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Ben Cerruti
Barack Obama Is Either An Economic Ignoramus Or a Devious Marxist
July 28, 2009

Recently Barack Obama said "Wall Street took unnecessary excessive risks and almost our entire economy into depression". It is unfortunate that he knows so little about economics and the fact that what happened on Wall Street was the effect rather than the cause of the economic tsunami. In fact, if not ignorant he certainly is disingenuous since the Wall Street to which he is referring happens to be the entity that markets the debt issued by the Treasury. Firms like Goldman-Sachs are in essence an arm of the Treasury. The fox in the chicken coop.

In regard to the economic crisis that occurred on Wall Street, its cause was initiated when the Fed placed an excessive amount of money into the economy to address the recession that started just prior to the George W. Bush presidency and extended to ease the economic blow of 9/11. This inordinate amount of money deposited into our banking system had to be loaned out since that is how banks make money. The ability to easily sell the loans removed the liability of foreclosure and the result was the accelerated development of creative loans to meet the demand.

The increased demand caused home prices to increase markedly attracting speculators. The increased need for buyers of these loans was met by Wall Street's investment bankers. They created bonds that were backed by a bundled package of a variety of mortgage types and initially priced by a complicated mathematical formula. Called Mortgage Backed Securities (MBS) they became considered as highly desirable investment vehicles and were sold worldwide.

Meanwhile, attempting to counteract what was occurring, the Fed started to reduce the money supply. This increased the Federal Funds Rate multiple times but was unable to curb the excesses that had been created and the housing price bubble finally burst. The collapse of housing prices also resulted in the collapse of the market for MBS. Their value could no longer be adequately determined by the market or by the original pricing mechanism due to this complexity of this security. Thus Wall Street investment banking firms could no longer provide liquidity for these securities and faced imminent bankruptcy.

The Federal Government stepped in to adroitly bail the leading investment banking firm Goldman Sachs out, not only by loaning them billions but by bailing out AIG who owed them $20 billion. Of course then Secretary of the Treasury Henry Paulson, who was a previous President of Goldman Sachs, was not at all an influence in this happening. If you believe this I have a bridge to sell you.

You might also be interested in the fact that when Paulson became Treasury Secretary he was allowed to avoid Capital Gains Tax on some $200 Million worth of Goldman Sachs stock he sold. By the way Goldman Sachs was also allowed to become a full fledge bank and thus to be able to borrow from the Fed discount window at a rate of between 0 and 0.25%. Fractional reserve rules allowed them to loan up to 10 times this amount out at much higher interest rates. No wonder their earnings have gone through the roof.

Barack Obama knows that Goldman Sachs and their ilk are essential accomplices in the management of federal debt. It is unfortunate but true that the Fed over many decades has aided and abetted the fiscal dalliances of the legislative and executive branches of our government by trying to micro-manage the money supply. This has allowed Wall Street firms like Goldman Sachs to become too necessary to fail. Barack Obama is now criticizing that in which he is a willing and contributing participant.

In my view, our President is either ignorant or disingenuous or both. In any event he appears to me to be a very good prevaricator. It stands to reason that our economic future cannot be based on false premises. It is obvious to me that Barack Obama believes like Karl Marx that "the end justifies the means". He is on the road to Socialism/Marxism regardless of the economic consequence.

About Ben Cerruti
Now a senior citizen, Ben Cerruti has been involved in espousing his views in writing for the last 20 plus years. He has been published numerous times in various San Francisco Bay area newspapers and has been actively involved in taking positions on ballot measures to the point of writing the arguments and rebuttals and appearing on television to state his position. He has had extensive correspondence with Milton Friedman, renowned economist and Nobel Laureate that provided him with intimate knowledge of the functions of the Federal Reserve System. He carries with him a lifetime of experience in business, marketing, sales and finance. He maintains a website at: ARationalAdvocate.com