Tuesday, March 21, 2023

Don's Tuesday Column

       THE WAY I SEE IT   by Don Polson   Red Bluff Daily News   3/21/2023

    People, businesses goof; gov’ts FUBAR

It’s oft said that people and businesses make mistakes—never intentionally expecting bad outcomes—but it takes the power, reach and general unaccountability of government to really “F(oul) Up Beyond All Recognition,” or FUBAR, in military shorthand. Wartime losses of lives, assets and territory have resulted from not only inept military command decisions, but also short-sighted, ill-conceived, strategically miscalculated or geopolitical foolishness of civilian leaders.

Examples abound but when the specter of economic collapse, unemployment, shortages, civil disorder, and depression, drug abuse and family breakdown loom—resulting from monetary and budget policies that duplicated past mistakes—it’s government FUBAR.

In fact, the “specter” of such calamities has arrived. Unemployment is nearly double reported levels when labor force dropouts, and those working two, or part-time, jobs are factored in. COVID-predicated policies of shutdowns, lockdowns, remote learning and firings produced hidden unemployment, emotional health and drug problems among the young, and killed hundreds of thousands of small businesses. Race/George Floyd protests/riots and disruptions were allowed, even encouraged by authorities in “blue” states and cities. Shortages are just a supply disruption or rumor away.

Economic weakness (negative or flat growth in 2022) could tip into a recession precipitated by systemic banking insolvency. Doesn’t the F.D.I.C protect depositors? Silly, trusting saps. Biden and Treasury Secretary Yellen now admit they will ignore the law and make wealthy depositors, even Chinese or foreign, “whole” by extracting fees from everyone else.

If government exorbitantly taxed the income of “the super-rich 1 percent,” even the “richy-rich” 10 percent, or even seized it all, it wouldn’t fund all the redistributionist, socialist and welfare spending commitments Congress passed. We’re only degrees away from having to turn all earnings over to “the guv’mint” and be grateful for what they provide.

Likewise, there aren’t enough depositor funds that can be hiked sufficiently to cover all the losses that could be incurred by every bank that took the “good intention-lined” road to asset hell shown by Silicon Valley Bank and others.

Massive foolishness was discovered after SVB depositors found insufficient money there for all to withdraw. Profitability is a “no brain” formula: Give those with deposit accounts small interest while loaning out their money and charging higher interest. Just have a dedicated, savvy “risk manager” to avoid shady or poorly-planned entities, unlikely to repay the loan. Sure-fire success? Not at SVB.

“Woke” Millennial and Gen Z-ers, brought into the D.I.E.-obsessed (Diversity, Equity, Inclusion—DIE is fitting) corporate world, brought such wisdom and insight. They’re inspired to devote time, money and personnel to 1) hiring (and advancing) minorities and women regardless of merit or qualifications to achieve “equitable” color and gender among employees and management;

2) Fund priorities like the E.S.G (Environmental, Social, Governance) standards increasingly endorsed by private-sector business types. Divert investor and profit funds into “feel good” projects related to “global warming/climate change/current thing” environmentalism. Double down on “Social” investments aimed at promoting “equity,” or equal outcomes, as opposed to “equal opportunity” colorblind policies. Whatever Big Government wants from business leaders, to support government priorities, it gets.

Younger, progressive leaders and subordinates obsessed over 1) and 2) for a politically correct leftist image. Simple realities were ignored: Interest rates were steeply hiked by the Federal Reserve, while the banks made long-term loans at lesser rates (lowering future income); depositors expected interest returns reflecting the Fed’s rates. Less income, more outflow=financial death.

The old joke was that even though the widget-manufacturer was losing money on each widget, he’d make it up in volume sales. “That dog won’t hunt,” as they say.

Big, Pollyanna-ish government types thought, over decades starting with Clinton, that the lack of equal racial home ownership (racist disparate outcomes, they said) could be rectified with easier borrowing for minority buyers. Low- and no-down payment loans sure did that but when any white borrower had to get the same terms, who could have predicted that the massive increase in (artificially induced) demand would artificially inflate prices?

When predictable foreclosures ensued, prices crashed below the value of the loans; the lenders got stuck with homes they could only sell by discounting heavily. The rest of the 2008 housing/banking crises is history; foreseeable government overreaction meant “too big to fail” bailouts would go on ad finitum. Isn’t it the same mentality now with insolvent banks, wealthy depositors and systemic imbalance? I was in the real estate field and saw, with incredulity, those cycles unfold.

Current crisis simplified: 1) G-C (Government-Created) crushing of the economy because of COVID; 2) G-C response was passing trillions of dollars of unpaid-for stimulus, inducing millions of former workers to collect more free money than they could earn, even after businesses reopened; 3) Predictable unprecedented inflation from predictable over-heated monetary supply caused 4) the Fed to start unprecedented rapid interest rate hikes which 5) caught some banks catering to high-tech or digital currency sectors in illiquid (broke) straits.

It's NOT from deregulation, Trump, Republicans, or free market Capitalism; just Big Government that FUBARed banking like it did with housing and the pandemic response.

Elon Musk: If they indict Trump, he wins in a landslide. I tend to agree.

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