Over the last week while visiting friends and family in California I have come to more clearly see the exquisite humor in what has happened over these last several months due to our faltering economy.

I have repeatedly commented on how the Federal Government has taken on an even larger role in the economy. Already the largest consumer, it will be even more so with the new budget that will increase Uncle Sam’s take from 20% to over 25% of output. Already the central banker, the Federal Reserve System, Uncle Sam now owns a substantial share of the private banking sector. Already the rules maker for the economy, Uncle Sam will now engage in a round of enacting even wider controls over the financial sector. And of course the new role for Uncle Sam, he has become the single largest stock holder in corporate America.

I have reduced this event to a terse comment, “What it took the Bolsheviks a sea of blood to do in Russia, Uncle Sam has done for peanuts.” What I mean is that the Bolsheviks seized the means of production by force, while Uncle Sam is doing it for a rather small price.

I say small price because Uncle Sam is doing all this with money borrowed at small cost, in the main for less than 1% interest. And his capacity to borrow is not yet exhausted. I calculate that he can double the national debt without causing serious harm.

So what do we have. Uncle Sam is borrowing funds from the private sector at ridiculously low cost and he is using the funds to buy up the private sector. In other words the private sector is funding the Federal Government to buy it out. As I said, I find this to be exquisite humor.

Leo Cecchini
April 2009