As Americans this week sat down to their traditional Thanksgiving dinner, the real feast was once again being enjoyed by the Wall Street elite. Citigroup received a heaping helping of government aid from the world’s two most famous turkeys – Bailout Ben Bernanke and Handout Hank Paulson.

The US government is now guaranteeing over $300 billion worth of Citi’s loans. It is obvious what will happen next on the road to Bailoutville, USA. Next will be a literal stampede of all the other American financial turkeys looking for a similarly juicy deal from Uncle Sam. By the way, do turkeys stampede like cattle or do they simply go into full panic mode?

Every other bank from Bank of America on down will be racing toward the government trough, like the greedy animals that they are, looking for Uncle Sam to guarantee all of their “turkey” loans. Although instead of oinks, we will hear “me too”! Let us not forget also all of those companies, such as Goldman Sachs and American Express, that have turned themselves into “banks” so they can also feed at the government trough.

The cost of the bailout of the American financial system is already approaching $8 trillion. I would not be surprised to see that number climb easily tenfold. Which brings me back to the subject I have discussed in previous articles – the US Treasury market.

Right now the US Treasury market is sucking up all of the remaining American capital the way a fire sucks up all of the surrounding oxygen. Such fires always leave behind them nothing but charred ruins and destruction of all life in the area for many years to come. That is what will happen here. First, crowd in all the remaining American capital into the US bond market and then burn it up.

That capital will catch fire and burn in 2009 as Wall Street comes to the stark realization that the key foreign capital that is needed to fund the ongoing trillion dollar plus US deficits will remain in their home countries taking care of their own economic problems and not bailing out the US.

It’s simple human nature. If there were a fire and you could save either only your own family or your neighbor, whom would you save? Obviously 99.99% of people would save their own family first. Wall Street is making foolish huge bets otherwise.

BOB the TURKEY

Speaking of burning up, I ran across an item in the Financial Times that just burned me up and reinforced my distaste for the turkeys on Wall Street. In a “View from the Top” profile, the Financial Times spoke to Robert Greenhill. Mr. Greenhill is the chairman of the independent investment bank, Greenhill & Co. Inc.

Mr. Greenhill claims to strongly disagree with President-Elect Barack Obama’s more interventionist economic policies. Yet in the same breath, he calls for massive government intervention and for the Federal Reserve to buy distressed mortgages directly. What a hypocrite!

When asked directly what concerns him most about greater government involvement in the economy, Mr. Greenhill stated that the most “dangerous” thing would be the government regulating “executive compensation and bonus pools”. The greed and sense of entitlement that exudes from Mr. Greenhill is so typical of Wall Street turkeys and should enrage every American! 

Americans and Tryptophan

Sadly, many Americans don’t seem to be outraged by what is happening in Wall Street and Washington. Americans should be outraged that they, their children, and their grandchildren have been shackled with the bonds of trillions of dollars of debt which will take decades to pay off, if ever.

Yet when I speak to people about it or write an article about the situation, I get virtually no response, no sense of outrage. I also get the same reaction when I speak about America’s current move away from capitalism and towards increased control of the economy by the US government. People just simply shrug their shoulders.

It’s as if most Americans are in a constant tryptophan-induced state of sleepiness. Most Americans act as if they eat a large turkey dinner each and every day of their lives.

Apparently that is what is happening. There was recently a very interesting report from the ISI or Intercollegiate Studies Institute. For this report, the Institute gave a 33 question quiz to 2500 average Americans including college students and elected officials on basic civics.

Of the 2500 participants, nearly 1800 failed. The average score was 49. It is interesting to note that the elected officials in the study had an even lower average score – 44. And only 27 percent of elected office holders in the study could identify a right or freedom guaranteed by the First Amendment! I’m actually surprised that 27 percent could.

Here’s another item from the study that was no surprise – twice as many people knew that Paula Abdul was a judge on American Idol than knew that the words “government of the people, by the people, for the people” came from Lincoln’s Gettysburg Address.

Since my emphasis is on investing and economics, here is the clincher for me. Only 17 percent of college graduates understood the difference between free markets and centralized planning! Are they teaching anything in American schools nowadays besides how to party hearty and to always feel good about yourself?

At least now I understand why I am getting so little reaction to my rants about how the American economic system is going down the drain. Apparently most people don’t know the difference between freedom and a governmental nanny state.

If you do, please feel free to drop me a line at Oxbury Publishing. Or go back to eating turkey leftovers and enjoy a nice tryptophan-induced nap.

Regards,

Tony D’Altorio
Analyst, Oxbury Research