Global oil demand is not going to “plummet.”  And for the FT to say so is just plain silly, if not irresponsible.  OK, I know.  There’s an old saying that they teach in journalism schools.  “You have to sell newspapers.”  But this declaration by the FT highlights the perils of letting a headline-writer do your thinking for you.  It’s what I call “arguing a screaming conclusion.”  And a wrong conclusion at that.

Oil Demand – Down, Then Up

But let’s move past the headlines.  The Financial Times article explains that the World Bank has just issued a new study.  The World Bank believes that the world is entering into the toughest economic times “since the Great Depression.”  Thus overall world oil demand may fall by about half a million barrels per day in 2009.  That’s what the World Bank states in its report.

Only half a million barrels?  Heck, the total world demand for oil in the past year was about 87 million barrels per day (a fact that the FT article fails to note).  By comparison, the Saudi oil tanker that was hijacked off the coast of Somalia held two million barrels of crude oil.  And despite this act of piracy oil prices still fell over the next couple of weeks, even without that tanker plying its route across the deep blue seas.

So if the world experiences the next “Great Depression” (Release 2.0, I guess), a reduction in overall oil demand of half a million barrels per day is down in the statistical noise.  And what the World Bank is saying about the grim future of the world economy is not the equivalent of “plummeting” demand.  At least, not half a million barrels of lower usage.

How Bad Is It?

How bad is it out there?  Well, according to this week’s MasterCard Spending-Pulse data, U.S. retail gasoline demand is back to about the same levels it showed earlier in 2008.  That is, high gas prices hurt demand over the summer and into the fall.  (I drove less.  Didn’t you?)  But the current low fuel prices have evidently allowed demand to recover.  People are driving more.  It’s basic Economics 101.

I was talking with an economist for the American Petroleum Institute about two weeks ago.  He told me that overall gasoline demand in October was down 3%, year-to-year.  But diesel fuel usage was up by the same amount.  Overall U.S. oil demand is down about 8%, but that reflects the slowing use of oil in industry.  Out on the road, people are still driving and trucks are still hauling.

For all the sound and fury about the run-up in oil and fuel prices through July, and then the fall in prices after that, the aggregate demand for oil is only changing at the margins.

Built-In Oil Demand

In both the developed and developing worlds, there’s a lot of oil demand built into the economic and social energy system.   That’s what modern development is all about.  That’s how the system was built over the past 100 years or so.  Yes, you can wish that the system were different.  You can even try to change the system – and risk collapsing it in the process.

Whatever you do, you can’t change the system very fast.  To paraphrase a former Secretary of Defense, “You live in the world with the energy system you have.  Not the energy system you might wish you had.”

So at best, if you want to change things you are looking at a generational shift.  If you have a generation.  Do we have a generation?

What Will OPEC Do?

Let’s try looking at some different numbers.  How about 7 million barrels of oil per day?  That’s the amount of output that OPEC might have to shut-in if it wants to get prices headed back upwards in to the range of $75 per barrel or so.  At least, that’s according to Philip Verleger, a long-time industry player as quoted recently in Platt’s industry newsletter The Barrel.

Current daily oil output from OPEC is about 32 million barrels per day.  Verleger thinks that OPEC’s output ought to be more like 25 million barrels per day.  There’s the 7 million barrel shift.  Easy, right?  It would be as if Iran, Iraq and Qatar simply stopped exporting oil.  How likely is that to happen?  Umm… yes.  Clearly, Verleger has a radical take on things.

One way or another, can OPEC cut production significantly?  Does OPEC have the discipline to manage its own affairs to cut 2 million barrels, or 4 million, let alone 7 million barrels per day?   The issue is that numerous OPEC nations cheat on their production quotas.  Hey, they need the money.  Thus they lift the oil and sell it.  Really, cheating on OPEC quotas is not a problem.  It’s a tradition.

What of the Future?

Looking ahead by more than about two years, world oil demand is certainly going to grow.  It almost does not matter what we do in the U.S. or Europe.  When you look at the numbers of young people who are already born and living and growing up in the developing world, the demand will be there.  Many of these young people already have a cell phone and a laptop computer.  When they finish school, they will want an apartment and a car.

And at the rate things are going, the energy industry is still under-investing in the necessary systems of the future.  Depletion is still ongoing.  It gets back to the very basic point that every barrel you lift from the ground leaves one less barrel down there.  And the overall global depletion rate is 6% at best.  Maybe it’s 8%.  It might be 10%.  To replace that depletion, the general trend is for the energy industry to go further away, to deeper waters or more remote sites, to drill deeper wells, with hotter temperatures and higher pressures.  Those little hydrocarbon molecules are just plain tough to catch.

And keep in mind that nobody can produce oil that has not been discovered.  Or developed.  Or for which there are no handling facilities.  That takes investment, and lots of it.  Which requires money and finance, which is in rather short supply just now.  So there are just a few years in which the world can reorder the way it does oil, let alone the big picture on energy.  And there are a lot of moving parts in all of this.

The Moving Parts of Oil Production

One of our fellow (sister, actually) readers is deeply involved in monitoring the world oil situation.  The other day she sent me a thoughtful list of “ifs” that have to happen just to begin to get future oil production on firm ground.  Here it is:

• IF oil price rises above the marginal cost of new non-OPEC supply in time to get new production back on track;
• IF oil-producing countries and China stop subsidizing prices to their own populations;
• IF OPEC gives international oil companies (IOCs) like Exxon, Shell, Chevron, etc. access to explore and develop their reserves;
• IF the trillions in exploration and infrastructure capital are invested;
• IF OPEC invests seriously in increasing their own capacity;
• IF enhanced oil recovery (EOR) processes can really increase the recovery rate as much as hoped;
• IF the reported reserves are really there;
• IF the U.S. Geological Survey predictions of “yet-to-find” oil in the Arctic, offshore and elsewhere are correct;
• IF the Saudis can are capable of reaching and sustaining 15 million barrels per day of output;

IF, IF, IF …

“And,” adds my correspondent, “virtually all of these are outside the control of any policies that might be set by the oil-importing nations of the West.”

So unless a lot of things happen – pretty soon and in the right sequence, and competently — we’re going to be faced with the prospect that there’s not going to be enough oil to go around.  So oil prices are going to head back up.  People and governments are going to get desperate over supplies.  And much of the usual and predictable bad stuff that you’ve heard before is going to happen.  Which gets back to that Financial Times headline.  “Plummeting” demand?  Really.

A Few More Dots to Connect

President-Elect Barack Obama made a major announcement last weekend.  It was along the lines that his administration would work to invest in infrastructure.  Congress loved it because it means that the politicians can appropriate money to spend on concrete and steel.  That’s what I’ve been saying would happen.  But it’s nice to hear it.

The announcement was good in the short term for a couple of the OI stocks, like Alcoa (AA:NYSE), Cemex (CX:NYSE) and General Electric (GE:NYSE).   They all have things to sell into an infrastructure buildout, as do more recent additions like Koppers Holdings (KOP:NYSE) and Allegheny Technologies (ATI:NYSE).

Where will the U.S. government get the money to pay for the infrastructure buildout?  Same place it gets all the money to bail out the banks and Wall Street, I guess.  It’ll borrow it.  And in the process the U.S. borrowing will soak up most of the nation’s “spare” capital, such as it is.  U.S. government borrowing will crowd private borrowing.

The U.S. government can borrow money for the time being.  For some strange reason, people still want to buy U.S. Treasury bills, bonds and notes.  Don’t ask me why.  The interest rates are just about zero (safety sells, I suppose).  And the dollar is strong.

Actually, the dollar is much stronger than it ought to be.  I expect a major dollar-correction in the first quarter of 2009, which will be good for foreign-denominated stocks that trade on the Toronto Exchange.  (Although Canada is having some surprising political issues right now.  I’d appreciate hearing from Canadian readers about their take on what’s going on with Prime Minister Harper.)

In the longer run, the U.S. expenditures will come back as inflation.  That means that you want to look at owning gold and shares in the best-run gold miners.  If I had to pick just one gold miner with the best prospects, it would be Kinross Gold (KGC:NYSE).   It’s well managed.  Kinross just completed a series of mine expansions.  And it’s ramping up production to sell increasing levels of output into a generally rising gold market.

Source: Whither the Oil Markets

This from Whiskey & Gunpowder:

What if you woke up one day and there was a flying saucer sitting in the middle of Central Park? It would change your view of the world, if not the universe, right? At least that’s the idea behind the newly released remake of the classic 1951 film The Day the Earth Stood Still.

And what if you went to bed one night and thought that you had money on account in a fine silk stocking firm? What if you believed that you and your family were well provided for? What if you were sure that you had made all the right choices and done all the prudent things? You saved your money. You placed it with a reputable outfit. You were in the bluest of blue chips. And you woke up the next morning and it was all gone? Poof. Vanished. You’re broke! It would change your world, right? Maybe your life would fall off a cliff. Your standard of living would crater.

The World’s Largest Ponzi Scheme — $50 Billion

Well, this is exactly what happened to a lot of people a few days ago. These unfortunate souls invested their funds with Bernard Madoff’s firm in New York. Apparently, Madoff (pronounced “made off”) was running what The New York Times said “may be the largest Ponzi scheme in history.” He may have wiped out as much as $50 billion of other people’s money. $50 billion. No typo.

For about 48 years, Madoff took in people’s money and claimed to invest it through his proprietary “split-strike conversion.” What’s that? Actually, I’ve never heard of it. It’s some sort of investment hocus-pocus that promises something for nothing. But Madoff always claimed he was making solid returns, in good times and bad, of 8-12% per year. Like clockwork. Such a deal.

Madoff’s investment firm was not for just anybody. You had to be somebody to be part of this firm. You had to be invited to invest with Madoff. So at fine country clubs up and down the East Coast, people would politely mention that “I invest my money with Madoff.” And other people would say, “Oh? Can I invest with Madoff too?” Then maybe they would get a discrete solicitation in the mail offering the opportunity to open a modest account. Maybe.

Or maybe they wouldn’t get that solicitation. And the people who were rejected wanted to know why. “So how come my money is no good with Madoff?” they would ask. And thus did the cachet grow. People wanted in. “Hey, tell me how I can invest with this guy?” was the topic at many a dinner of lobster Newburg or veal a l’Oscar. Over the years, thousands of people, firms, businesses, charities, pensions, hedge funds and even government entities placed money with Madoff. And Madoff took it. With pleasure.

It was all a swindle. Madoff was taking in the new money and paying it out to the previous investors. He had no real system of investing. Madoff just dabbled in the markets, making some money here and losing it there. He lived well. He owned a yacht. He attended fancy parties. He was a patron of the arts and charity. He contributed generously to politicians in the Democratic Party (Hillary Clinton, Chuck Schumer and Charles Rangel, among others, in recent federal campaign filings). He was polite and distinguished. He was a counselor to many a family, always good for wise advice about how to make the next right move in life.

Financial Sociopath, Money-Murderer

Indeed, Madoff pretended for decades that things were all right. But things weren’t all right. Madoff and his firm just took money from one group of people and paid it to others. He sent out elaborate statements, documenting how well people’s accounts were doing. Yet in the process, Madoff lost billions of dollars. The funds vanished into money heaven. And Madoff did it all under the noses of auditors, lawyers, accountants, tax agencies, the Securities and Exchange Commission (SEC) and a host of other pretend regulators.

In short, Madoff is a financial psychopath. He’s a money-murderer. He is to money management what Ted Bundy was to unsuspecting young women.

“No Innocent Explanation”

Along the way, a few people raised suspicions. They said things like, “No one can deliver those kinds of results year after year. It’s impossible.” But many other people didn’t want to believe anything was wrong. The final whistle didn’t blow until Madoff’s sons turned him in to the FBI last week. (The sons claimed that they “knew nothing” about the scam.) And according to press reports, Madoff confessed everything to the FBI arresting agent, saying, “There is no innocent explanation.”

Many of Madoff’s clients are from the Jewish community. That was Madoff’s heritage, and thus did Jews form much of the clientele that Madoff cultivated. According to The Wall Street Journal, some Jewish investors called Mr. Madoff “the Jewish bond” because of his solid and predictable returns.

The “Old Money” Is Now Gone

Now with Madoff’s demise, there is an entire swath of Jewish “old money” gone down the tubes. There are personal wipeouts that will devastate entire extended families. The legacy economy of many trust fund families is wrecked. A lot of country club bills, condo dues and school tuition statements are about to go unpaid.

This will impact communities from Boston to Palm Beach and even overseas as far away as Buenos Aires and Johannesburg. That is, for some overseas Jewish families, Madoff held the “safe” money, the strategic reserve for when it was time to pack the bags and move away. (An old African expression comes to mind: “When the Jews leave, it’s time to leave. When the Portuguese leave, it’s too late to leave.”)

Some charities are hitting the rocks too, totally wiped out by Madoff. There are several hedge funds going down like the Titanic, with one fund losing nearly $1.8 billion. Just in Geneva, Switzerland, a number of banks reportedly may be out of $4 billion invested with Madoff. French bank BNP Paribas is said to be on the hook. Japan’s Nomura Holdings, which markets Madoff’s funds, also has been swept up in the financial wipeout. HSBC is taking a serious hit. Kingate Management of Bermuda has reportedly invested part of its $2.8 billion fund with Madoff.

How Bad Is It Out There?

So it makes me wonder. How bad is it out there? How many other Ponzi schemes are there besides Madoff’s? How many more financial psychopaths are ginning up fake account statements? How many little old ladies are there out there who think they have money in an account, but it’s all just some big scam? How many more bad banks? How many bad brokerage houses? How many more bad companies with bad stock? How many more bad government entities with bad finances and worse bonds? How many bad pension funds?

It drives home the point of wondering whom you can trust. And how bad is it with even the U.S. government? Do you really trust government statistics, like the one for the rate of inflation or unemployment? And how about the numbers in the national budget accounts? We’re spending how much? Does money even have any meaning to the people who have the power to appropriate it? Our whole national accounting process has turned into an intergenerational Ponzi scheme.

Really, our $10 trillion national debt is not enough? We are looking at trillion-dollar deficits in just the next year or two. How long can it last? And whom can you believe in any position of authority? So Bernard Madoff had a “system” for investing? And Ben Bernanke has a “system” for managing the monetary policy of the country, right? Hank Paulson has a “system” for managing the Treasury accounts? And Congress and the president — G.W. Bush, and after him B.H. Obama — have a “system” for spending the nation’s limited wealth on important things, yes?

Own Gold and Silver – Just Do It!

How do you know that you don’t own a big fat piece of nothing? It’s why I believe you need to own some real gold and silver. I’ve said it before, and I’ll say it again: You need to own some gold and silver in addition to whatever else you own on account. Just do it! Go out and buy some. Today. Now don’t get me wrong, I’m still very positive about the potential in our ESI portfolio — believe me, we hold plenty of quality assets that will soon have their day. But when all else fails, if you have the precious metals, you still have something you can hold in your hand.

And when someone comes along with that great deal that looks just too good to turn down — steady returns forever, with minimal risk — remember what happened with Madoff. He was a pillar of the Jewish community. “Such a nice man.” Now his fraud has collapsed like the temple around the ears of Samson. Let me mix my Old and New Testaments on this one and quote Matthew 10:36, “A man’s foes shall be they of his own household.”

Source: Madoff Makes Us Love Gold Even More

This from Whiskey & Gunpowder:

Lately I’ve been discussing concept of scarcity in the energy and natural resource sectors. In one recent note, I discussed how the idea of scarcity has transformed from a “geological” basis to an “above ground” basis. In another note I discussed how the financial system of the world has broken down. This breakdown has damaged many a portfolio. But I still believe that an investment focus that is based on future scarcity of energy and mineral resources is basically correct.

In the future there will still be profound restraints on the availability of energy and natural resources. So owning shares in firms that “do energy” or “do resources” is still a good idea over the medium and long term.

We Still Have a Big Problem

We still have a big problem. The credit system is broken (and that’s the nicest thing you can say about it). Many large banks in the world are broken too (ditto). The investment model of the modern era, starting back in the 1860s during the U.S. Civil War, has almost ground to a halt. That is, the idea and method of “floating capital” is not functioning. Indeed, capital no longer seems to float. Actually, it seems like capital has been sinking like a stone.

The lack of capital (at least, in the forms that we’ve come to utilize it for large scale investments) means that it is difficult – impossible in some cases – to go forward with the new energy and resource projects that are designed to mitigate the present depletion’s in older oil fields and other resource provinces.

In the face of this, most governments of the world are trying just to look good for the TV cameras. Central banks and government treasuries across the world have been reduced simply to throwing money at whatever problems catch their collective eye. Squeaky wheels get the grease. So we see the national treasuries “recapitalizing” busted banks. We see the likes of the U.S. Big Three automakers coming hat-in-hand to Congress for a bailout, and Congress in turn acting like it knows how to run a sophisticated manufacturing business. And we hear announcements, from China to the U.S., of massive new public works programs to get the world moving again.

It’s like if we pour enough concrete, and then everything will turn out all right. Somebody ought to ask the Japanese about that. They all but paved the island of Honshu in the 1990s, and still lived through a stagnating era.

Can things really turn out all right? Can we return to some happy past? As Heraclitus once noted, “You cannot step twice into the same river, for other waters are continually flowing on.”

Prosperity Stolen from Fort Knox

Indeed, all rivers flow to the sea. In Asia Times Online, the always insightful Henry C. K. Liu recently wrote that the credit crash has “turned out to be a catastrophic, global, financial perfect storm of unprecedented dimension that will cause serious structural damage to all market economies around the world. It may even spell the end of the cowboy finance capitalism of the past two decades in which risks are socialized and gains privatized, with debt manipulated to act as phantom capital.” Yep.

A fellow Pittsburgher, financial writer Jim Willie, is even more pessimistic. He thinks that in 2008 the U.S. economy and financial structure suffered “mortal wounds.” Jim states – using a very clever turn of phrase (I wish I’d said this) — that a “decade of prosperity was stolen from Fort Knox.” That is, major elements of U.S. monetary policy in recent years involved the gold carry trade enacted by the U.S. Treasury in the 1990s.

What is the gold carry trade? The U.S. Treasury and Federal Reserve treat the details like state secrets. But what has leaked out makes for a sordid story – treasonous, even. It’s enough to make you wish that we still executed people by firing squad in this country. Let me put it this way. Perhaps President-Elect Barack Obama thinks that his biggest surprise will come when he gets “THE briefing” and finally learns what is really out in the tightly guarded hangars near Groom Dry Lake in Nevada (a/k/a “Area 51”), and Dugway Proving Ground in Utah. Well just wait until Pres. Obama asks how much of the original Fort Knox gold still remains the unencumbered property of the U.S. government. Surprise, surprise.

The Wolf is At the Door – Say Hello to the Nice Wolf

In 2008 we all experienced the destruction of a world-wide credit bubble. This was the end of many decades of dollar-abuse and monetary malpractice by the U.S. Federal Reserve and the utterly profligate U.S. government in general. As Gresham’s Law states, “Bad money drives out the good.” And decades of bad money did not just drive out the good stuff. In turn it sowed the seeds of its own destruction.

It was just a question of time before the wolf showed up at the door, and that time has arrived. Say hello to the nice wolf. So now it’s time to face the fact that the U.S. economy is in far worse shape than most people believe. And it will be in bad shape for a long time to come. If everything goes right, it might take a generation to clean out the stables.

But we are already off to a bad start. The 2008 credit meltdown has caused huge collateral damage. And in 2009 we will see an extraordinary attempt to re-inflate that bubble. Will it work? Probably not like people expect.

The traditional financial system is now in the fight of its existence. The system was based on U.S. dollar hegemony and the supremacy of U.S. national power. That, and the way that the U.S. benefited from ingrained habits of foreign monetary authorities kowtowing to Washington based on decades of living with Bretton Woods and its ghosts. It all hit the wall in 2008. But like the creatures in the Aliens movies, these critters won’t stay dead for long. The Wall Street/Treasury Axis will come back to fight hard and play dirty.

Things to Do to Ensure Your Security

I believe that the old system is irretrievably doomed. But you cannot replace something with nothing. There is still no “new” system that has come around to take the place of the old one. Thus the big task for 2009 is to save your personal wealth from going down with the ship. So how do you ensure your security?

In the short term you can protect your financial interests by increasing your cash position as a percentage of your assets. When all else fails, add to cash. Yes, we will probably see inflation in the future, but for now more cash is better.

Also, in anticipation of inflation you should own physical metals like gold and silver. I mean it. I’ve said it before. OWN GOLD! And I mean OWN THE METAL. Take delivery! Maybe I sound like the Mogambo Guru on this, but he’s right. Let me quote Mogambo. “Own freaking gold!”

And get out of any but the very best shares. The first requirement for share ownership is to look for companies with enough cash to fund operations and make it through some very lean times. Then you also want to invest in firms that are going to be important in the world that’s coming down the tracks.

What kinds of firms will be important? Well, energy and resource firms for starters.

Source: Falling Prices and Scarce Energy

Yard Work, Troubled Assets, Bankruptcy and Energy

I often mention that I live in Pittsburgh. Well, the truth is that I live in a leafy suburb of Pittsburgh. I grew up in the Steel City. But when I got married I moved to the suburbs to be near my wife.

Life in the Leafy Suburbs

There is a problem with living in a leafy suburb. When autumn rolls around, the leaves turn brown and fall off the trees. So you have to deal with cleaning up the yard. And after being away in South Africa for two weeks, I sure had a lot of dead leaves in my yard. Thus did I spend time the other day, working like a man on a chain gang — totin’, liftin’ and haulin’.

There I was, raking leaves and dragging them down to the front curb. From curb side, the local municipality has a dump truck with a big sucking machine (the “suck truck”) that scoops up the leaves and takes them to some place called “away” — wherever that is.

And then this guy drives up in a pickup truck and says, “Hey sir, are you the owner?”

I acknowledged that I was the owner, and the man said “I need work. Could I help you clean your yard for a couple hours and you could just pay me?”

The guy seemed OK, and I had a heck of a lot of yard work to accomplish. So I figured I’d hire him for a couple of hours and get the work done faster. Thus did Mike — my casual employee — and I clean up the area around my house.

As we worked, Mike and I talked. Mike is 45 years old. He’s a high school graduate. He served in the Navy (See? I knew he was OK.) After the Navy he worked at a manufacturing job, from which he was laid off in the early 1990s. Then he worked in a warehouse, which closed in the mid-1990s. Then he worked as a mechanic, until his employer went bankrupt in 2000. Then he drove a truck and hauled freight, until that fell through last year after his major customer moved operations out of the country.

“It’s the story of my life,” said Mike. “I’ll work someplace for a couple of years. Then the economy changes or there’s a business setback, and I’m out on my butt.”

Doing Jobs That Americans Won’t Do

Now Mike drives around leafy suburbs. He looks for people who might need help with cleaning up around their house. Mike’s wife is a cashier at Target, “so she’s got the real job in my house.” Mike has settled down to where he lives in the world of cash, earning a few dollars here and there.

“Y’know,” said Mike, “George Bush said that we need more immigrants here in the U.S. because ‘they do jobs that Americans won’t do.’ What the hell was he thinking when he said that? Here I am. I can strip a diesel engine down to the last nut and washer. And I’m cruising neighborhoods looking for yard-work. Heck, I was born in Pittsburgh. I served my country and I’m no immigrant. But I can’t tell you the kinds of crappy jobs I’ve done just to pull a couple of bucks out of the economy for me and my family.”

“We’re All Immigrants Now”

Mike continued. “I don’t see it getting much better for people like me. That’s for sure. And now all the big banks and big businesses are laying people off too. Everybody’s losing their retirement funds. I guess we’re all immigrants now.”

Where Do We Go from Here?

So where do we go from here? At least Mike can strip a diesel engine down to the last nut and washer. Are we all destined to become — as Mike so delicately put it — “immigrants.”

Call me quaint — even old-fashioned — but I’m proud to be an American. It’s just that I don’t like this “immigrant” sort of governance that has evolved within the U.S. We have too many family political dynasties, taking care of their old friends from way back — if you know what I mean.

Really, it seems like every political administration of recent vintage has had people from Goldman Sachs (GS) hiring other people from Goldman Sachs to bail out more people at Goldman Sachs.

Yes, it may be paranoia at work. I confess that I think along these lines quite often. But it has been especially prominent in recent days, as Treasury Secretary Hank Paulson — a former Goldman man — comes up with new and different versions of the Wall Street and banking bailout plan.

First Congress authorized $700 billion — quite a bit more than the entire Department of Defense budget — for some sort of “troubled asset relief plan (TARP).” (Nobody ever really explained it to my satisfaction. Somehow we were going to throw money at a very big problem and fix it.) Then the money flowed like rainwater to Wall Street and a bunch of banks. Then the banks and Wall Street houses continued to pay their insiders’ big salaries and bonuses. And the banks have not exactly been lending into the economy. Meanwhile nobody has been buying up any of those so-called “troubled assets.” So for $700 billion, we are not getting any results. And there’s little or no accountability.

Then Sec. Paulson comes along and says that the TARP money really doesn’t have to be used to buy “troubled assets.” He says we’ll use it for other things instead.

But wait a minute. It would be like Congress authorizing funds for the Navy to buy a new aircraft carrier (actually, 100 new aircraft carriers for $700 billion), and then the Secretary of Defense saying, “No, we won’t use the money to buy aircraft carriers. We’ll use it to pay big salaries and bonuses to defense industry executives.” How long do you think that a charade like that could go on?

Let’s go back to the beginning. Did it ever make any sense for the U.S. Treasury to buy up “troubled assets” — whatever those are and however one might value them? And does it make any sense for the Treasury to just hand out funds to banks and bankers? Like I said, call me quaint or old-fashioned, but of course not.

Until we meet again,
Byron W. King

Source: Americans as Immigrant Workers in America