New Congress Must Act Quickly to Prevent Cascading Financial Meltdown

Sure, keep trusting those “experts”

I am not a financial expert nor am I an economist – but considering they all have missed virtually every significant financial event from the dotcom bubble to the telecom bubble and the housing bubble let’s just say not being an economist or financial expert probably is a distinct advantage.

Having said this, I would like to discuss a few issues which need to be out in the open and discussed before the new Congress begins.

Bank runs are bad

Banks do not keep all of their assets in cash meaning if the majority of a bank’s customers decide to withdraw all of their money at the same time, the bank collapses. Think about it – they loan much of the money they have to others and don’t have access to it all. When one bank collapses there is a chance other investors will get spooked and create a cascade of bank failures. When not stopped, you have the potential for another Great Depression.

Bank runs are currently stoppable because governments can stop them

To date, bank runs have been stopped because governments around the world have been able to stop them by assuming the bad loans the banks have made.

Soon, global governments may not be able to stop the bank runs
With all the debt global governments have amassed, there is a possibility at some point that investors will start a global bank run meaning county after country will see their banks collapse because the confidence in the ability of a country to pay back its debt has plummeted.

Ireland may kick off a worldwide panic

If you follow financial news you may know much of Europe is in trouble because in general they work less hours than they should and produce far less than they need to in order to sustain the lifestyle they live. Moreover, we all know a typical worker in China could work 50% longer hours in far worse conditions for a small fraction of the wages seen in Europe and elsewhere such as the US. How can this be sustainable? It obviously can’t. To make matters worse, retired Europeans and many Americans enjoy pensions which are not sustainable and financially suicidal. For sure, this situation is a recipe for bankruptcy at the country/state/federal level. That is the best case – global riots are the worst case.

For more, please see the excellent article from Colin Barr about how 2011 could be the year of the bank run.

Please stop the entitlements and other useless spending

All entitlements and government spending needs to be slashed in the US. Many of our newly elected politicians were sent to represent the American people who believe in being fiscally conservative in order to allow our children to have the same or similar opportunities that we have had in the US.

The US needs to be a safe haven and not part of a global financial meltdown (again)

Watching a cascading financial meltdown due in large part to progressive Republicans and Democrats irresponsibly raiding the US treasury is something we will no longer tolerate.

And frankly, the RINOs (Republicans in Name Only), liberals, progressives and Democrats who believe we need to tax and spend our way out of every problem better understand those days are over.

The American public was woken up and is watching Europe very closely. Virtually every fundamental transformation taking place here in the US which is changing us into a socialist/statist political system needs to be undone and we need to go back to our roots as a conservative democratic republic with limited federal powers and far greater rights at the local level.
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