Paulson Says, "He's Not in This Stove"

Pretty soon we’re going to need a ramrod with a wet sponge to swab down the barrel of Treasury Secretary Henry Paulson’s bazooka. In another emergency meeting on Friday, this time to discuss what to do about the (again) bankrupt Lehman Brothers, Paulson, Federal Reserve President Timothy Geithner, SEC Chairman Christopher Cox, and what Fed spokeswoman Michelle Smith would only name as "senior representatives of major financial institutions" met at Geithner’s offices at the New York Fed. As reported by Martin Crutsinger, AP Economics Writer, “the Wall Street Journal reported on its website that this group included Morgan Stanley chief executive John Mack and Merrill Lynch chief executive John Thain among others.”

So, another investment bank goes bankrupt and again we have the U.S. government, its private banking monopolist, and the investment bank’s two chief competitors getting together to figure out what to do. It is refreshing that at least there is no longer any pretence that the U.S. financial sector is a free market, rather than a cartel. Of course, history shows that tight collusion between government and large corporations is the best thing for a society that wants to remain free, open, and prosperous. Just ask the Italians. However, this is not the best news. Crutsinger goes on to say,

“Earlier in the day a person familiar with Paulson's thinking said that the treasury secretary was opposed to the use of any government money to bail Lehman Brothers out of its financial difficulties.”

If you’ve been paying attention for the past few months, your reaction should be something on the order of “here it comes.” Of course, this is merely “a person familiar with Paulson’s thinking” (which should qualify him or her for a purple heart) telling us that no bailout is coming. The real news will not come until sometime after Paulson holds a press conference and tells us that the U.S. government absolutely, positively will not bail out Lehman Brothers. At this point, those press conferences are starting to sound like Bugs Bunny telling the Irish cop “he’s not in this stove.” By now, we should all be saying, “Oooohhhh! So you’re hiding Rocky in the stove, are you?” As long as he remains this consistent, his communication to the American public has become quite effective. Just assume that he is about to do exactly the opposite of what he says.

Considering that Paulson and Bernanke are both Bush appointees, it is fair to characterize this “strategy” as a Republican strategy. This is significant because it points to one identifiable difference between the two major parties. Neither wants to cut government spending and both are equally socialist. However, the Republicans wish to keep tax cuts in place, while the Democrats want to raise taxes. While the Republican strategy might seem perversely illogical at first glance, it is not. They are simply going to run deficits and steal your money through inflation. They are going to talk about free markets and capitalism and give you fascist socialism.

On the other hand, if you paid attention to the primary races and have read Barack Obama’s platform, it has become clear that the Democrats really make no secret that they are going to give you the closest thing to communism that they feel like they can get away with. They will steal your money through direct taxation.[1] Perhaps that makes them more honest. I knew I’d finally find something nice to say about them.

So, the Republicans will say, “I’m not going to steal your money,” and then steal your money, while the Democrats will come right out and say, “I’m going to steal your money,” and then steal your money. Well, at least Americans can’t complain that they don’t have any choices. Of course, we may wake up in four years wondering where the last vestiges of our freedom have gone. However, with the government in the housing business, the mortgage business, the healthcare business, and perhaps even dabbling in energy, at least we will have a good idea about where to look. Just don’t bother to come out and ask your government, because you already know what they’ll say.

It’s not in this stove…

[1] Of course, inflation will not end with Democratic rule, as the Fed really does whatever it wants. However, the Democrats have at least proven that it is incidental to their agenda. If they had it all their way, they’d just take all of your money directly through taxation.

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