Bill Bonner

Poor ol’ Alan…

We almost felt sorry for him…

“Maestro mauled…” said the headline in The Financial Times. We wanted to maul him many times. But now that others were doing it…it made us feel sympathetic to the old scalawag.

Didn’t the Alan Greenspan Fed’s failure to curb subprime lending deserve to go into the ‘oops’ category, demanded chief tormentor Phil Angelides.

Mr. Greenspan defended his legacy. He was right 70% of the time, he said. The other 30% of the time he was wrong.

Hey, that’s not bad. Pity it’s not true. Greenspan was wrong 90% of the time – at least.

He thought those fancy derivatives actually spread the risk of failure…and made the system more stable.

He thought those subprime loans helped people of modest incomes realize the goal of home ownership.

He saw no risk in keeping the key rate at an ‘emergency’ low level…years after the emergency had passed.

But he hit one of those magic moments last week…when he was finally right about something. He declared that the yield on the 10-year note was “the canary in the coal mine.” This week, the canary wobbled…but stayed on his feet. He’s still standing…but looking a little peaked.

While the former Fed chief was in the spotlight at The Financial Times yesterday, the present Fed chief was front-page news over at The Washington Post. Alan Greenspan is a scoundrel, no doubt about that. But he was, in some ways, a better Fed chief than Bernanke.

The trouble with Bernanke is that he doesn’t know his limitations. He actually believes the Fed can look at the possible outcomes going forward and improve them before they come out.

“Fed chief sounds a deficit warning,” is the headline. He said Americans faced a “difficult choice.” It’s between higher taxes and fewer entitlement services, he said.

This doesn’t seem like a difficult choice to us. We’d gladly accept fewer “services” from the feds if they’d lay off on the taxes. But that’s because we’re in the half of the US households that actually pays taxes.

No kidding; the report was in yesterday’s news:

“Almost one half of US households pay no federal income tax.”

So, welcome to the beginning of the end. If half the citizens get bread and circuses without paying for them, you can bet that the whole shebang is headed for destruction. The math doesn’t work. Half the people have no interest in curbing taxes or spending. Obviously, those people would prefer to raise taxes – on us – rather than give up their free pills and retirement benefits. Even among the half that does pay taxes, most pay very little – less than they get back in ‘services.’

Meanwhile, the ‘rich’ get socked hard. According to the reports we’re seeing on scurrilous blogs and from our usually unreliable sources, the tax burden on the rich is set to rise over 60% of income – thanks to the health care charges they will have to bear.

By the way…the whole thing is a fraud. The services, that is…

Here’s how it works. In 2007, the private sector finally blew itself up – thanks largely to all that debt offered by Wall Street and encouraged by the Alan Greenspan/Ben Bernanke Fed.

So then…in comes the Fed again…and the US government…wearing white hats and pretending to save the situation. How? By bringing more of the economy under their control!

As far as we can tell, the last successful government program was WWII. And that was only successful because the competitors’ programs were also run by government. But that doesn’t stop them…

Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.

  • tony bonn

    greedscam and bernquacke are wrong about everything and it’s not because they are stupid – it is because they are evil….

    politicians promise other people’s money for everything under the sun…every cause always has a “compelling” justification….

    the truth is that the rich and poor conspired to destroy each other and the country – only the poor didn’t realize that they were the chumps.

    as in all games of plutocracy, the rich always win…

  • sierra

    Short version: Too much power in one individual.
    And, it was kind of pathetic watching Greenspan in the hearings.
    The totality of the hearings were fairly good. It will be interesting to get the final report.
    But we all know what that will be:
    A BIG EFF!!!!

  • sierra

    Short version: Too much power in one individual.
    And, it was kind of pathetic watching Greenspan in the hearings.
    Greenspan clearly didn’t understand the markets he was supposed to oversee and almost completely stifled the FED’s responsibility in regulatory oversight.
    He is terribly responsible.
    For 18 years he rode the limelight and loved it; for 18 years he rode a wild steer and didn’t realize he had been bucked off at the beginning.
    It doesn’t take a rocket scientist to lower interest rates to zero……even I could do that!
    “These people” live in a different world than us common folk. They don’t get it!
    The totality of the hearings were fairly good. It will be interesting to get the final report.
    But we all know what that will be:
    A BIG EFF!!!!

    As far as taxes, I live on a small pension and SS and I pay a fair share; the rich by definition don’t feel anything…that’s why they’re rich. See how many offshore their income so that they don’t pay any tax. Go ahead, do the research.

  • Lost & Found

    I would always squeeze a tear for the tax paying rich. But that is all I would do for them.

Recent Articles

Bill Bonner
Confessions of a Newsletter Man

Bill Bonner

Being a financial newsletter writer certainly has a few advantages. Namely, it affords one the opportunity to comment on the financial markets without having to take them seriously. Today, Bill Bonner looks back on what drew him to this business, and the unique and entertaining cast of characters he's met along the way. Read on...


In the Year 2024

James Rickards

Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...


Buy Solar Before 2015

Stephen Petranek

This is the time of year when investors are easily distracted. Oil is down, and it’s creating a drastic mispricing in the solar markets. Science expert Stephen Petranek says one solar company is mispriced by as much as 40%... but it might not last until January.


We May Have Reached “Peak Shale” – Here’s Why That’s Good News!

Jody Chudley

I don't know how low the price of oil will ultimately go in the near future, but I do know that the seeds for an oil price recovery are already being planted by North American shale producers. These companies are dramatically slashing their capital spending plans for 2015, and I believe that the impact on production will surprise the markets…


“Can We Talk?”

Dave Gonigam

Our discussions in these pages tend to freak new readers out. Dave Gonigam and Addison spent a fair amount of time last week discussing the implications of a deflationary environment and Fed policies on your existing portfolio. Dave sums up their conclusion in a neat gift box with a tight bow on it in today's essay.