Tuesday, August 23, 2011

An Idea Whose Time is Dumb

Goldman suggests letting the Chinese buy a big piece of Bank of America (BAC) because they don't want to buy low-yield U.S. Treasuries at this point.

Please read Goldman's arguments. From a Wall Street perspective, it makes sense because the bankers and financial manipulators have no concept of value outside of money. From my perspective, allowing the Chinese to buy up and control U.S. companies is a bad idea. The Chinese government is still Communist. They allow some freedom in the market, but they also employ slave labor, including that of imprisoned Chinese Christians.

Would Chinese investment in BAC and other shaky institutions boost the markets? Probably temporarily, it would. Keep in mind that Goldman still believes stocks are undervalued. I am not so sure. There is still tremendous bad debt that is floating around in the system. There are still derivatives being sold on the basis of somebody's magic beans. Why not draw in those Chinese suckers and relieve them of their excess cash? Because the Chinese then become players on the boards of American companies with direct CASH access to American politicians and American governance and policy. Foreign money was probably funneled into Obama's presidential campaign in large amounts in 2008. More will be funneled in during 2012. Still, it is not the same as Bank of America being able to finance campaign commercials directly on prime-time television with the Chinese holding 49% of the BAC stock.

I suggest that we let BAC go under and take some of the bad debt in the system down with them. If it collapses the market, well, that's the price of blowing bubbles. We might as well get it over with rather than perpetuate an even bigger bubble based on Chinese money rife with Chinese totalitarianism.

We have every reason not to believe the accounting given by major corporations because it has been bogus in the past. The same is true of the U.S. government. The same is true in spades of the Chinese government. Instead of them learning from us, as Goldman suggests, we are likely to see more of the Chinese government's deceptive accounting techniques in our system.

We are not going into a recession but a depression. We are going to take the whole world with us. The worst thing we can do is try to stave it off with desperate, straw-clutching measures like giving the Chicoms control of major American banks. New Deal "public works" are not the answer. The answer is to let the bubbles burst, let the economy bottom, and let people find a firm foundation free of excess regulation and control by governments. Once we find the bedrock, we can build again.

Time to face reality.

And get back on track.

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