Sunday, January 17, 2010

Adam Smith Vomits in His Grave

The President has announced a $90 billion special tax over the next 10 years on various banks. Gerald Celente has accurately called it chump change for the banks. Obama's favorite banker, Jamie Dimon, has complained that it is unfair.

In his weekly radio address, the President responded to Dimon and others who have commented negatively about the tax. He said:

Those who oppose this fee have also had the audacity to suggest that it is somehow unfair, that because these firms have already returned what they borrowed directly, their obligation is fulfilled. But this willfully ignores the fact that the entire industry benefited not only from the bailout, but from the assistance extended to AIG and homeowners, and from the many unprecedented emergency actions taken by the Federal Reserve, the FDIC and others to prevent a financial collapse. And it ignores a far greater unfairness: sticking the American taxpayer with the bill.
One has to think this is all for show. As I argued earlier, the bailout benefit to the banks has been much greater than $90 billion. When you get to the bottom line, the bankers remain huge net takers of money from the pool of collected tax money.

Curiously, President Obama acknowledges in his statement that the bailout goes far beyond the direct bailout when he mentions the bailout of AIG and other government finance activities that were conducted. Thus, he knows that the bailout was much more than $90 billion. The AIG bailout itself was $180 billion.

But the greatest audacity of it all comes in a form that few are commenting about. Specifically, this entire government operation from bailout itself to the taxing of banks to get the "money back for the taxpayers" (as though you will actually see some of it) is so far removed from a free market economic system that I have no doubt Adam Smith is vomiting in his grave.

The bailout itself broke every rule of the free market profit and loss system by bailing out the incompetent and protecting them from the ramifications of their losses.

To now tax the beneficiaries of the bailout simply creates the image in peoples mind that the government must play an important and necessary role in the economy to "set things right." And to promote the false image that the government is on your side.

It's as though a gang of thieves robs you, and the tallest and strongest of the thieves suddenly sees that you are agitated by it all and calls the robbery he participated in an outrage and robs the others of some of the loot they took from you to punish them for what they have done to you, while stuffing all the loot in his pockets.

And make no mistake, the minute you get back on your feet and have new money in your pocket , the tall strong one will be back to take more from you, and do so by proclaiming how he helped you out by robbing the other muggers in your name.

These are the twisted antics that now go on in the name of trying to protect you. It is sick.

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