Speaking about California governor Arnold Schwarzenegger's request for $1 billion in TARP funds to ease the pressure on the state budget, Treasury Secretary Tim Geithner said that while the administration was "in touch" with California and other struggling local governments and may indeed end up providing them with federal assistance, he objected to the labeling of their involvement as a "federal bailout": "I wouldn't use the word bailout or federal," Geithner said. "I would say we're in close consultation with the people who are looking at ways to make sure these markets are working so that states and munis can meet their needs." Anyway, it's not really a bailout, it's just a "little something to tide them over," if you don't mind. In addition, Geithner would prefer that everyone refer to their $15.4 billion deficit as "their little problem" – NY Magazine
Dominant Social Theme: It's just a little push.
Free-Market Analysis: We don't have much sympathy for entities such as California. In California, as in too many other states, thousands of workers can seemingly retire in their 40s with million-dollar pensions and lifetime health care. Teachers, too, even though the literacy rate has been in a free-fall for decades. Environmental laws, workplace regs and food-safety rules all conspire to create a toxic and ruinous system of governance. Lawyers feast on ever-evolving definitions of white-collar crime. Local, state and federal law-enforcers rove the street looking for ephemeral terrorists. Jails are filled with prostitutes, drug-takers and vagrants – many of whom hurt no one but themselves. Almost anything that moves is regulated. Everything else, criminalized.
It is no coincidence that the rise of the hyper-nanny state throughout the West roughly parallels the rise of central banking. The current American (Western) system is based on paper-money stimulation. Back in the 1800s, when freedom (for the Anglo-Saxon axis, anyway) was a good deal more tangible, many in the middle and upper class understood a good deal about the relationship between man and state. It is this knowledge that has been attacked over the past century. Until the Internet came along, the dumbing-down was going fairly well.
Without the ability to create money via central banking, the Leviathan likely would never have swollen to its current proportions. In fact, it is possible that our entire system of hyper-regulated democracy would never have been feasible. But once past the Gutenberg enlightenment, it was necessary. The goal of the monetary elite was renewed control. The first step was to buy off citizens by providing them with expensive benefits. The next step was to create a regulatory bureaucracy to keep them safe. Thanks to central banking, almost unlimited funds were available to provide a governmental solution for every private problem – and serial wars besides.
No more. Since the paper-money hegemony collapsed in 2008, we have anticipated the deflation of the Western regulatory apparatus. There is simply not enough money now for the endless bureaucratic elaborations. We are living in an interregnum between what was, economically, and what will be. Eventually, the monetary elite, through governmental entities, will declare victory but that will not change the "facts on the ground." Money will still be scarce, along with jobs. Western governments will have a great deal of trouble nourishing the Leviathan in a time of failing currency.
Of course what will happen, eventually, unless it is stopped, is that the powers-that-be will create an entirely new bubble. China had eight separate fiat-money regimes, apparently, in its history, and the West (in its current incarnation) is now onto #2, at least. Does that shock you dear reader? The mainstream media will eventually come to our conclusion as well – likely in several decades.
Meanwhile, California is voting on budget remedies, even as this article is being written. The Wall Street Journal tells us that, "Californians head to the polls Tuesday to decide the fate of six ballot initiatives, all of which are ostensibly designed to combat the Golden State's budget crisis. If the polls are right, all but one of these measures will crash and burn – and by wide margins."
Articles such as the one excerpted at the beginning of this report (NY Magazine) inform us that no matter how the voting turns out, federal government intervention is likely. Of course, American constitutionalists have already started pointing out that giving some states federal money to bail out profligacy amounts to "taxation without representation." This may explain Treasury Secretary Geithner's semantic sensitivities.
"I would say we're in close consultation with the people who are looking at ways to make sure these markets are working so that states and munis can meet their needs." Anyway, it's not really a bailout, it's just a "little something to tide them over."
Geithner says he is in close consultation to "make sure these markets are working." But here's a definition of a market from Encarta.com: "Market: The whole area of economic activity in which the laws of supply and demand operate, often thought of as a regulatory force affecting both economic and political affairs … "
Markets according to almost any recognized definition recognize the laws of supply and demand. That's the point. If markets are not recognizing the laws of supply and demand, then either you don't have a free market, or you don't want one. Markets provide price discovery. Markets are efficient, factoring in all available information in order to produce a price.
After the past year in which Western governments have repeatedly interfered, the financial markets are becoming increasingly debased. What Geithner is really saying in his off-hand remark is that the Obama administration will guarantee the Californian municipal bond market – making sure the market does not value Californian muni bonds at their real price, which is next to nothing. Why? Because the state of California has so mismanaged its affairs that it can no longer maintain a solvent market.
It is difficult to see a way out for those who are determined to ensure that there will be a new fiat-money regime to take the place of the old one. Instead of letting a real market of honest money emerge, every lever of power and profit will be pulled to make sure it doesn't. As a result, inflation will surge to new heights, interest rates eventually may climb sky high and the dollar, among other currencies, could well collapse. The monetary elite should make peace with honest money and settle for a little less control. Having soared so high and tasted the ethereal power of money creation, we guess it's difficult to settle for less. They may crash and burn.
You don’t have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.
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