Last night I got 30 seconds on Donny's "Big Idea" and handed out the 30-second version of The Ticker from yesterday - that is, lock up all the fraudsters and rescind the TARP.
Cramer had his usual retort that "ATM machines would stop working" if we had done that (or do it now.)
That's a lie.
How do we know its a lie?
Because the TARP was sold as a plan to buy distressed mortgages, and in fact not one distressed mortgage has been purchased, but the ATM machines are still working!
In reality what the TARP/EESA is and was is exactly what I propounded on Big Idea last evening - it is a heist.
Cramer looked like he had a lemon in his mouth when I said "lock 'em all up"; he should, given that he's one of the people who would get locked up. His misdirection, as I see it, goes beyond just being a crappy analyst.
Anyone remember his call on Downey Savings and Loan (NYSE: DSL) last year? I do - well. Cramer's call was that it was going to $100 and/or was going to be bought out for $100.
Now let's look at what Downey really is. Downey is a financial institution that made loans which the borrower had no chance in hell of being able to pay back according to their original terms - "Option ARMs" in California.
Why is this important? Because this was the essence of the bubble.
Donny was "surprised" that a trader would have a position of "lock 'em all up!"
Why should he be surprised? When I make a bad trade (and I've made many) I get to own 'em. I must suffer the loss that comes from it, no matter how bad it is - even if it bankrupts me and I wind up handing out shopping carts at WalMart. It doesn't matter - it's my error, it's my loss.
The essence of this bubble was to get big enough, and intertwined enough, that the government would guarantee your losses.
This, of course, makes people like Cramer smile - after all, he's "Wall Street establishment."
Make sure you smile (or is that grimace?) when he takes his position behind you, because he and his buds are not coming to pat you on the back.
But beyond the obvious personal problem I have with asking taxpayers to bail out the bad bets made with full knowledge of their stupidity, I am in fact opposed to this because of the mathematics at work.
Again I refer back to the fact that we are dangerously close to new debt generating a negative GDP return. Once that happens the game is over; you now are compelled to issue new debt to pay the interest on the old debt, and every dollar you issue causes more depression of GDP.
The BS about "bailing out" the banks and therefore "restarting credit creation" is in fact a lie.
Credit creation can't restart to any material degree because the maximum amount of serviceable debt in the system has been reached.
We are now seeing the terminal phases of this in the consumer space, as consumer credit card borrowing has gone parabolic. I've been writing on this for over a year and in the last couple of months the feared acceleration has shown up - the "blow off" that comes before the "blow up" - which is now inevitable.
Moving that debt from one place (consumer, business and bank balance sheets) to another (the Treasury and Fed) does not change the outcome, and it is not possible to "grow" our way out of this because we have been creating false GDP "growth" through credit issuance, not production of goods and services.
We cannot grow incomes as "global wage arbitrage" has offshored too many high-paying jobs, never mind that radically boosting wages would produce the dreaded wage/price inflationary spiral that Bernanke (and everyone else) remembers from the 1970s.
There is only one way out of this box that does not pass through destruction of our economic, monetary and potentially our political system, and that is for the bad debt in the system to be forced into the open and defaulted, accepting that this will produce a lot of bankruptcies in the process.
Bankruptcy is in fact a cleansing mechanism in that it removes debt from the system and thereby reduces overall systemic leverage. While it is painful for the organization or individual who goes through it, and the knock-on effects frequently produce even more pain, it is the only way to eliminate excessive debt when one can no longer pay it down through growth.
The sooner we recognize this threat the less pain we take in total (not in the short term) extricating ourselves from this mess.
If we wait too long there is no extrication possible; we are then compelled to strike the singularity of a monetary reset, where the monetary system of the United States fails.
That event has a near-certainty of producing a political failure in the nation at or near the same time.
History tells us that nations caught in this mess, if they pass the event horizon of monetary failure and are representative governments, never escape without passing through a totalitarian regime.
The Roman Empire is the first written example for which we have solid evidence, and from there the path continues onward and upward through Weimar Germany post-WWI, which underwent the same monetary destruction and had its populace elect a fine gentlemen with the first name of "Adolf".
None of us want to see that outcome - at least, none of us who are sane.
I therefore issue an open challenge to Jim Cramer, CNBC and the rest of the media - let's have this debate in the open. I'll get on a plane; I'd prefer to do it face-to-face rather than on a remote, as there's real benefit to being able to have that debate across a table. We'll all bring our charts, data and brains, and "air it out" for The American People.
In the meantime if you're looking for "a bull market somewhere" I would recommend instead checking the other end of the bull.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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