I like Obie, but he has drunk the Kool Aid. We are doomed. He’s listening to the advice of those very same world renowned egonomists who never saw the current mess coming. How could those who never saw it coming in the first place, and didn’t recognize it after it had already begun have any clue how to get us out of this mess? It makes no sense. But Obie is obviously listening to them. So we are doomed.

Doomed, I say.

What’s my advice? After all, I was one of those non-economist types–called bears– and we are multitude–who did see this coming. People like Bill Outada Poole, Big Dick Cheney and others say that nobody saw this coming. Well, the government bigshots and mainstream egonomists didn’t see it because they were the problem. It was their system. Greenspan built it and he was their maestro. Those of us malcontents on the outside looking in–we saw it and we screamed and yelled and ranted and raved, but nobody on the inside wanted to hear it. They were having too much fun sucking on the teat of the Ponzi scheme they had created.

But that’s for another time. The question is what I think “they” should do now.

Nothing. Because contrary to their conventional wisdom, doing nothing is actually much more likely to help the situation than following the advice of those who caused the problem.

That’s right, nothing. Oh, we definitely should have a little trickle up economics–some programs to allow the unemployed to subsist. We need to spend a lot less money on guns and more on butter for sure. And I guess we’ll have to raise the age for Social Security to 70, and roll back government fat cat pensions.

As for bailing out the bankers and brokers and corporate CEOs and all the friends of the politicians, I say let ‘em fail. Too late, I know. Bailing out the rich bankers and brokers will not save the system, it only puts the US taxpayer, instead of the investors who assumed the risk in the first place, in the position of bagholder of last resort. Why should we be the victims just to bail out the irresponsible self aggrandizing bankers, financiers, and economists, the thieving corporate CEOs and CFOs, and the lazy, irresponsible, and crooked investment managers who caused this mess? These spending programs are burdening US from now till kingdom come with a problem that those people caused. Yet we are bailing THEM out. WHY? Because they have the power. We don’t.

Take for instance Senator Scummer thanking Citibank today for throwing its support behind the bankruptcy proposal to allow judges to force mortgages to be crammed down. What the hell does Citicorp have to do with the legislative process? Why should the Congress need that company’s support to pass any legislation? Why are OUR representatives THANKING THE CRIMINALS? Whatever happened to government of the people? The extent to which the corporations have taken over this government is shocking. The politicians don’t even pretend any more. They thank their corporate bosses publicly for giving the OK to legislation.

It’s an outrage.

OK, just another outrage. After a while you get numb to it. That’s how they get you to play the game and turn over the fruits of your labor. They slowly and surely wear you down and numb you to the pain. Orwell wrote the manual 60 some years ago. Did he suspect, did he know, that he was predicting the future of the United States of America?

They’ve already done this business of borrow and bail twice and the result is as obvious as the finger up your nose. Just look at what happened to the markets the previous two times where the federales engaged in massive public borrowing over a short period of time, last May and last October. The outcome will be no different this time.

The borrowing for “The Stimpack” as currently envisioned will crush the stock market and destroy whatever is left of confidence world wide. It will cause an even greater crisis by potentially destroying the world’s perception of the creditworthiness of the US Gummit itself. We will ultimately be at the mercy of our creditors, and they at ours.

Unless they scale this Stimpack thing down to next to nothing, or by some other miracle they don’t try to raise the money, we are doomed. I think our best hope is that when they begin to implement this monster and things start to go over the cliff they will, like Wily Coyote, somehow grab a branch, pull themselves back up, reverse course, and stop all the damn borrowing.

As so many bears have pointed out, we cannot cure the disease by giving the patient more of the same poison that caused it in the first place.

Furthermore, substituting the US Gummit in the sick bed of the financial system as the dying patient of last resort is the height of folly and irresponsibility. We will now all pay the price, doomed to a pitiful, sickly existence for generations to come.

If Shakespeare lived today, he would not have suggested that they should “kill all the lawyers” because he would have had economists as his foils instead.

Polonius’s advice would still hold, however.

Neither borrower nor lender be.

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That question arose from the fact that that amount disappeared from the Fed’s balance sheet last week in the line items covering loans to and equity investments in the broken AIG. The Fed’s balance sheet as it pertains to custodial accounts for FCBs also makes clear why the Fed was forced to announce yesterday that it would begin acquiring $100 billion of GSE paper and $500 billion of MBS directly. FCBs forced the Fed’s hand by pulling out of the mortgage securities market over the past 2 months. The end of 4 years of subsidy brought about the collapse of that market, just as predicted here in these pages. That left the Fed no choice but to step in on behalf of the American taxpayer and other future victims, as the bagholders of last resort.

There were many more interesting tidbits to be gleaned as I went through the Fed’s balance sheet with a fine toothed comb. There were lots of tangles, split ends and frizz, but there were a few strands that stood out. One of which is that the Fed still does not appear to be monetizing to any significant extent. The question that remains to be answered is how they are going to fund the coming $600 billion balance sheet expansion in mortgage securities. Monetize, or otherwise? Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.