Call it the GoFundMe Syndrome, depending on others to carry the financial ball for you.
It’s a sentiment that long before the digital age had been expressed poignantly by the character Blanche DuBois in the play “A Streetcar Named Desire,” when she said “I have always depended on the kindness of strangers.”
This whole GoFundMe thing, which exists under the label of crowdfunding, seemed like a good idea on the surface when first it was dreamed up, but the devil is in the details.
Too often, it is the triumph of a good sob story over acting responsibly, like an example relayed to me about a couple who spent $50,000 or so on restoring a Volkswagen bus, then went the GoFundMe route to pay for some medical expenses for their dog.
Selling the vehicle to pay for the dog’s care never entered into the calculus of the situation, either by the grateful shakers of the GoFundMe begging bowl, or the donors who shelled out the bucks to help Fido, including the 2.9-percent, plus .30 transaction fee the GoFundMe people skim off each donation to pay for their efforts.
The GoFundMe web page notes right out of the box that the person setting up the account (the beggar) incurs no costs.
Winner, winner, chicken dinner. This is freewill socialism at its best, as opposed to the brand of socialism practiced by governments, who take wealth from one party (willing or not) and give to another – often extracting their “fees” along the way, too.
This sort of GoFundMe lifestyle was presaged more than 100 years ago in an 1891 Sherlock Holmes short story “The Man with the Twisted Lip.” Spoiler alert: The outwardly successful businessman actually makes his living as a London beggar, finding out almost by accident that begging “paid” better than his job.
GoFundMe-like behavior is practiced by various municipalities and political sub-divisions. Our own Greater Johnstown area has elevated the practice to an art form, collecting huge funding from state and federal sources, often funneling it through various nonprofit, not-for-profit or similar operations, with considerable amounts of the gifts left behind in the way of large executive salaries or doled out via contracts with favored providers.
This all comes to mind as various agents of the federal government are attempting to do what they do best, paper over a banking crisis with the unlimited money available to those who run the metaphorical printing press.
Our Federal Reserve Bank, the bankers’ bank responsible for the nation’s money supply (extract currency from your wallet and you will read “Federal Reserve Note” printed proudly at the top margin) created economic distortions for years by suppressing interest rates and injecting copious amounts of money into the system, so-called quantitative easing.
When that practice created inflation, topping out (so far) at about 9 percent last year, the brakes were applied in terms of higher interest rates and sucking money out of the system — quantitative tightening.
The problem is, a lot of banks got caught thinking interest rates would stay low forever. They bought long-term bonds at ultra-low interest rates. Now that interest rates are up, the value of those bonds is reduced in present value, a so-called marking to market of the securities.
If the bond purchasers can hold to maturity they will be made whole nominally. But the dollars they get then will have been eroded in purchasing power by inflation. If they sell now, they get back less than face value in the way of principal.
Having to mark to market these various holdings has left some banks underwater in terms of meeting requirements of assets to liabilities, which in the quaint world of the banks, are deposits. Those depositors, learning of problems, rushed to withdraw their money and the Federal Reserve threw dollars at the problem, adding $448 billion to its balance sheet just last week, bringing the Fed’s total exposure to $8.6 trillion.
Before you ask, yes, if the Fed had to mark to market all the bonds and other securities it bought at lower interest rate yields, it would be underwater, too. Bank analyst Dick Bove last week estimated that Fed loss would be about $1.1 trillion.
But when you create the money, no problem. There actually has been serious mention in some circles of borrowing that trick and creating a trillion dollar gimmick coin, to be borrowed upon, despite its lack of actual worth, to solve our current debt-limit crisis at the federal government level.
The Fed bankers, not similarly constrained by such things as debt ceilings, are meeting Tuesday and Wednesday, announcing any action on interest rates the second day. It is somehow fitting that an arguably insolvent institution is presiding over the attempt to mask the insolvency of the United States and the world.
GoFundMe can’t solve this crisis. There is no begging bowl large enough.
Sam Ross Jr's site 