March 23, 2020

A letter to my elected officials

Senators & Congressman,

“When, in the course of human events, it becomes necessary for one people to dissolve the political bonds which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation…That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.”

These are the words and just some of the wisdom from our Founding Fathers that they embedded into our Declaration of Independence. Hopefully, you recognized the above passages. More importantly, I hope that you understand their meaning and their place in the context of history. I say this, because we are witnessing an historic global phenomenon – the pandemic of COVID19, financial and economic collapse, and attempts by central banks and federal governments to expand their ever-increasing reach for power.

I have written to you in the past, as well as to The White House, warning of the economic and financial stresses that lie ahead and that which we are in the midst of. These warnings were written well before the onset of COVID19 and were largely ignored. However, I am now gravely concerned that this pandemic will be used as a convenient excuse among politicians and central bankers to justify actions, which are unjustifiable. While COVID19 may be of serious concern, it is not the cause of the economic and financial hardship that is surely to ensue. Rather, it has been the generational policies that have been adopted and implemented by our government, the Federal Reserve, and those of other countries the world over. Outrageous and inexcusable national deficits and debts occurred well before the onset of the pandemic. Trillions of dollars’ worth of unfunded liabilities and broken promises with respect to pensions, occurred well before the onset of the pandemic. Cheap and easy money and credit from financial institutions and central banks occurred well before the onset of the pandemic. Seemingly endless wars that have contributed greatly to our financial and societal ruin occurred well before the onset of the pandemic. A merger between some of the largest technology firms and our national security and defense apparatus, which monitors, and tracks US citizens, and infringes upon our Constitutional rights, occurred well before the onset of the pandemic. Deteriorating infrastructure, from roads, bridges, levees, dams, etc…have been in disrepair well before the onset of the pandemic. Over-leveraged corporations, drunk on their unquenchable thirst for easy credit has led to a record amount of corporate debt and at levels near 50% of GDP, occurred well before the onset of the pandemic. These same corporations then used this easy credit in addition to their operational cashflows to purchase significant quantities of their outstanding shares – share buybacks. This form of financial engineering served the purpose of artificially increasing their share price by making their earnings per share look better than it otherwise would have, had they not engaged in aggressive share buyback programs. As a result, many executives of these companies were paid handsomely due to the “great” performance in share price. All of this occurred well before the onset of the pandemic. And in addition, their “impressive” share price gains have been completely wiped out in a matter of weeks.

Now, in light of the pandemic, many of these various companies that  squandered their easy credit, their cashflows, and even the reputation(s) of their respective companies, now come on bended knee to ask Washington, meaning the US taxpayer, to bail them out. The total sum of which is not likely to be known for some time. However, what is known is that our government, including the President of the United States, appears ready and willing to bailout one industry after the next. The President recently noted that the current situation is not the fault of the airlines – one of the many industries now in distress and seeking aid. While true, that the pandemic is not the fault of the airlines, their management or lack thereof of the cashflows and operational plans is their fault and responsibility. Had they not squandered their cashflows and debt on financial engineering then perhaps they would have the cash on hand to sustain themselves during these uncertain times. Asking the taxpayers to bail them out is ridiculous on its face and should not even be considered. When will these bailouts end? Boeing is lining up for $60 billion and I suggest you investigate their share buyback program as well. The cruise line industry in lining up. The hotel industry is surely to make the list. As is the restaurant and bar industry, among others. What about the energy sector? We also currently find ourselves in the midst of an oil price war. Well take a look at the indebtedness of our energy companies, many of which are rated junk, and ask yourself how long they can sustain themselves with their debt loads, operational costs, and commodity prices at multi-decade lows. Their indebtedness also occurred well before the onset of the pandemic.

Expand this further to the consumer/household balance sheet and what are we witnessing. We are seeing delinquencies on auto loans that are surpassing those during the Great Financial Crisis (GFC). Survey after survey indicates that some 40% of the country could not come up with $400 in the event of an emergency. Furthermore, and in agreement with the previous sentence, a significant portion of the population lives paycheck to paycheck and requires the use of credit cards to make ends meet. And despite record low interest rates, once again, the rates charged on credit cards stand at record highs and are more akin to loan sharks as opposed to some kind of reputable financial company. All of this too occurred well before the onset of the pandemic.

In addition, look at the disgrace and mismanagement of federal taxpayer dollars. In the midst of the longest expansion in business cycle history in the United States, somehow, our genius representatives thought it prudent to enact a monumental tax cut that went mainly to the benefit of corporations and this is indicated by the low amount of corporate taxes collected – which when at these levels, typically indicates the country is in or nearing recession. Now tax cuts are fine, granted that the other side of the ledger, meaning spending, is also cut. This did not happen, and as such, we now face trillion-dollar deficits. During a time, when we are told by our President and many others in our government and business communities, that this is the “greatest economy of all time.” Which is laughable and completely not true. A nation does not incur trillion-dollar deficits in “booming” times. Nor would a President ask for emergency monetary policies such as quantitative easing, lower interest rates, and even negative interest rates, which would surely decimate the banking and financial sector(s). Simply look to Japan and Europe as a case study. All this nonsense occurred well before the onset of the pandemic. And now, in the environment in which we find ourselves, likely headed into recession, if not already in one, perhaps even a depression, and our deficit is going to explode. How is this to be paid for? There will not be enough growth, especially during a recession/depression to pay off these debts. Well if history is any guide, it will be done through inflation and hyperinflation. Ensuring the destruction of capital. Guaranteeing the loss of savings. And destroying any salvageable reputation the United States of America has left. In short order, we will have gone from a Constitutional Republic to a banana republic. And all of this is likely to occur without so much an outcry, let alone a whimper from our representatives. Pelosi, Schumer, McConnell, and Trump are nowhere near Washington, Jefferson, Adams, and Franklin.

Furthermore, and getting to the real culprit of this insanity rests with the Federal Reserve and other central banks. Expanding their balance sheets by trillions of dollars. Injecting themselves into markets as buyers and sellers of government debts. Providing daily liquidity to markets to the tune of billions if not trillions of dollars, depending on the day. Negative interest rates, quantitative easing, destroying capital formation and savings. Causing reckless and damaging speculation in one market after the next. The formation of malinvestment across the economic and financial spectrum. And now again, only a touch longer than a decade ago, here we are at the abyss, and central banks stand at the ready to bailout the very industries and companies that have led to such ruin – and I assure you, this is only getting started. It is also being mentioned how the Federal Reserve should step into the corporate bond market and buy the very bonds and debt I described above, thus bailing out these corporations and their creditors. As if this was not enough, there is also talk of bailing out the States, which would presumably mean pension plan(s) as well. From free-market capitalism to nationalization. From free nation to bailout nation. And from Constitutional Republic to banana republic. And a side-note, free-market capitalism has been abandoned in this country for generations, which is one of the main reasons we find ourselves in such utter disrepair.

Yet despite all of this, politician after politician, and central banker after central banker, is going to use the pandemic as an excuse to justify bailout after bailout, reckless “stimulus” spending, and asinine and fraudulent monetary policy after monetary policy. And who gets to pay for all of this when the dust settles? That’s right, the American taxpayer and with interest. I am an American. I am a citizen of the United States of America. I am a taxpayer. I did not vote or give my consent to any of this fraud, deceit, corruption, mismanagement, and nonsense. So, what is my recourse? Where and what is my representation? Did our Founders not tell us that it is our duty and obligation as citizens to demand change when our government has failed us? Did President Kennedy not tell us that, “those who make peaceful revolution impossible, make violent revolution inevitable.” I am not paying for this out-of-control government and central bank. I am not bailing out company after company and industry after industry because they squandered their resources. I am not bailing out students and their debt loads whom knew well in advance what they were getting themselves into. I have paid mine off and I will be damned if I am going to stand idly by and allow for any type of student debt forgiveness. For if this comes to pass, I want my money back plus interest.

These disastrous policies have led to so much future growth and wealth to have been stolen from my generation (Millennial), and that of younger generations, and those even yet to exist. Yet all these generations get to pay the bill. How is this ethical? How is this moral? How is this American? I want you to stand in strong opposition to any bailout for anybody. I want you to challenge the status quo. I want you to call for a full restoration of free-market capitalism and that of our Constitution. One would think, in the United States of America that this would be an easy request of one’s elected officials. Yet, for some reason, something tells me not to hold my breath. But what a pleasant surprise it would be. And saying these things is not enough. You must make them happen. And if you cannot, then resign and allow someone who can and will, to take your seat(s).  

Allow these companies to restructure. Allow new and better management to take the helm. Allow debtor and creditor the ability to negotiate their terms. Let the markets work. There is no easy solution. But I can assure you, that more of the same with respect to fiscal “stimulus” and monetary policies will not work and expecting it to work is the definition of insanity. This country and the world need leadership right now and we need the truth and we are getting neither. What we are getting are the same policies that have led us to this ruin and destruction of our economic, financial, and social fabric. I pray you have the strength to lead and to tell the truth. As an elected official to the Congress of the United States of America – this is your duty and obligation. So, do it!

In Liberty,

Godspeed,

Alex Karidis