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Dear Congressman

I sent this letter to my Congressman this morning.

Dear Congressman-

As editor and publisher of the Wall Street Examiner and several other financial publications, I have been a close observer of financial and economic matters for the past 9 years. I have also been a Democrat since I was old enough to say “Adlai”. I have been very proud of your representation of us in Congress, and appreciative of the help your office gave me and my wife when the INS lost her permanent residency application.

I proudly voted for President Obama, and I support him in every way except one.

The Obama Administration and the Congress are on a PROFOUNDLY WRONG course in attempting to rescue the economy and the financial system.

Briefly, because the world economy is in contraction there is no net capital formation, and there will be none for the foreseeable future. Every dollar that is to be spent on bailouts and stimulus for some elusive, and probably illusory, future economic benefit must be raised in the capital markets in the present. Because there is no net capital formation, each new dollar of Treasury debt requires the liquidation of other financial assets, particularly common stocks.

There is a direct correlation between the level of Treasury borrowing in a given period of weeks, and the performance of the stock market. When the Treasury is in the market in a given week for $100 billion or more of new borrowing, the loss in the aggregate value of the financial markets is often 2 to 3 times the level of Treasury borrowing. This creates a vicious cycle of deflation and additional financial stress that is far greater than the value of the increase in Treasury Debt.

This vicious cycle must be stopped, or we will bring on the very catastrophe the government is seeking to avert. Adding more debt now only adds more fuel to the deflationary fire, and will very soon cause the government to face the conundrum of printing money to avert financial collapse and in so doing, risking a sudden rupture of confidence that could lead to monetary collapse and a crisis of confidence for the US government itself.

These policies have been created by the very same economists who either actively encouraged or failed to see the bubbles that were the cause of our current and long term predicament. They are still blind to the effects of their latest policy actions.

The bailouts must be stopped. The economic stimulus dollars must NOT be spent. NO ADDITIONAL FUNDING SHOULD BE RAISED IN THE CAPITAL MARKETS. The effects of such borrowing now will be catastrophic.

We must take the medicine now and put our fiscal house in order now. The only programs that the government should be funding now are those absolutely necessary to provide for a minimal social safety net to keep people from starving or freezing to death.

If the government does not stop the borrowing and stop the transfer of private credit risk onto itself and the American taxpayer, we are headed for a cataclysmic day of reckoning.

I beg you to consider these ideas, and to pass them on to someone in the administration who will listen. I know that you must be close with Mr. Emmanuel and others at the White House. It is essential that these thoughts be placed before them. They are listening to the wrong people, the very people who brought us this chaos, and who have no clue how to fix it.

We must change course now, or it will be too late.

Respectfully,

Lee Adler

7 Comments

  1. Julio

    Good letter Lee, well written and all true. What do you think about coordinating a mass faxing/emailing and phone campaign using your letter (modified slightly to remove the first few sentences) as a template for all people on your sites to send the letter to their own Congressman/woman? The power of these grassroots efforts can be awesome..Mish’s has done a lot of this and some others too..the gov’t clowns are going to run us into catastrophe eventually…people need to revolt peacefully to try to change..before revolt turns ugly..
    Good work
    JO

  2. Paulm

    In the spirit of Julio’s suggestion, here’s my paraphrase of Lee’s excellent letter that I’m sending to my Congress critters.

    President Obama, please …

    1) Global economic activity and demand for credit are contracting (a nice word for “crashing”).

    2) No net new capital formation is occurring. (“Capital formation” is a fancy-pants term for the savings that accumulate from selling labor, goods, and services for a profit.) The opposite, in fact, is happening: debt is defaulting, asset prices are declining, wages are shrinking — in a word, capital is i>disappearing.

    3) Meanwhile, each week the U.S. Treasury brings billions, often hundreds of billions of dollars of new debt to the capital markets to raise money for bailouts, stimulus, and ongoing federal expenses.

    4) As no net new savings exists to purchase the U.S. Treasury’s debt, existing assets must be sold. Every new dollar of government debt requires the liquidation of another financial asset to raise the funds.

    President Obama, please …

    * Your actions and those of the Congress are accelerating the vicious downward spiral of deflation that you claim to want to arrest.

    * The U.S. Treasury’s massive borrowing binge must stop.

    * The bailouts must stop.

    * The economic stimulus dollars must not be spent.

    * No additional federal dollars should be raised in the capital markets, starting tomorrow.

    * It’s time to circle the wagons: You need to focus exclusively now on ensuring both the ongoing viability of the government itself and a minimal social safety net to keep Americans safe from crime and from starving or freezing to death.

    President Obama, you are a smart guy, no doubt about it; but you’ve surrounded yourself with the wrong people whose advice is leading you right over a cliff. Abort. Change course. Get rid of the Keynesians in your administration before it’s too late.

    Sincerely,
    PM

  3. Lee Adler

    Thanks folks! I think everyone should write and call their Senators, Congressman, and administration officials with whatever comes to mind.

  4. G.F. Hunter

    First!, I am an INDEPENDENT!! (Call me
    ‘wishy-washy’ if you want to) I sense
    you may well be one of the FEW BRIGHT
    Democrats! Congratulations!! Why don’t
    you become a Republican, better-yet, be
    an INDEPENDENT, free yourself of being
    beholden toa huge aray of HYPOCRITS, and
    use your knowledge and skills to bring the U.S. back to its’ once
    GREATNESS!! We true AMERICANS need
    ALL THE HELP WE CAN GET. THANKS!!

  5. G.F. Hunter

    First!, I am an INDEPENDENT!! (Call me
    ‘wishy-washy’ if you want to) I sense
    you may well be one of the FEW BRIGHT
    Democrats! Congratulations!! Why don’t
    you become a Republican, better-yet, be
    an INDEPENDENT, free yourself of being
    beholden to a huge aray of HYPOCRITS, and
    use your knowledge and skills to bring the U.S. back to its’ once
    GREATNESS!! We true AMERICANS need
    ALL THE HELP WE CAN GET. THANKS!!

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