The gang that couldn't think straight

That would be the Gang of 535, the U.S. Congress.

I'm getting almost as tired of writing about the United States's economic death wish as I am about Britain self-destructing. But I am also gobsmacked by how little attention our brain-damaged mainstream media are paying to the looming disaster, even as they launch a news bulletin followed by in-depth anaylsis every time His Holiness Cardinal-Rabbi-Imam Obama blinks.

While Wanted posters of the Federal Reserve Board governors should be on every post office wall, the Gang of 535 is an accomplice before, during, and after the fact of the economy's blowup.

Latest exhibit: "the government's" bailout of Fannie and Freddie and its rescue of sharp lenders and mortgage suckers. I use the quotes because, in reality, the government is not making any of them whole. It can't: the government is broke, in debt to the tune of $9,536,116,902, 021.58 as I write this. If the government were a citizen, its credit cards would all have been scissored long ago, its assets divided among its creditors, and it would be allowed to keep the White House and one car.

No, the Gang has voted a banker welfare package of, well, nobody knows quite how much, but somewhere between $25 billion and $100 billion, or maybe more — who's keeping tabs? When you walk through the looking-glass into the financial Wonderland, or Underworld, ordinary laws like gravity and size don't apply.

But, to get back to the earlier point, the government isn't saving anything or anyone: it's borrowing from you, China, Japan, the Sheik of Araby, and anyone else who'll still, for some reason, own U.S. federal securities. It will then use its latest wodge of borrowed money to put scaffolding around the banking system. You know, that system that has hoovered up untold billions of dollars in uncollectable debt, rolled it into a ball, gift-wrapped it, and sold part of it off to dumb buyers counting on high yields. Only now that nobody's dumb enough to bite anymore, keeping the rest of it locked up in the attic where they feed batty granny through a slot in the door.

The difference between you and China, Japan, etc. is that they have a choice about whether to take the U.S. government's funny money certificates. You don't.

The government's other weapon of choice: inflation. Borrow and borrow and borrow, then make the value of your hard earned cash condense, so big-time deadbeats (the biggest-timest deadbeat being the government of these United States) can pay it back in clipped coin.

Disappointed Zimbabwe cab driver
contemplates a stingy tip from his latest fare

The Fanny-Freddie-mortgageholder cavalry rescue is only a symbol. Yes, $100 billion is no more than a postage stamp compared to the whole debt debacle brought about by bubble-blowing cycles of loose money, leveraged debt, and derivatives only two people in the world can understand, and they're not returning calls. The mania has gone on for decades because a few people who figured out how to game the system have gotten stupefyingly rich, some others have supped on the trickle-down, and the masses pushed their credit cards into the red zone in the foolish belief that they were the ones getting rich, and would always be able to keep the juggling pins tumbling in the air.

Sooner or later, though, Nemesis comes calling, as it has now for Americans from the top to the bottom of the food chain. And our überbankers and Congressgang are reaching into your pocket to try to fix the system.

The wind carries a few voices crying out in the wilderness. Jim Rogers, the big-time currency and commodities investor, said Fannie and Freddie are "basically insolvent" and added: "I don't know where these guys get the audacity to take out money, taxpayer money, and buy stock in Fannie Mae."

Ingo Walter, a professor of finance at New York University, writes:

It is now apparent that governments in the future are likely to participate in bailing-out individual financial firms to stem financial turmoil, whether or not they are banks. In the process, taxpayers will be exposed to significant losses associated with individual financial intermediaries whose collapse is thought to pose a danger to the financial system - not to mention the slippery slope toward bailing out systemically-important nonfinancial companies in the automotive, airline and other sectors whose businesses have been wrecked by market shocks.

Nouriel Roubini, an economics professor at New York University, says:

Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers.

Do you think the Fed cares? Hell, it's just money. The Treasury can print as much of it as it needs to cover the debt. It's not like a dollar has to be backed with a tangible metallic standard of value anymore. It's just an IOU — from the world's biggest debtor. There are big printing plants in several U.S. cities where they can keep the presses rolling 24/7. Maybe it can be done electronically now, creating "money" with a few keystrokes. So there will be plenty to go around. For the moment, Zimbabwe has more billionaires than any country in the world, but we're catching up.

Do you think the Gang of 535 cares? Real reform now would mean a lot of short-term pain so that markets and regulations governing them could return to sound principles instead of voodoo and leveraged Ponzi schemes. But there's an election coming up, and for most of the gang another every two years. Opportunism comes cheap when you can give the patient a quick shot of anaesthetic and bill him for it.