The lesson: Follow the Wall Street bankers' money and you'll make a killing, too

The difference between the Democrats and the Republicans today is like the difference between the Haiti earthquake and the Chile earthquake. It is one of degree and intelligent planning

Note: It's always good to hear from Mr. Boschert of Wimberley, who has an earthy way of explaining cosmical financial subjects.

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By Rocky Boschert
Guest Commentary

As a professional money manager, I find it amusing how the politicos like to believe the US President has a lot to do with our economy and the stock markets.

In reality, the Federal Reserve Board and their banking cronies on Wall Street (and in the Treasury Department) are the real movers and manipulators of the US economy. Let's look at the facts.

In late 2008 and throughout 2009, rather than use the zero interest rate stimulus money to make loans to small businesses and consumers to re-stimulate the economy, the five biggest US bank-brokers instead invested in the stock market. Specifically, the Wall Street banker-brokers believed it was less risky to buy very oversold and under-owned company stocks that had been pummeled by the 2008 crash than it was to loan to a US consumer riddled with foreclosures and bankruptcy. It was primarily because of the stock investing by the institutional banks that US stocks were up over 60% in 2009.

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In other words, the too-big-to-fail banks made billions of dollars again, this time from "borrowing" our tax dollars at zero interest rates to speculatively invest in stocks. This very well orchestrated "corporate welfare" dream started under George W. Bush and Henry Paulson and continued under Barrack Obama (it would have continued even under a McCain presidency; any thoughts to the contrary are simply anti-Obama nonsense).

This well-designed and recurring Wall Street-Federal Reserve Board-US Treasury money supply game is simply the way our economy keeps moving from one stock market bubble to the next.

Ironically, President Obama, being the socially liberal but compliant capitalist that he is, followed in the same footsteps as Clinton the deregulator and Bush the ultra-deregulator.

All this Tea Party rhetoric about “Obama the Socialist” is laughable when we look at the stock market in his first year.

Yet the big lie still in the public’s mind today is that there is a huge difference between the Dems and Reps when it comes to the US economy. In fact, there is some, but only in their favored sectors of the economy, i.e. their select corporate backers.

For instance, under the Bill Clinton presidency, stocks in the technology, media and banking/brokerage sectors performed best.

Under the George W. Bush presidency, companies in the defense and aerospace, energy and oil service, and natural resources-mining sectors performed best in the markets.

Now, under Obama, we are back to the banking, new media, and technology (also global commodities due to a weak US dollar) stocks making our mutual funds the most money.

It shouldn't take a rocket scientist to see the relationship between the two political parties and the stock markets. In other words, both parties are to some degree bought and owned by their favored sector lobbyists. Say hello to the 1) military-energy complex, 2) medical-industrial complex, 3) banking-government complex, 4) mining-commodities complex, 5) health insurance-pharmaceutical complex, 6) real estate-construction complex, etc. Whose turn is it to be the moniker in the next stock market bubble?
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One Anonymous responder to the article below said "Bush was part of it by letting democrats and the Fed push him around" Make no mistake. Bush was no victim of anything. He and his cronies like Darth Cheney knew exactly what they were doing and made their corporate masters tons of money off war profiteering, energy speculation, and more deregulation of whatever there was left to deregulate after Clinton.

The other main difference between the Democrats and the Republicans today is like the difference between the Haiti earthquake and the Chile earthquake. It is one of degree and intelligent planning.

Haiti had little or no codes and regulations for their infrastructure. As a result, the loss of life from a 7.0 earthquake was huge and the rebuilding costs will be enormous.

Chile, on the other hand, was hit by a much more powerful earthquake (8.8) but experienced much lower loss of life and much less structural damage due to stronger regulatory rules and codes designed to prevent a debilitating national catastrophe.

Domestically, by comparison, we just finished with eight years of a Haiti-like Bush/Republican regulatory regime and we see what has happened to our economic infrastructure. Like Haiti, it will take years to get our economy rebuilt.

Yet if Obama, the Democrats, and any sensible Republicans can re-institute a Chile-like regulatory regime in the US financial system, we will someday again see a stronger real economy – and not just a temporarily better Wall Street economy that is going up largely on smoke and mirrors economic data.

In the end, however, if we refuse to change the incestuous money hoarding relationship between the Federal Reserve Board, the US Treasury, and the too-big-to-jail banker-brokers, we are probably doomed to repeat our increasingly extreme boom and bust cycles every four years or so. And once again, it will not be the bankers that lose.