As you all know, I recently settled with the SEC with regard to their complaint against me on the use of cash in one of the “side pockets” in one of the BayStar hedge funds that we manage. The settlement was in the best interest of my family, my business, my partners and my friends. In so doing I did not admit nor deny guilt and paid the SEC a fine. I want to thank so many of you who supported me during a very difficult time. As well, to those of you who disagreed and let it be known, I appreciate very much your right to do so. If anyone has further interest in reading the terms of the settlement, the agreement is a public document and can be found on the SEC website.
With the SEC settlement now behind me, I’ve had time to re-examine my prior writings on this blog and stand by my positions as firm as ever. As always I welcome your comments.
The latest readings on US consumer confidence show some of the lowest levels in 3 years or since the onset of the banking crisis. Even more disturbing, the Expectations Component of the index had its fifth largest drop in history last month which is no surprise given the recent rise in food and gasoline prices. One topic we have written about time and time again in this blog is that throughout history, when governments have had their back against the wall due to a poor fiscal situation, or poor approval ratings etc, they commonly have turned to war as a method of distracting the population with a common threat. Wars also serve a very critical dual purpose of creating nationalistic support for the military and most importantly, political leaders. Some people may ask what Libya has to do with finance? Well, besides the fact that employers aren’t going to hire as many new workers and people are going to spend and invest much less in the face of all of this uncertainty, as the consumer index shows, there are deeper social and moral issues in play here that risk seriously weakening our entire economy.
It doesn’t take a financial genius to understand that a nation cannot run deficits year after year without eventually running into trouble. Three years into this economic depression we are still wasting valuable time and energy trying to find out just who could have caused our money problems as a nation. Just last month, the Washington Times ran a story that read “Financial Terrorism Suspected in 2008 Economic Crash”. The article was written by a respected journalist in Washington, Bill Gertz. The basic premise behind the article is that a Pentagon Contractor Report suggested that financial subversions carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the US financial system. The article continued by naming suspects including Middle Eastern states, Islamic terrorists, hostile members of the Chinese military or government or organized crime groups in Russia, Venezuela, or Iran.
Unfortunately, as we all know, terrorists are not the cause of our economic problems. Regardless of who is to blame, the damage is done and we have now spent another three years and trillions of dollars trying to repair the insolvent US banking system which is still not functioning properly and if anything is only causing a drag on domestic growth. As we have repeated many times before on this blog- if we want to fix our economy we need the Fed to stop printing money and manipulating financial markets. Finally getting a financial reform and regulation bill passed may also help fix our economy- but don’t hold your breath.
Today, in this country, while states like Wisconsin, Ohio and Michigan are fighting to protect low and middle income wages of teachers, firemen, police and nurses, basically the backbone of this country, against draconian budget cuts, there is apparently more than enough money for another war. In just the first night of attacks, 112 cruise missiles were launched at Libya. Each one costs approximately $1 million so there was $112 million of destruction in one night with some analysts estimating that the war could eventually top $1 billion. We have written about the wage disparity in this country on many occasions and it has only gotten worse after the 2008 banking crisis. Asking the workers of this country to take the majority of the cutbacks now, after giving Wall Street a $700 billion bailout, and only a few months after extending tax cuts for the rich, is flat out immoral and a slap in the face to any hard working American. The dissatisfaction is only exacerbated when we have companies who are notorious for outsourcing American jobs are rewarded instead of punished. For example GE reported billions of dollars in profits and received extensive tax benefits at the end of the year. On an individual level, we have all seen the data by now: The median take home pay of full time workers is virtually unchanged on an inflation adjusted basis since 1973, and 58% of real income growth has gone to the top 1% of Americans since 1976.
Whether or not you agree with them, the protestors in Madison, Wisconsin said that the protestors in Cairo inspired them to take over the Capitol Building. Thankfully the protests in Madison ended peacefully, and again whether or not you agree with what happened is not the point. The point is that our economic problems are leaving an entire generation of young, working class people and families behind and the longer it takes to fix, the worse it’s going to get for our society and country in the long term. We write this blog every month because we don’t want to see what happened in Cairo happen here. Our economic system is in dire need of a makeover as soon as possible before the situation gets truly out of hand.
This eerily prescient quote by one of our country’s Founding Fathers sums up where we are heading unless things begins to change soon:
"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."
U.S. President Abraham Lincoln, Nov. 21, 1864
