A picture emerges, but...

... it may not be the one the administration wants to hear.

Bernanke:  "But given the significant costs and risks associated with a rapidly rising federal debt, our nation should soon put in place a credible plan for reducing deficits to sustainable levels over time," using cuts and tax simplification.  The Fed chief said the economy is stronger when taxes aren't too high and are collected in an efficient, equitable and transparent way.  "At present, a broad consensus exists that the U.S. tax code does not satisfy these criteria and is in need of reform."

Jeepers!

UPDATE 4/28:  Another version of the story:  "Bernanke said the U.S. economy could not grow its way out of the problem."

So, where's the money going?

Two investment principles that people are following with their money right now:

1. Put the money where it's safe--minimize risk;
2. Put the money where the government has little or no access to it--taxes WILL rise.

So, it's no wonder the markets continue to slalom. Folks are stuffing their mattresses.

Of course, the nasty side of that will come when inflation hits. Then, the mattress-stuffers will be caught between the proverbial rock and the hard place unless they've stumbled into assets that appreciate pretty dynamically. But now, and as long as the current president and congress have sway, apparently no risk is a good risk.

Shame and more shame.

Shame on these people--specifically, the president and the congress. The stimulus the country needs should address priorities, not all this senseless growth of government spending. Here are the clear priorities: provide relief in the housing mortgage sector--people genuinely need some intervention here; get the banks lending again--otherwise, what was the original TARP for?; provide people with quick cash through a fast tax rebate and/or substantial tax cuts. These actions would be LESS COSTLY and far more effective than this "generational theft," as several parties have called it. The nation will be limping from this ineffective indebtedness for many years. Actually, if all they did was to help with the problematic mortgages--which were encouraged by the government in the first place--the neediest and hardest-hit would benefit directly, and the economy would start itself in short order. I hate to call people fools, but this train is heading for the cliff.

A Saturday wrap-up on the economic earthquake

The heads of the EU's four biggest economies - Britain, France, Germany and Italy - held a first crisis meeting last week but were split over the need for a common plan.

It doesn't appear that unified solutions are going to happen quickly, in spite of the hopes of our president and our nation. The Europeans, when it comes down to the real issues--like their money and their long-entrenched banking institutions, won't be a union. They agree on ideology, however:

In the financial district of London, the pubs of Dublin, and on the campuses of Holland, people are citing reckless lending in the US mortgage market, unbridled American consumption, and a lack of government oversight for the financial meltdown that has engulfed Europe. Many dismiss the US bailout as an unwise and hypocritical move that rewards the greedy bankers who caused the crisis and breaches the ideals of the country that pioneered market-driven capitalism.

And it isn't like the finance ministers who met today are doing nothing. Fox News reports this morning that there are some agreements in the works. The "fiddling and diddling," to quote the great Johnny Most, may not be bad thing. The US Fed's current solutions may be starting to kick into gear, as Friday's stock market performance appeared to exemplify. It threatened early in the day to blow downward through the 8000 mark, and did, but pulled up well above the 7000. It wobbled, teetered, steadied itself, and the buyers stepped in at the very end of the day. The pattern was a reverse image of the previous days of the week. One day does not a bottom make for the economy, but I think the weekend will allow a breather, allow folks to reassess, allow the credit markets to absorb the impacts of the Federal rescue plan, allow some of that money to start flowing, and allow some of the stalled businesses to resume operations.

Some problems remain:

• Folks have been saying for a long time that the housing, automobile and speculative financial markets and the trading economy have been overvalued. We don't know if all of the bad trading has washed out of the system. Folks won't invest until there is some assurance about that. Buyers won't buy until there is money available and they feel some confidence about the future (see next point).
  
• There are fears of hyperinflation. There need to be some answers about the real and hidden tax impacts of the rescue spending.
• It appears there are some corrupt financial barons (I'm shocked--shocked!) Some prophylactic prosecutions are in order. (Round up the usual suspects!) This would not be an empty gesture. There needs to be a statement by the country that more is expected from those who would be allowed to manage money for all of us.
• I know that many will say that this horse is long gone from the barn, but we still have to know where to stop the market involvement and regulation. There's now a real danger of "creeping socialism." The federal government should be careful. Having acted decisively, there is now a need for circumspection, restraint, and public education. (Let's be careful out there!)
  
• Neither of the presidential candidates knows what he is talking about. They're flailing around to see what voters will respond to. Give me the person who will actually tell the truth in a reasoned way and commit to market recovery. The more of this the markets do on their own steam, the sounder any recovery will be. (I have a feeling this narrows the possibilities....)