Saturday, December 13th, 2008 | Author:

Reuters tells us of a report that while a few large, vocal businesses are struggling, there really is no credit crisis.

“It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson’s remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead,” said the report.

*Overall U.S. bank lending is at its highest level ever and has grown during the current financial crisies.

*U.S. commercial bank lending is at record highs and growing particularly fast since May 2007.

*Corporate bond issuance has declined but increased commercial lending has compensated for this.

You can go read the rest of the story for yourself, but have we, once again, been hoodwinked, this time to the tune of several trillion in bailout dollars?

Thinking about this today inspired a little story. I’m sure the parallel is not perfect, but it’s a lot closer than Bernanke and Paulsen’s version.

The Falling Snow

Winter had arrived in upstate New York. Snow, sleet, and freezing rain had covered every unprotected surface, taking down trees and knocking out power to over 150,000 people. In the wake of the storm, bitterly cold air had filtered in, shrinking the mercury to single digits.

The next morning on his way to the barn, farmer Joe stopped to take a look at the roof. The snow had begun to slide off the steep pitch, and then frozen in place when the temperatures dropped.

As he was standing there, his neighbor Bob joined him, and said, “That snow’s gonna fall soon. Best not be standing under it when it does.”

Joe replied, “Nah. It won’t come down ’til it warms up. That’s a solid sheet of ice.”

Some other neighbors, who were prone to gambling, joined in. “I betcha five bucks it doesn’t come down today.”

“You’re on. Once the sun gets over to this side, that whole thing’ll be a pile on the ground.”

As the crowd grew, so did the bets, ’til soon trucks, heifers, and even houses had been placed on the line.

Another neighbor named Henry, who was originally from New York City, joined the conversation. “That’s a dangerous situation. We need to do something about it.”

His good friend Ben, who thinks he’s an expert about everything because he works for the government, said, “Well, of course we do. If that snow falls, all these people who have invested in this situation will lose everything. The whole economy will crumble. What we need to do is put more snow up on the bare spot to hold it in place.”

Now Joe, who owned that roof, said to Ben, “Now wait just a minute. That’s my roof and you’re not putting more snow on it.”

“But the local economy depends on it, Joe. We have an obligation to all these fine folks to keep that snow up there.”

“You idiot! The snow is supposed to fall off! That’s why the roof is pitched!”

“Joe, for the good of everyone, I’m calling in the engineers right now, so we can determine the best way to keep the snow from falling.”

“Listen to me, Ben! If you keep the snow from falling, and then add more snow, the whole barn will collapse.”

“Just trust me, Joe. I’m from the government, and I’m here to help.”

Category: bailout, economics, nature
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2 Responses
  1. Ogre says:

    Sadly, that story sounds like a real, true story.

    As for the current “crisis,” did you notice that the auto manufacturers didn’t have any problems until the government started giving away money? I strongly suggest that the reason many businesses, the auto industry in particular, are only in “trouble” because they want free cash!

  2. akaGaGa says:

    Of course they didn’t, Ogre. Neither did the state governments, and they’re all lining up, drooling, too.

    People don’t realize that the money has to come from somewhere. Even when it’s being printed by the Fed, we’ll still pay in coming inflation.