Alan Greenspan was perhaps the worst Fed Chairman in recent history. But he will not be held accountable for the current Great Recession. Congress and George W. Bush are also to blame for the subprime mortgage meltdown. While members of the Bush administration warned Barney Frank back in 2003 that Fannie and Freddie were going to create financial crises unless stricter mortgage lending standards were put into place, Bush failed to center his focus on the economy and instead was consumed by waging what will ultimately be a loosing war in Iraq and Afghanistan.

          Wall Street did not help either. Securitizing bad mortgages made matters worse. Wall Street always wants consumers to be confident, even if the fundamentals are not there.  They want people spending recklessly, but consumer overconfidence is what contributed to this economic failure.

          The best thing that can happen in this economy is for consumers to save because they are now broke. Obviously initially it will have a negative effect on the economy. We need a real restructuring instead of stimulus and bailouts that simply delay the pain to a time when the pain will be much worse.

          The necessary restructuring is unlikely to take place. If FDR’s New Deal of the early 30’s tells us anything, it tells us that government stimulus programs like the CCC, WPA, TVA, AAA, and others that create debt and not wealth do not work. The anointed view is that FDR saved America from an even worse economic collapse and that WWII brought us out of the depression. Despite those government programs it took until 1953 for the economy to recover, and if war were the prescription for success I guess the wars in Iraq and Afghanistan were just not big enough, to use the logic of Paul Krugman.

          Words have meaning, but when the intelligentsia uses them they do not mean what we think they mean. This past Sunday, “investing in America’s future” was what Arnold and Gov. Rendell said is necessary. What they were really saying is that since the private sector has been decimated by over-regulation, unions, and high taxes; the government now has to spend taxpayer money on infrastructure. FDR tried that and failed.

          When people are working for the government, they are not available for wealth producing jobs in the private sector.  Some infrastructure projects are beneficial, but to say that every government project is necessary is foolhardy. Infrastructure projects create debt which requires higher taxes on industries which then have to lay off workers who then take jobs working on taxpayer supported make-work projects. The net result is that no jobs were actually created, but the government is touted by the intellectuals as the savior of mankind.

          What happens when the infrastructure jobs end and the private sector can not absorb the workers? The argument that putting people to work in government jobs will allow the private sector to grow due to greater consumer spending is a myth created by the anointed class of intellectuals who will never be held accountable for their failures since they use “verbal virtuosity” to explain away their failures, to use a term coined by Professor Thomas Sowell.

          So much for investing in dollar denominated stocks, it’s a bad idea.