Ali in Blunderland

He’s baaaaaack. Ali Velshi used to be a regular talking torso on CNN’s morning TV. Then something happened and we didn’t see him much. Perhaps it was because he was writing his book "Gimme My Money Back: Your Guide to Beating the Financial Crisis". Like all the other investment books before him, he promises... something.

Anyway, Ali’s back spouting out opinions again instead of reporting. This morning he said, “There is a school of thought that says we’d be worse off without the bailout [$350,000,000,000 given to the banks and insurance companies], and I’m one of them.” Well, that’s an opinion that needs revising. Don A. Rich's "The Real Cost of a Full Bailout" will help.

I think that Ali Velshi even admitted – or at least didn’t dispute – that we don’t even know on what that $350,000,000,000 – that’s three hundred fifty BILLLLLLLLLion dollars - was spent. It could have all been wasted - (clear throat here) - to maintain certain people’s status quo. For sure it will result in more inflation... or curtail the necessary deflation. (You don't believe in the value of deflation? Check out Jörg Guido Hülsmann's "Deflation: The Biggest Myths".)

Some might say that knowing that there was another $350,000,000,000 available helped people’s confidence. That’s ludicrous. Knowing that a bailout is there only allows people to be more reckless with their spending. It’s a perverse incentive. Having the people responsible for this mess to be accountable – accountable, not just “take” responsibility and then throw it away – is what was and is needed.

Why stop at $700,000,000,000?

Ali Velshi - cheerleader extraordinaire - said that we just must have a $700,000,000,000 bailout, so it must be the truth, right? Well, if it's so wonderful, then why stop there? Why not go for a cool $1,000,000,000,000 or even $2,000,000,000,000? The answer is that it will all cause much more inflation, i.e. higher prices.

Ali also said that this is a time to put aside principles - as in a principled opposition to a bailout. Well, he doesn't have to worry there. Most politicians haven't had one since high school.

WARP Speed Ahead?

The U.S. Congress is being asked to bailout financially failing (or is that failed?) institutions. Specifically, the draft legislation would allow the Secretary - he doesn't really do much typing - of the Treasury to establish a TARP, i.e. a "troubled asset relief program". It is now realized by some that this was a typo. It should have been titled a WARP, i.e. a worthless asset relief program. With this program, those institutions deemed worthy of such help will get a fresh start to keep doing what they did before. There will be some new rules, but, as with all new rules, they'll find a way around them.

This new money will eventually be used to increase the prices of food, clothing, fuel, disease & disability care, and you-name-it. Tax rates won't have to be increased - people don't like that. The balance sheets of businesses will also look better - on paper. We can import more goods - since we're running so low on them - from China. China can also keep receiving those hefty interest payments from financing U.S. Government debts. The whole world will be a happier place... You can wake up now.