The Sun'll Come Up Tomorrow

Well, it seems that the stock market has bounced back from its 8,000-odd "floor", to around 9,300 at this moment. As Chris Farley of Saturday Night Live would say, "whoop-de freakin' do"! A couple of weeks ago anything less than 10,000 would have caused mass migrations of penitents, dressed in sackcloth and ashes and scourging each other with birch switches, doing penance and seeking forgiveness. Now it's just business as usual. Amazing how readily the unthinkable becomes thinkable -- like, "I would never wear a colostomy bag", and the next thing you know those airport security guys are checking that suspicious bulge under your coat and going, "eeewww!" And of course, we don't know for certain that that 8,000 floor is really a floor, or a flimsy piece of balsa wood ready to give way and lead to further plummeting. And I suspect one reason for this is, as I've said before, it's hard to know how to value something no one is all that interested in when the entire value is based on that degree of interest -- added to which, the "valuation" of stock is based on the dollar, which is itself starting to look like the proverbial Continental. But, having said that, I suspect that the market will, eventually, level out at some point, thanks mainly to the government effectively nationalizing the entire financial structure of the country (to which the Europeans are probably saying, "It's about time they got with it"). But that brings us to the next act of the current drama, which is: How precisely are the Treasury and the Federal Reserve going to pay for all of this nationalization? Last time I checked, it wasn't in the budget. And to suddenly raise taxes enough to do the job? Can you say "revolution"? Well then, how about another loan from China? So solly, roan officer not available today.

The answer, of course, is they're going to pay for it by printing money -- lots of it. The "money supply" will gradually be increased by whatever is necessary to pay for all this stuff (and this is even before Obama takes office, note), and what will happen then is the dollar will become the next piece of road kill on the world financial scene. So if you thought you were smart getting the hell out of the stock market before the crash, you're going to have to think some more -- and soon -- about what to do with that pile of cash on the kitchen table that you're guarding with a shotgun. You're going to have to, in other words, get rid of it. So what to do? Put it back into stocks? Ironically, at current levels, that might not be the worst idea. One thing is sure -- if you put it in an "instrument" that basically maintains it as cash, and pays some piddling amount of interest, you're going to wind up with a bunch of wallpaper... or fireplace kindling. In fact, as the dollar starts its own slide as a result of the bailout, we might even see an apparent improvement in the market -- but that will simply be the effect of inflation, i.e. stocks will go up about as fast as everything else simply because the dollar is worth progressively less.

So rather than a simple roller-coaster ride, like we've been having for the past few weeks, we're in for more of a double loop-de-loop, whereby whatever measures are taken to stabilize the financial sector will inevitably have a deleterious effect on the currency, which, in turn, means that whatever people have left in their portfolios is going to start taking a second major hit before long. Of course, the dollar has never been as volatile as the stock market. Even with a steadily increasing supply, the corresponding demand, of late, has been either level or steadily decreasing. But what happens when all of these foreign investors and currency speculators decide it's time to "dump the dollar"? Is it then going to start looking awfully like many of the major stocks?

Of course, it's also bitterly amusing that our socialist friends in Europe, who are not fighting two major wars and/or preparing for a few more to boot... who were not directly involved in the subprime mortgage scam... and for whom "race" is not the be-all and end-all of politics... they have been impacted by this situation as well. So no one is immune, as it turns out. What I suspect is that they, on a less blatant level than China, had decided that the U.S. was easy pickings because of our foolish policy of deregulation while still backing up anyone, or anything, that threatened to go under -- sort of like requiring no insurance but still picking up the tab for things like hurricane damage and... oops, we do this too; never mind. In any case, they, just like our home-grown wheelers and dealers, saw a golden opportunity to make some fast money at the expense of the bovine American middle class, and they took it, like any smart person would. So they became much more "exposed" than they had any business being, mainly because of greed. It's as if a bunch of natives started carving up a beached whale and consuming the meat, then discovered it was badly tainted. I suppose some of the smart ones got out before the deluge, but the rest clearly got caught with their culottes down. In any case, some of the bit players are getting what they deserve; I suspect the high rollers got free and clear a while back, as they always seem to do.

But even this may not be as gross an insult to the world economy as it appears to be. I mean, what do people do when they have a lot of money -- ill-gotten or otherwise? Do they keep it in a floor safe and get it out every night like Ebenezer Scrooge, cackling gleefully while they pour the silver and gold from hand to hand? Maybe they have a money bin, like Uncle Scrooge, complete with diving board. No -- what they do is invest it, and also they buy things -- "stuff" -- goods and services. And who ultimately provides these goods and services? The average schmo, of course -- people like you and me. This is what's called "trickle-down economics", and I don't know why it shouldn't work just as well with stolen money as with money that's rightfully earned. Now, granted, they could also invest overseas or spend most of their money offshore. But I suspect that, by and large, they distribute it right here on the home front. And frankly, they probably keep much better track of it than the government does our tax money... and they probably spend it on much more useful and attractive things than the government does. In other words, if we're going to be poor anyway, we're better off in a country where a few people are rich than in a country where only the government is rich. Even a shoe repairman in Monaco probably has a pretty decent life, whereas how high on the totem pole did you have to be to avoid lines at the bread store in Soviet Russia? What I'm saying is, there are worse things than to live with people who know not only how to steal, but how to spend. Why, right here in Pittsburgh there are many high-flying executives -- not mentioning names -- who are the beneficiaries of "corporate welfare" of all sorts. And yes, they have very large "manor homes" in Fox Chapel, and yachts, and Lear jets, and all the rest of it. But, doggone it, they also donate to the symphony and to the museums, etc. Think of them as government agencies and you'll feel a lot better: They take, but they also give back -- and in most cases with more efficiency, taste, and judgment than any agency.

And as someone said, I'd rather be poor in a rich country than rich in a poor country.