Connect the Economic Dots Part IV

The first three parts of Connect the Economic Dots laid out the perfect storm of an unregulated financial industry eating itself, much like the snake who has swallowed its own tail, as consumer debt spiked, at the same time the oil industry decided to give themselves a pay day.

Here’s a factoid from Sharon Astyk’s blog:  McDonald’s Restaurants are now the second largest merchant vendor on credit cards.  People are buying their Big Mac on credit, as they don’t have the actual cash to buy lunch.  The amount of credit card debt has grown more in the past 10 weeks than in the past 10 months combined.

To complicate matters even more, the US credit-card industry may pull back more than $2 Trillion dollars in credit card debt over the next year and a half.  The reason the banks want to pull in their exposure?  Too many credit card holders are tanking and the bankruptcy courts are writing off the credit card debt.  This is risky to a bank, as it means they don’t get paid.

Now a review:  The financial industry caused about three-fifths of this mess.  They get a bailout.  The oil industry spiked prices for no good reason and saw consumers park their cars.  Expect the oil industry to ask for government money, as demand for their product is dramatically down.  Consumers, who are the actual engine of the economy, get flogged by the financial industry for their part in the mess. 

So far, most of the people who are actually responsible have skated away without losing their houses. It is incumbent to name them: 

#1:  The US Federal Reserve Chairman, Ben Bernanke.  His department is the one that modified the rules for debt to equity ratios for Wall Street.  His department permitted highly leveraged debt financing at the corporate level.

#2:  US Treasury Secretary, Hank Paulson.  His department controls the financial taps and is at least on paper, in charge of regulation of the financial industry.

#3:  Securities and Exchange Commission head, Christopher Cox.  This is the regulator for Wall Street, more or less.

On paper, these are the three lads who are, under the direction of the government, supposed to keep tabs on the economy, making sure it works well and fairly so that consumers have confidence in the whole system. 

You can be assured that Cox, Paulson and Bernanke do not make $5.15/hour, the US Federal minimum wage. 

You can also be assured that the only way these three lads got theirs job is they are buddies of the President.  That would be President Jo Jo The Idiot Boy, George W. Bush.