune you marry into has shrunk by more than 99 percent, and that family fortune is based on shopping malls , and you’re already of a world-improving mentality, it’s natural to adopt an outlook that meshes the worst of consumer-culture contempt and climate-change hysteria.

It is also natural in light of those circumstances to be utterly blind to the real causes of the crisis.  He writes about China’s purchase of Treasuries as if it were a phenomenon in isolation.  There’s zero acknowledgment that what we face is a debt crisis — a crisis of excess credit fomented by the Federal Reserve that metastasized through the financial system and then the wider economy.

Friedman actually quotes an expert who says, "We have not generated real wealth," without realizing what’s actually happened in the 20 years he’s been extolling the virtues of globalization (as he defines it):  The art of money-shuffling was elevated above the craft of producing real goods that people can use.

No matter.  Friedman speaks for the Davos crowd he’s hung out with the whole time that’s managed to screw things up so royally.  And their message now is:  Suck it up.  Learn to live with less.

You know, I think most people are probably able to figure that out without Tom Friedman’s help.  But he’s bound and determined to help anyway.

The Conviction of the Converted originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

We’re hearing a lot lately about earmarks — DC-speak for pork-barrel spending.  Whether it’s the “stimulus” bill signed into law last month, or the $410 billion spending bill that’s supposed to tide over Uncle Sam for the rest of fiscal ‘09, it seems we can’t get away from them.

Nor can we get away from complaints about some of more ludicrous-sounding pet projects for individual lawmakers — like research into malodorous hogs.

In fact there’s so much caterwauling about such line-items, you’d think that if it weren’t for earmarks, we’d have a balanced budget.  Heck, we’d have had a balanced budget for years.

Not so.  Earmarks typically make up about 1% of the federal budget.  In the spending bill being debated right now, it’s a little under 2%.

Yes, it’s a great opportunity for certain politicians to posture about their colleagues setting aside money for golf courses and leashless dog parks.  John McCain has put this to great use in crafting his political identity.

But really, we’re talking about a pittance in the big scheme of the federal budget.  Slaughter all the earmarks, and it would barely put a dent in runaway spending.

Well actually, it wouldn’t even do that.

That’s because earmarks come out of a total amount of federal spending that’s carved in stone before the earmarks are ever doled out to the lawmakers.  In other words, the money’s going to get spent anyway.

The only difference is that with earmarks, individual lawmakers get a little bit of say in how it gets spent.  Take earmarks out of the equation, and the decisions get made within the executive branch, or at best, among the Congressional leadership — whose primary concern would be rewarding friends and punishing enemies among the back-benchers.

From a sheer separation-of-powers standpoint, earmarks are actually a good thing:  Remember, the money’s going to get spent anyway.

The new president talks about earmark “reform,” but leaders in his own party promise to resist.  “I don’t think the White House has the ability to tell us what to do,” says Rep. Steny Hoyer (D-Maryland), the House Majority Leader.  Hoyer is about as hacktastic as they come, but he’s got it right here.

So why is there so much screeching about earmarks?  Well, it serves a very useful purpose for our political masters:  If you get the public in a lather over golf courses and dog parks, they’re less likely to ask questions about bailing out failed bankers, or mega-deals for defense contractors, or even wider questions about the proper role and size of government.

Next time you hear a politician or a pundit railing against earmarks, you might want to ask yourself:  Does this person have a clue how little difference earmarks make in the big picture?  Or does this person know full well how little difference it would make, and wants to create a distraction?

Earmarks: Much Ado About Nothing originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

You can actually do something about it.  And I don’t mean write your congressman or buy a bumper sticker.

You can stop paying your own mortgage, free of fear that you’ll be kicked out of your home, provided you play it right.

And that’s not me making the suggestion.  In fact, it was all over the place just last fall.

You say you missed it?  You find the suggestion morally offensive?  Just hang with me a bit.

In October Peter Schiff wrote an op-ed for the San Diego Union-Tribune titled, simply enough, “Stop Paying Your Mortgage.”

After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away. Why pay your mortgage if foreclosure is off the table, and if you know that lower payments, and possibly a reduced loan amount, would result? A tarnished a credit rating is a small price to pay for such a benefit…

If your mortgage does become the property of Uncle Sam, the growingly popular impulse to “just walk away” should be replaced by “just stay and stop paying.” No one will throw you out. After a few months, or years, of living payment free, you will get a call from a motivated government agent eager to adjust your loan into something affordable.

One could argue Schiff was being tongue-in-cheek.  But Karl Denninger, writing the same month, was dead serious, offering an explicit and audacious justification for stiffing your mortgage holder:  If the mortgage holder was benefiting from TARP money, you’re essentially reclaiming some of your own tax dollars.

Since our government continues to pursue the idea that everyone from the imprudent speculator and even the fraudulent buyer who overstated his income, along with the bankers who literally stole billions, can and will be allowed to rip off the public treasury, creating tax burdens forever for ourselves and our children in a futile attempt to prop up home prices along with screwing future buyers by keeping homes unaffordable, I am forced to advocate that you, The Prudent American, do back to the bankers and your neighbor what the bankers and your neighbor did…

I know, its a radical step.  And one more time, you need to consult with both a CPA and attorney before taking any such step – spend the couple hundred bucks to get both in the same room and go over exactly what this entails and what sort of impact it may have on you.

But it would appear to me, at this time, that this is the only way you can recover at least some of the tax burden that you have been thus far and will be in the future assessed for our government’s idiocy and pernicious theft of taxpayer dollars.

By the following month, November, the suggestion had gone mainstream.  “Should you keep paying your mortgage?” asked Kathleen Pender, the San Francisco Chronicle’s personal finance columnist.  “If you have significant equity in your home, absolutely.  If you don’t, it’s getting harder to answer that question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay.”

Pender went on to quote Schiff and to outline precise, practical steps a homeowner could take.

Now again, all of this was last October and November.  So here’s my question:  Now that the Obama administration has rolled out a $275-billion “homeowner rescue” plan, why aren’t we hearing more about this?

What Schiff and Pender and Denninger laid out is a concrete plan of action in which you can reclaim what’s rightfully yours.

But we don’t hear any of that now.  All we hear instead is what might be called “resentment rhetoric.”  A long, dragged-out whine, and a misdirected one at that — targeting not the banksters, but solely the irresponsible homeowners.

Typical of this is the Tennessee Republican Party, which has begun selling bumper stickers saying “Honk if you’re paying my mortgage.”  4000 have been sold in five days, at $5 each, or three for $12.

This is the source of my frustration with Rick Santelli’s infamous “rant.”  It really doesn’t matter whether he nailed it last fall on the insolvency of the banks.  In popping off about the homeowner bailout, without taking the banksters to task at the same moment, he took his eye off the ball.  Especially because the plan doesn’t even help the people it claims to help — because it won’t enable them to build equity in their homes.  Indeed, they’ll likely end up further in hock to their lenders.

Imagine if someone could harness the frustration of these underwater “homeowners” (glorified renters, really) with the frustration of the people who’ve managed to keep up with their payments… and directed all that outrage toward the banks and the Federal Reserve that created the whole mess.

Instead they’re divided along red state-blue state lines — resentful right-wingers fed up with “deadbeat” homeowners who only followed the advice of esteemed leaders like Alan Greenspan and can’t understand why they’ve become an object of such vitriol.  Just look at the comments thread in the Wall Street Journal blogpost about the bumper stickers to see what I mean.

If I were more conspiracy-minded, I’d think it was all a bankster plot.  Divide and conquer.

It’s a sorry state of affairs in this country when they don’t even have to resort to such efforts.

On another matter: The Fed just told Bloomberg to go jump in the lake.  Bloomberg sued the Fed under the Freedom of Information Act to find out just what sort of toxic “assets” it was taking onto its books, and from whom.  The Fed’s rationale is fascinating — that the New York Fed, where most of the relevant documents sit, is not subject to FOIA requirements.  Is that because it’s not really a government entity?  The mind reels.

The Treasury can’t make that argument.  It’s under court order to comply with a similar FOIA filing by Fox Business.  The deadline is March 23.  We shall see.

What Happened to the “Stop Paying Your Mortgage” Meme? originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

The sound bite that got all the play yesterday was this: “What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. You know, it bobs up and down day to day. And if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong.”

Leave aside the particulars of his economic policy, and that’s a fair enough statement.  But then, what prompted him to say this in the next breath?  “On the other hand, what you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it.”

This sounds like someone trying to have it both ways: “I don’t give a flip about the stock market… but you know what, there are some mighty good buys out there right now.”  Mixed messages, if not necessarily a blatant contradiction.

There, in a nutshell, is the reason the S&P has tanked 30% since Election Day, and roughly 13% since Inauguration Day.

The scholar Robert Higgs sums up this phenomenon with the delicious expression, “regime uncertainty.”  It’s when investors choose to sit on whatever money they have rather than put it to work creating wealth, because they have no idea what the rules are going to be day to day.  Higgs applied the term primarily to the New Deal, but we’re seeing the phenomenon at work today.

We see it when the administration chooses to run up record deficits, but then Tim Geithner says it’s “crucial” to bring deficits under control.

We see it in every speech Geithner gives about the shape of TARP II, in which the parameters change as quickly as those of TARP I under Hank Paulson.

We see it in Geithner’s commitment to go after “tax cheats,” a declaration shorn of any self-awareness or irony.

Conventional wisdom has it the broad stock market won’t recover its losses for three to six years.  But if this administration continues to take its cues from the New Dealers, we’re looking at another 16 to 23 years.  Figure it this way: The Dow finally returned to its 1929 levels in 1954 — a 25-year gap.  Assume the market topped in 2000 and the 2002-07 runup was a bear-market rally, then we’re looking at a recoup of the losses by 2025.  If the top came in 2007, then it’s 2032.  A “long-term perspective” indeed, Mr. President.

And if the president is focused on P/E ratios, perhaps he should ponder this: If P/Es are near historical norms right now, and if Q4 earnings are about to take a major hit, doesn’t that imply P/Es are about to grow?  And prices will have to fall further to come back in line?  Just asking.

Regime Uncertainty originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

What makes him so confident?

The answer might lie in a fascinating article in the Moscow Times, an English-language daily.  Now I can’t speak to the publication’s credibility; according to Wikipedia, it’s under foreign ownership and isn’t afraid to take an anti-Kremlin line.  But the Wikipedia article is thin, to say the least.  So if all of what follows turns out to be a crock, I won’t be too surprised.  But it’s too intriguing to ignore.

The paper reports the president of Sakha Republic, in Siberia, came calling on Putin recently.  Vyacheslav Shtyrov brought ill tidings: The swoon in world energy markets has hit Sakha hard.  But rather than continue to paraphrase the article, l’ll let the rest of the story unfold on its own:

Sakha is having trouble keeping up with its investment goals for 2020 and the region’s labor market is suffering, Shtyrov said at the meeting.

Putin listened and then took a breath.

“Vyacheslav Anatolyevich,” he said, addressing him by his patronymic, “the global prices of coal, gas, metals and even diamonds have fallen. But the price of gold is rising — and gold is mined on your territory.”

When Shtyrov called attention to miners’ problems with creditors, he was once again rebuffed. “We’ll solve the problem with gold mining,” Putin said. “Especially since — I’ll say it again — I’m well aware that the price of gold is rising on world markets.”

The paper attributes this account to a transcript of the meeting released by the Kremlin.  Assuming this is correct, and the transcript is accurate, Putin is making a remarkable bet here, not just for Sakha, but for his whole country: What low energy prices have taken away, high gold prices will restore.

According to the article, Russian mining firms have been at least as attractive since last fall as names more familiar to Western goldbugs’ ears.  Shares in Polyus Gold have risen 172% since bottoming on November 18; Polymetal is up 207% since its low on November 20.  By comparison, the HUI index is up a little under 80% since its lows last October, the XAU up a little over 65%.

I have no idea whether Putin’s big bet is true, or whether it’s plausible.  But it’s out there.  And it’s fascinating.

Putin’s Fascinating Bet originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

To refresh your memory, the rumor dated back nearly a year.  During a secret session of Congress, members were supposedly briefed on plans for “the imminent collapse of the U.S. economy to occur by September 2008”… followed by “the imminent collapse of US federal government finances by February 2009″… followed by the introduction of the Amero and roundups of dissidents to be hauled off to camps built by the former Halliburton subsidiary KBR.

What made the rumor so spooky, of course, were the events of September last year — Fannie and Freddie nationalized (although its debts weren’t taken onto government books, go figure), Lehman collapsing, Merrill Lynch’s shotgun marriage, WaMu seized, Wachovia, AIG… as I said last month, maybe not outright collapse, but close enough.

But it’s hard to say “U.S. government finances” collapsed last month.  Yes, we now have a record-high proposed federal budget with a record-high deficit to match.  But none of the possible catalysts I wrote about took place: Commercial real estate is in horrible shape, but nothing that’s triggered a big crisis.  The Treasury auctions went about as well as could be reasonably expected.  U.S. Treasury debt is still rated AAA.

That’s the good news.  The bad news is that all the Black Swans that could have shown up in February and didn’t could well show up during March.  Because the driving forces behind fading market and consumer confidence are all still there — starting with indecision and repeated acts of insanity from the White House and Treasury stunningly similar to that of the previous administration.

I mean, how many more bailouts is AIG going to need?  “Had the government not taken such action, AIG would have had its credit ratings cut by major agencies,” reports Marketwatch, “and that would have triggered the need for the firm to post collateral it did not have.”

Collateral it doesn’t have — isn’t that sort of the whole problem everybody’s got?  So there are the Fed and Treasury essentially telling us, “Yes, we know the last bailout didn’t really do the trick, but take our word for it, this one will.”  It’s like Bullwinkle forever trying to pull the rabbit out of his hat — “This time for sure!”

At some point, he’ll pull out a Black Swan.  Then it’ll get really interesting.

You Survived Black Swan Month originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Item: GDP contracts an annualized 6.2% in the fourth quarter.

Comment: Let’s break down the four major components of GDP.  Consumer spending?  Down the worst since 1980.  Business investment?  Down the worst since 1975.  Exports?  Down the worst since 1971.  Government spending?  Up slightly.  Lots more where this came from, I’m afraid.

Item: U.S. government taking 36% stake in Citi.

Comment: I love how in journalistic shorthand, these sorts of stories become, “U.S. taxpayers will soon own a big share of Citigroup.”  Like hell I do.  If I own a piece of it, where do I sign up for the dividend checks?

Item: War spending no longer to be done off-budget.

Comment: As much as the new president’s first budget proposal is an abomination, let’s at least give him credit for declaring an end to the practice of “supplemental” appropriations for Iraq and Afghanistan.  Doing so accounts partly for the mind-bending $1.75 trillion deficit.

Of course, the officially-announced deficit is never the number to watch anyway.  It’s the year-over-year increase in the national debt that really matters.  By that measure, there never was a “balanced budget” during Clintontime.

Item: SEC had a heads-up about Allen Stanford’s shenanigans in 2003.

Comment: Asleep at the switch on Madoff.  Asleep at the switch on Stanford.  Whatever the next one is, I’m sure we’ll hear similar revelations too.  It’s hard to root out real fraud when you’re busy pursuing “insider trading” witch hunts against Martha Stewart, Marc Cuban, and Joe Nacchio.  Nacchio, by the way, lost his latest appeal this week.  He’s running out of chances to avoid doing prison time for his heroic refusal to act as enabler for the government’s warrantless wiretapping schemes.

Item: Lefty economist nails the flaws with TARP.

Comment: An altogether remarkable speech by James Galbraith (son of John Kenneth):

“Guaranteeing bad assets will not stabilize the price of housing. It will not stabilize incomes and profit opportunities in the economy. Therefore it will not solve the credit problem.

“Meanwhile the guarantees will support incumbent management and shareholders. They will add vast sums to the public debt – directly or contingently – making achievement of the president’s other priorities more difficult. And they will distort the distribution of wealth, by guaranteeing the financial position of an elite group while that of so many others is collapsing.

“Keeping the existing management in place means that we will not arrive at clean and trustworthy audits of the banks. Therefore no one will know to what degree they actually are, or actually are not insolvent. No one will know just how bad the bad assets are, and most will (prudently) suspect the worst. This collapse of trust means that lending to the banks, including by other banks, will continue to be impaired.

You can’t fix a problem until you correctly identify what it is.  You have folks running the gamut from Galbraith to Rick Santelli (hey, I’ll give credit where it’s due) to the chief of U.S. Bank who can identify the problem, even if they’d probably come to blows over how to address it.  Contrast that with the clueless relay teams of Bush-Obama and Paulson-Geithner who actually make the decisions.  (And then change them.)

Item: Zimbabwe’s Mugabe plans $250,000 birthday party.

Comment: None necessary.  Have a good weekend.

Friday Potpourri originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Which prompts this unabashed free-marketeer to wonder: Might nationalization be preferable to what the Fed and Treasury and doing now?

Nationalization is a loaded word.  It invokes the specter of socialism, another loaded word.  But really, which is better: Continued federal support for these zombiefying, turning-Japanese banks under nominal private control — or a nationalization that would wipe out existing shareholders and unsecured creditors, remove incompetent managers, discharge the bad assets, and sell the good ones to stronger hands in the prviate sector?

Not a free-market solution by any stretch.  But Sweden did it (more or less) and the world didn’t cave in.  Heck, it was done in this country (more or less) with the Resolution Trust Corporation after the S&L crisis reached the point of no return.  A darn sight better than the perpetual privatization of profit and socialization of risk that’s put Japan in the tank for two decades.  Give me my socialism unfiltered!

Perhaps there are just too many powerful forces at work behind the scenes to allow that to happen.  Sounds conspiratorial, I know, but look how little transparency there’s been to this whole process; Bloomberg and Fox Business have to sue the Fed and Treasury to get them to come clean about who’s getting their assorted bailout and guarantee funds, and for what purpose.

That’s bad enough in the finance sector.  But we see this same bastardized-socialism dynamic and its attendant lack of transparency at work in all three areas the new president made priorities in his address to Congress the other night — energy, health care, and education.

Key to his energy plan is a scheme for new environmental regulation — carbon credits, cap-and-trade, whatever you want to call it.  I’ve never understood this.  If you’re going to clamp down on the emission of greenhouse gases, why not issue a bunch of regulations and be done with it?  (Especially when polling data shows more support for going that route.)  But instead, we’re going to have a “market” for carbon, which presumably will make a bunch of intermediaries quite wealthy.  Who are these people?  Darned if I know.

Health care?  Same thing.  For all the carping about “socialized medicine” both now and during Clintontime, the comparisons to Britain and Canada are completely off the mark.  The insurance companies had a prominent seat at the table in Hillary Clinton’s secret task force, and they’ll have a prominent seat at the table in whatever this present administration draws up.  The advocates of real socialized medicine (they prefer the term “single payer”) are consistently shut out.  Whatever emerges from the backroom deals this time will continue to privatize profit while socializing cost and compromising patient privacy.

Education?  There were all manner of private firms who made a mint off George W. Bush’s “No Child Left Behind” atrocity — including one owned by Bush’s brother Neil, which marketed software that school districts lapped up as they desperately sought any quick fix that would goose the all-important test scores.  The new president’s education secretary (Quick aside: If Arne Duncan did such a great job running Chicago Public Schools, why didn’t Obama see fit to put his own kids in the system?) is a big proponent not only of the testing regime, but of that private-public mongrel known as “charter schools.”  Someone stands to make a lot of money if he pushes this trend, still a localized phenomenon, on a national basis.  Who are those people?  Darned if I know.

Yes, I think I prefer my socialism unfiltered.  At least that way you know it’s only the Party elites who are living large at everyone else’s expense.  Besides, when you think about it, this bastardized socialism isn’t socialism at all.  What’s the word that better captures an iron-clad alliance of Big Government and Big Business?

It’s fascism, of course.  But you can’t use that word to describe policy made in Washington, D.C. without basically shutting off all discussion.  Use it to describe Bush administration policies, and you’re tagged as a terrorist sympathizer.  Use it to describe Obama administration policies, and you’re tagged as a militia nut.  So I’ve never bothered with the word.  But it does capture the essence of matters in recent years, and especially at this moment.  It provides the sort of clarity that “socialism” does not when so many private parties with clout and connections stand to make fortunes.

I Prefer My Socialism Unfiltered originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."