If Celente is correct–and he probably is–2009 is not going to be pretty. Tax revolts sounds good to me. Those government leeches are stealing way too much from us now.

Dr. Robert Barro is an economist from Harvard and had this to say about Obama’s stimulus bill (emphasis mine):

This is probably the worst bill that has been put forward since the 1930s. I don’t know what to say. I mean it’s wasting a tremendous amount of money. It has some simplistic theory that I don’t think will work, so I don’t think the expenditure stuff is going to have the intended effect. I don’t think it will expand the economy. And the tax cutting isn’t really geared toward incentives. It’s not really geared to lowering tax rates; it’s more along the lines of throwing money at people. On both sides I think it’s garbage. So in terms of balance between the two it doesn’t really matter that much.

The article also had a nice graph to show how bad this economic crisis is compared to the 1970s and 1980s. Obviously, things aren’t as bad as they were then but, all this government spending will cause a tough recession to turn into a depression.

Now that the stimulus bill has passed and the politicians can spend money on all kinds of useless and unproductive things, we just might see a recession in line with the 70s or 80s–even the 30s.

I originally saw this article on LewRockwell.com, brought to attention by Joseph Salerno of Pace University.

Ron Paul questions Bernanke and, as usual, Bernanke answers in some convoluted way that explains nothing. He has also clearly learned nothing in his study of the Great Depression as he continues to suggest that the Fed didn’t do enough in the 1930s. Paul has the final word in the video that is exactly correct.

It has been a while since WaMu was taken over by the FDIC and sold to JP Morgan Chase for a fraction of its worth. I still have accounts with WaMu even though I despise Chase. I had switched over to Commerce Bank–now TD bank–a week prior to the FDIC take over. I was staying abreast of the news and discovered that a few bank runs on WaMu branches were happening across the country. That was a clear sign to me that things were going wrong.

WaMu is still operating as the WaMu I knew. I don’t expect it to stay this way forever. When Chase bought Bank One, it was only a matter of time before all traces of Bank One was replaced with Chase. Ironically, I did have an account with Bank One. They were certainly not as good as WaMu.

WaMu was the first bank where I opened a checking account and is the absolute standard that I hold banking to. In that sense, I am sure I am a little spoiled. I am also a college student without the hundreds of thousands or millions of dollars that need to “protected”. WaMu provided the services and friendly customer service that I have taken for granted.

As fantastic as customer service is supposed to be at TD Bank, it still doesn’t feel remotely as warm as WaMu did. It still feels like an impersonal bank. WaMu made banking a different experience. I’d say it was better.

WaMu never charged me a million random fees. Their free checking was really free. No minimums. Nothing. They had free checks for life. That is free checking. I have not since found a bank with a similar national scale that offers the same or comparable service. It just does not exist.

Once upon a time, a check from work had bounced–a risk when working with barely funded start-ups–and I incurred a ton of overdraft and non-sufficient funds fees. WaMu graciously refunded me the majority of the fees. They didn’t have to but, they did. Their newest free checking offerings includes a free overdraft/NSF recovery. It really is the thought that counts.

WaMu also employed Check 21 where checks are cleared immediately after you deposit them. TD Bank does not do that. It is a little riskier on WaMu’s part to put some trust in the newly deposited check but, that’s exceptional customer service. Sometimes you just need access to the money immediately. And I find it hard to believe that with today’s technology, we can’t instantly confirm the availability of funds in other bank accounts.

The other day, I had left my ATM card in the machine by accident. I’ve done it once before. I fault it on getting used to TD Bank’s ATMs as they have a card sliding system. Both times that I’ve left my ATM card in the machine, I was able to retrieve it at that branch. I’m sure other banks offer the same service. The difference is the attitude of the employees. The teller was exceptionally nice and retrieved my card for me when I told her I had left it in the machine the night before. It is the little things that make WaMu different.

The gift to Chase is unfortunate. Not only did the FDIC rob shareholders of WaMu but, they have effectively taken a bank that was really changing the playing field and gave it to a bank that only maintains the status quo. JP Morgan Chase is big, mean, and who really likes them? Who recommends Chase because of their phenomenal service? I’ve never heard it. Everyone knows Chase because they are so big and “stable”. Their service is sub-par at best.

No one can know if WaMu’s business model was viable in the long run. It is also unknown whether WaMu would have been in the same financial condition without the Federal Reserve induced boom and bust cycle. It is entirely possible that WaMu would have made the same bad choices without the government forcing it down the their throats but, it would have been a lot less likely.

What would have never happened would have been a sale of WaMu for $2 billion to Chase. WaMu had $143 billion in deposits. That alone justifies a bigger price tag than $2 billion. The government is creating monopolies as it has all throughout history.

WaMu was a casualty of the economic cycles that the government creates. I will probably miss them once Chase finishes the destruction of WaMu. I just hope that once Chase lays off a rather large number of former WaMu employees that a new bank with similar beliefs as WaMu will surface. There is at least a single demand for such a bank.

The politicians in DC have been telling us that we need to act now in order to stabilize the economy. They passed a massive bailout bill against the voice of the people last week in order to do just that. Afterall, the bill was named the Emergency Economic Stabilization Act of 2008. In predictable fashion, markets around the world closed lower in the days and even minutes after the bailout was passed. Could it be that the politicians have misdiagnosed the problem and is now proceeding with the wrong treatment?

On the popular TV show House, patients with mysterious illnesses are treated by Dr. House. He and his team of doctors try to find out what is wrong with the patient in order to cure them. The kicker is that it is never simple to diagnose the problem. In fact, that point of the show is that it takes a doctor who thinks completely outside the box to solve these medical mysteries.

Fortunately, our economic crisis is not as mystifying as the patients on House. The mainstream economic school of thought is just not capable of understanding the current state of the economy. The politicians believe we can just throw more money at the problem and it will be fixed. They happen to be wrong.

In order to understand what we should do to fix the problem, we first must understand how we got here. Just a month ago, people who supposedly understood the economy was telling us that the fundamentals were strong. Clearly, they were not. In fact, they must have been held together by duct tape considering how quickly it has fallen apart.

This economic crisis, like those before it, was created during the economic boom. No one complains when the economy is booming and everyone feels richer. The free market is touted as the greatest thing in the world during these times. The free market might be the greatest thing in the world but, the it didn’t create the boom. The government created the boom. The boom created the bust. So, the government is responsible for the economic calamity we now find ourselves.

Every piece of legislation that is signed into law has an affect on market forces and therefore direct capital to places it otherwise would not go. The enforcement of the Community Reinvestment Act and the use of Fannie Mae and Freddie Mac to buy up mortgages directed massive amounts of capital into real estate. This alone didn’t create the sinking Titanic that we are on today but, it did contribute heavily.

The artificial lowering of interest rates flooded the economy with dollars. Due to legislation to make sure that every American could own a home, these extra dollars flocked to houses. This caused the price of houses to skyrocket from 1995 to 2005. The artificial lowering of interest rates was possible because we have a central banking system known as the Federal Reserve.

It is said that the Federal Reserve’s purpose is to create greater financial stability. In reality, it has only created more distortion in the economy.

With the government affecting the flow of capital and making it profitable to give mortgages to practically everyone, banks did just that and gave mortgages to everyone. They created all kinds of creative financing to put more people into homes because they were easily able to turn around and sell those mortgages to Fannie and Freddie. If the only problem was with mortgages given to people who would normally not qualify, this would be a smaller problem.

As housing prices went up, almost everyone refinanced and borrowed money against their homes believing that home values could only go up. Once the value of houses reversed course, many people found that they couldn’t actually afford their larger mortgage payment and with negative equity in their homes, they couldn’t borrow the money to make the payments–that is a bad idea anyway.

With the availability of loans against homes diminished, people could no longer live beyond their means. Spending had to stop. The price of houses had to come down as homeowners started to miss payments and foreclosures spread across the country. Without the same level of spending to drive the economy, jobs were also lost.

This economic turmoil will continue until all the bad debt is liquidated and there is once again sufficient capital to be invested productively. The only way for there to be sufficient capital is for people to save. Government cannot create money to spur the economy. What it does is create a bubble that leads to the economic destruction we are witnessing today.

In order for bad debt to be liquidated, companies will have to go bankrupt and cease to exist as we know them. People will lose jobs and homes and maybe more but, it has to happen. Trying to rebuild on a shaky foundation only means the crash will come later and be more painful.

The only way for people to save is to live beneath their means. We are going to once again learn to save our money for the things we want. We won’t be able to borrow money to buy all our trinkets and widgets. To put it in bleaker terms, our standard of living will go down. It won’t be fun but, it is the fastest way out of the crater we are in.

Wall Street is sinking into the abyss because of these economic conditions and it has to. The bailout bill that was passed last week doesn’t change the fact that banks are not willing to lend money like they used to. It is not as if banks aren’t lending money at all. They have to lend money to make money. The only difference between now and the last decade is that you need to be well qualified to get a loan–not many are qualified today.

Throwing money at this problem will not suddenly make the banks change their minds and lend money frivolously again and they shouldn’t unless we want this problem to get even worse. The unfortunate part of all this government intervention is that there is a consequence to printing so much money. They aren’t taxing us for the money. They are going to print it and that is worse than taxing us because we don’t see it. It is basically robbery.

I call the government “they” for a reason. The people are not the government and the government are not the people. The people should be the government but, this is not a perfect world. We didn’t want the bailout bill passed, it gets shot down and on that day the people won. The politicians couldn’t let that happen so it gets passed anyway and the people ultimately lose.

This drunken sailor creation of money is likely to cause runaway inflation like we’ve never seen before in the United States. We won’t see the inflation immediately since the banks are still not lending money to every person who walks through their doors. However, the banks will find themselves with a lot of reserves once they are no longer in fear of a run. When that happens they will begin to lend money because that is how they make money and inflation will skyrocket.

Next to hyperinflation, our current economic woes are going to look like a walk in the park. Every dollar that the government is creating to “fix” this economy is going to hurt us that much more. The price of necessities are going to go through the roof. If we think food and gas are expensive now, just wait until the government is finished saving the economy.

Washington DC has misdiagnosed the problem. They think the problem is that banks are not lending money. That is not the problem. The problem is that DC created the bubble by flooding the economy with too much money. Their solution to fix the problem is to flood the economy with more money. While that might make some sense if the problem was what they say, it makes no sense knowing what the problem really is. If too much money caused the problem, the solution is not more money.

Deregulation is also a popular topic in DC. The problem is not deregulation of the economy. The problem is too much regulation of the economy. Regulation of the markets is any form of government intervention. Just because the government is attempting to do “good” with bills like the Community Reinvestment Act, doesn’t make it non-regulatory. Those bills regulate the flow of capital–that is the definition of regulation. Because this problem was created by government intervention, more of it is not going to solve the problem.

The politicians are administering the wrong treatment to the economic crisis. If they don’t stop, things are going to get much worse before they get better. The way to cure cancer is to remove it from the body. In this economy, the government is cancer and we need to remove it.