When Doing Nothing Is the Only Smart Thing To Do

The global melt down is raging and gathering strength, turning from a Category 3 Hurricane to a Category 4 and threatening a Category 5 with maybe an earthquake or a volcano for company and every move of the central banks has failed. Why?

Simply put, the Masters of the Universe (or at least it's Finances) have read the wrong history books to draw the wrong conclusions. All are looking at the Great Depression, where over inflated stocks and high interest rates and a relatively tight money market caused a large crash and where liquidity was pulled out causing a massive contraction.

The problem is, of course, this is the wrong experience to look at but it is the model upon which they are basing their solutions on: flooding the market with liquidity where hyper inflation is not a possibility but now a given. Of course the issue here is one of confidence not more cash, but as the insanity continues (doing the same thing under the same conditions and expecting a different result) liquidity and lower interest rates (thus sparking more liquidity) is being constantly created and yet the markets continue to fall. Why?

The better historical example is the Bank Panic of 1872. What never heard of that? To bad, because it made the Great Depression look not so great and not as so much of a depression. Unemployment rates hit nearly 50% from the central plains of the Russian Empire west to the gold coast of the American Empire (and yes, the US has been an empire from the day it broke away from England. An Imperial Republic but an Empire non-the-less. On this at another time).

What caused the great Bank Panic of 1872? The introduction of mortgages in Austro-Hungary and the German Empire (substitute for complex mortgages by modern America and England). Both were driven on to much loose money, no supervision, massive corruption and a huge "perpetual" building spree. The entry into the market by a new economic giant under cutting prices in the industrialized world for manufactured goods and food products, was the final push. In this case it was America doing it to Europe, just like China has done it now to America.

America in the late 1860s early 1870s caused a collapse of established industries in Russia, Austro-Hungary, Germany and France. This in turn drove up unemployment, put a brake on new planned and often under construction projects and caused the banks to reposes property. Thus began a Crisis of Confidence and walla, something that makes the Great Depression look almost trivial and affected every major nation. Sounds like today? "Ywu Betche" as Vice Presidential candidate Palin would say, if she understood anything about economics. She doesn't.

So what is the solution for a Crisis of Confidence? Doing nothing...something the modern Keynesian ideologues can not bring themselves to do. They blindly, and yes these egotistical monsters are blind to anything but their own bloated opinions of self worth, feel in the deepest recesses of their souls that they must do something, always, for the world would surely collapse if they did not.

But here is the rub, the more they do, the more radical their actions, the more of a message of panic they send. This is simple human logic, but something far beyond their ability to grasp. Every bailout has shown that the central banks fear a far worse future then they let on. This in turn has drawn a bigger draw down in the markets. Every flood of cash, has had the same effect. Every hollow assurance has rung just hollow, but still they continue.

If you want the solution, say enough is enough. The markets did not collapse when the US Congress, for a short brief momentary break from its greed and stupidity, actually shot down the $700 billion bailout. The markets began to recover, yes recover. But what did those idiots that the American people hire but never fire, in Congress do? They allocated yet even more funds to various "emergency" projects and now passed a $850 billion bailout, even bigger, even more radical and sending an even louder message of "we're doomed! All doomed!"

The markets have reacted accordingly.

The coordinated rate cuts have done the same. Now the crisis is obviously not limited to one or two or three countries but to the investors' eyes, it has spread world wide. Why else would central banks collaborate in this way. It must be true.

Again, the markets have reacted accordingly.

This weekend's meeting of top world leaders with the Bush regime, to "solve" the issue and the possibility of further American Marxism (yes America, you are a Socialist mega-state taking your final steps into the loving embrace of Marx...enjoy the next 100 years of pain, you're bringing it on yourself), by further nationalization of the banking sectors, will cause the markets to again react accordingly.

Thus the vicious cycle, where every solution only creates a worse problem and requires a yet more radical solution creating as yet a more radical problem.

The only question that remains in this perfect spiraling storm: is this all by accident or purposeful?