Time For America to Get Back to Financial Basics

Have you been watching the financial markets these past several weeks? Scary, isn’t it? I have always had an interest in watching the big boys play the game, although I have had little success trying to play the game myself. The rules are complicated. In the old days, there were stocks and bonds. Today, there are CDI’s (collateralized debt instruments) and CDS’s (Credit Default Swaps) and naked short selling and derivatives…the list goes on and on.

I have come to the conclusion that unless you were a finance major in college, you won’t have clue as to how things work. That is probably part of the problem. We expect our politicians to understand these things, when our politicians can’t figure out how to pave a road let alone run the world economy.

That being said, all of this junk paper garbage aside, I have come to the conclusion that the country has lost its way from the fundamentals that made us an economic powerhouse. Unless we find our way back, it will be long, hard road for us in the future.

How do you measure the wealth of a nation? It’s by how many refrigerators it makes, not by how many hamburgers it flips. And you know what? We don’t make a whole lot of refrigerators here anymore. I hear the continual mantra about the change from a manufacturing economy to a service economy. Horse manure!!! Service is nice, but to base an entire economy on it is to build on nothing but paper and air, because that is all that is there. It is time to revitalize our manufacturing base, so products are made in the United States by Americans, for Americans. If you make nothing, what you got is nothing.

Our banking industry has to go back to basics. Our commercial banks should only loan money to people who are credit worthy and based on realistic appraisals of real estate or legitimate pro-forma business plans. Limit the resale of the loans. Lending banks should carry their own paper. Paperwork should be made universal, and the banks could form a consortium to handle the back of the house maintenance for cost savings. But if First Place Bank makes a bad loan, First Place Bank should be responsible; not some unsuspecting bond holder.

After the Great Depression, there was a reason that commercial banking and investment banking were separated. But that was deregulated years ago, and since then there has been an amalgam of integrated banks offering total banking services. THIS IS A MISTAKE. The result of the market turmoil over the past few months is the so-called “universal” banks. In other words, Bank of America absorbed Merrill Lynch, and will use your deposits to back Merrill’s investment bank activities. Wachovia will merge with Morgan Stanley. Do you want your deposits backing some of this goofy paper these investment banks issue or deal? How stupid is that? Separate them out, and build the wall real high.

Finally, here is the most important of the bunch. Our “balance of trade” should be in balance. While people are quick to point to Wal-Mart as the villain, most of our trade imbalance comes from purchasing our energy needs overseas. It is time to dump the environmental whack jobs and begin producing energy here at home. Energy imports are the single biggest drain on our economy. T. Boone Pickens and his energy independence initiative and General Motors with its Chevy Volt are showing us the way. Do what they say and support what they do, and America will right most of its problem in within the next 5 years.

This isn’t complicated stuff, folks. This is just common sense. We should demand nothing less from our political candidates and government officials.