On Christmas Eve, while nobody was supposed to be watching, the Treasury Department lifted the bailout ceiling on Fannie and Freddie from an already appalling $400 billion to an unlimited amount.

In 2007, I denounced the entire bailout as little more than a looting operation.  I appreciate that some consider the bailouts as necessary to prevent a wholesale liquidation/collapse of the entire economy, and I even share some sympathy with that view.  However, I humbly submit that similar actions could have been taken without enormously enriching the very same parties that either caused the disaster or unwisely invested their money with the companies that did.  Both sets of participants deserved to learn a very expensive lesson, not get bailed out at enormous expense to future taxpayers and national prosperity.

In 2008, I warned that the Fannie and Freddie bailouts were going to cost a lot more money than was claimed by the government, despite the fact that the then-director of the Congressional Budget Office, Peter Orszag, firmly declared that there was only a 5% chance that taxpayers could lose more than $25 billion.

Note:  This is most of a recent Martenson Report that I am making public after numerous requests to do so.  Normally I reserve such reports for at least several months before general release. I’ve only left off my conclusions about what this all implies about the future. One member from Germany (thank you Michael!) has translated this piece into German and that appears as a downloadable attachment at the bottom of the article.

Preamble: I normally avoid writing on Global Warming/Climate Change as a topic for discussion because it tends to be a heated topic for many people on both sides, which can work against collaborative solutions. This article is not about global warming and/or the science behind it, and it is not my intention to discuss those ideas here.

I want to point out that a massive discrepancy exists between the official pronouncements emerging from Copenhagen on carbon emissions and recent government actions to spur economic growth.

Before and during Copenhagen (and after, too, we can be sure), politicians and central bankers across the globe have worked tirelessly to return the global economy to a path of growth.  We need more jobs, we are told; we need economic growth, we need more people consuming more things.  Growth is the ever-constant word on politicians’ lips.  Official actions amounting to tens of trillions of dollars speak to the fact that this is, in fact, our number-one global priority.

But the consensus coming out of Copenhagen is that carbon emissions have to be reduced by a vast amount over the next few decades. 

These two ideas are mutually exclusive.  You can’t have both.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

      Ludwig Von Mises

It’s time to face facts.  Washington DC is out of control.  Spending is breaking all records, the deficit is climbing higher and higher, and the general populace is voicing graver doubts about the deficit and mounting debts, even as politicians drag the country even deeper into a financial pit.

In 1981, the federal debt first crossed the $1 trillion dollar mark, never to look back.  And now, here in 2009, lawmakers are considering boosting it by as much as $1.9 trillion in one fell swoop, with the hope (fingers crossed) that nobody will notice if they do it over the holidays.  Their calculations in deriving the $1.9 trillion number appear to not involve any considerations about what is best for the long-term fiscal health of the country, but whether the amount will be sufficient to make it past the mid-term elections.