Gold News

Praise Be, It's St.Timothy!

TARP, ZIRP, QE and the rest fed some "collateral beneficiaries". Including...
OH MY...Tim Geithner is back, writes Bill Bonner in his Diary of a Rogue Economist.
The former secretary of the Treasury tells us that, thanks to him and his fellow fixers, the US was able to "prevent another Great Depression...
"We put out the financial fire," he claims, "not because we wanted to protect the bankers, but because we wanted to prevent mass unemployment."
In any event, he prevented at least one person from being unemployed: Timothy Geithner.
After his tour of duty at the Department of the Treasury was over, he turned up his nose and told the world he was not just another corrupt bureaucrat slipping through the revolving door to Wall Street. A few months later...whoosh!...and there he was in a private equity firm.
Our job is to connect the dots...and today we connect a few more. The definition of democracy is this: Two wolves and one sheep decide on what to have for dinner.
The wolves, no doubt, are with Pope Francis. The pope believes governments should redistribute wealth. Many people agree with him. They want to see the lucre passed around. It is a shame the pontiff did not bother to wonder how the wealth got where it is in the first place. If he had, he may have taken a closer look at Mr. Geithner.
Maybe God – with his invisible hand – let the chips fall where He wanted them to, following the crisis of 2008. Or maybe Geithner and his Wall Street cronies got their fat mitts on the loot first.
Everyone – believers and heathens alike – believes he knows the mind of God...or claims to. Reforestation, recycling, redistribution...and economic recovery! Surely, the Big Man is for them all.
Then you let it be known you favor higher marginal taxes (on someone else, of course); this puts you on the side of the angels, too. But for all we know, the angels prefer strip mining and flat taxes...and drive down the highway throwing beer cans out the window.
The mind of God, like the future, is unknowable. But that doesn't seem to stop anyone. Geithner's book comes out this week. It's called Stress Test.
As the title suggests, Geithner claims he was tested by the financial crisis in 2008-09. He believes he passed. Now, he's peddling his version of the story, complete with God in his pocket, and the future on the teleprompter.
In the autumn of 2008, for example, Geithner knew what was coming. As his colleague Meg McConnell put it, "There will be shantytowns and soup lines across the country."
How did she know that? Because "panics kill economies," says Geithner.
Based on the evidence, panics help bring economies to life. Like forest fires, they burn off the dead wood.
That happened twice in the early 20th century. There was a panic in 1907 and another in 1920. The stock market fell by half between June 1907 and January 1908. The economy retreated, too. But by mid-1908 stocks were back to their highs and the economy was booming.
Again, between July 1920 and June 1921, the US stock market lost half its value. And again, the feds did nothing. The economy went into a depression, with double-digit unemployment and 30% less smoke belching from factory chimneys.
Instead of running stimulative budget deficits, the federal government posted a surplus. No TARP. No TALF. No ZIRP. No QE. Despite, or perhaps because of, this government neglect, the fire burned hot for only a few months. By the summer of 1921, the tinder was consumed and the flames died out. Within 18 months people were back at work.
That was the last time federal firefighters let an economic blaze have its way. Since then, every conflagration has been met with smoke jumpers and water bombs. The Panic of 1929, for example, was fought by Hoover...and then by Roosevelt. Together, they dumped so much water on the economy it was soggy for more than a decade.
More recently, Alan "Smokey" Greenspan extinguished the campfires of 1987...and 2000. Then, it was Geithner's turn.
Yes, it was "messy," he admits. And yes, there were some "collateral beneficiaries" (he doesn't mention himself by name; there was no need to do so).
"But this is the only way to ultimately protect the innocent victims of the crisis from the calamitous damage of economic depressions."
St. Timothy to the rescue. Hallelujah!

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals