Oh Goody, another Great Depression!

Unless you are living under a rock, you might have noticed that the United States is on the verge of another Great Depression. Over the last year, something like 15-20% of the United States' cash has literally disappeared.

In addition to taking over Fannie Mae & Freddie Mac, the Federal Government has now purchased an 80% stake in AIG, the largest insurance company in America.

What I found hilarious about the AIG bailout is how completely out of touch with reality some people in this country are about the financial markets. A group of Republican Congressmen protested the bailout of AIG yesterday, arguing it was unfair to place the burden on the taxpayers. This kind of argument is cute for a college classroom setting, but in reality if AIG were to collapse, you could basically kiss goodbye the American economy. AIG is in the business of bond insurance, something called credit-default swaps, where essentially AIG guarantees the bonds issued to retail banks. If AIG were to declare bankruptcy, the bond ratings of countless retail banks across America would be reduced to junk status, resulting in hundreds if not thousands of bank failures. Not to mention that AIG is also a major retail insurance provider, meaning that if AIG collapsed, state governments would be on the hook for the insurance policies of AIG's policy holders across the country. Most states probably don't have enough money for that, so they would have to borrow the cash from the Feds.

And now, to top it all off, the SEC announced today that it is implementing tough regulations on something called Naked Short Selling. Basically, when you exchange securities on the open market, you want to reach an equilibrium of buyers & sellers. In order to balance this, some people 'short' stocks, meaning they borrow a stock from a broker at a set price, betting the share price will decline. When it does, they buy the share back on the open market, and exchange shares with the broker, keeping the difference between the higher and lower share price. Naturally, as the markets crumble, short positions are increasing, more people are shorting stocks. In its infinite wisdom, the Bush Administration's SEC announced today they are implementing a 3 day time limit for Naked Shorting, meaning the complete transaction must take place within three days. The SEC is also requiring hedge funds to disclose their short positions to the Feds.

This is sad and pathetic for a few reasons. For starters, the SEC is basically trying to sell fire insurance to a man who is currently leaping from the 10th story window of a burning building. Does the phrase too little - too late mean anything to the Bush Administration? Three years ago Jim Cramer made the statement that the SEC under the Bush Administration had basically turned into a mergers & acquisitions firm, because they no longer enforced enough meaningful regulation of Wall Street. The idea that the SEC is now getting religion on the topic of market regulation, literally as Rome is burning, is such a pathetic attempt at mea culpa, I don't even know what to think.

Even more disheartening was hearing John McCain's response to the meltdown. For starters, on Monday morning McCain actually said the 'fundamentals' of our economy are strong. Within a few hours his advisers had apparently told him the sky was falling, and he changed his tune. But even now, on the stump when McCain tries to address the issue, his big idea is to have a '9-11 style commission to study this crisis.' Are you kidding me? We know why this crisis happened, that isn't the problem! The last this this country needs is a freaking Federal Commission to sit in some dusty office in Washington and study the minutia of what led to the new Recession! The complete and utter schizophrenia in McCain's approach to this mess really has me worried.

Under the Bush Administration's watch we have had both the highest spending government relative to GDP in the history of America, and the largest Federal government takeover of American business in the history of America. Every day that goes by with me being forced to listen to John McCain talk about 'shaking up Washington' without enumerating a SINGLE economic policy difference between himself and Bush Administration, I feel like pulling my hair out.

Anyways, the next time geriatric McCain tries to spout his economic nonsense on the stump, consider the graph at the top of this post, put together by the Heritage Foundation (conservative think-tank). Notice anything about the graph? You should... this is to remind you that the next time McCain or Palin or any other Republican hack tries to scare you into thinking that Democrats will increase spending and decrease revenue, just remember that they are LYING!