Comment: Recovery money is sitting in hedge funds

Fareed Zakaria on CNN the other day said that outgoing US president's George W. Bush's worse mistake was cutting taxes on the rich.

Bush not only cut higher tier taxes he also restructured the tiers basically lumping together the super rich with the moderately rich and then lowering both of their taxes. It was the last phase in a process that began in the Reagan years.

While Republicans like to criticize "socialist" redistribution of wealth, what has happened over the last few decades is a redistribution of wealth from the middle class and the poor to the rich.

Money that used to be in the savings of ordinary Americans is now sitting in derivative markets, in which average players are locked out. These markets are designed to allow the super rich to win, but to protect them from losing, i.e., they're rigged.

When Japan's real estate market melted down, the Japanese government was able to borrow from its people, who had stockpiles of money, at almost no interest. Actually it would have been better off just taxing the people.

Because by borrowing the money, it just transferred the problem of the Japan's banks to the central government.

Now, corporate types like to criticize the central government, but many in the corporate world are looking to the central government for help. The fact is that a country's economy is closely tied to the performance of the central government and the central bank.

The Japanese people could have easily just given the government the money not obliging them, i.e., the taxpayer, to pay it back. You see how there is a wasteful cycling of money here. The Japanese had sufficient savings to absorb such higher taxes. As it was, they ended up straddling the central government with debt that it's still trying to pay back.

Now, the American people have very little savings to offer the government for bailout money. Much of the needed money again is sitting in the derivative funds of the wealthy.

These wealthy elites want to lend the government the money instead of paying it in taxes. But who pays for the loans?

Yes, the taxpayer will eventually pay for those loans. So again we see a wasteful cycling of money that benefits the wealthy and will leave the central government swimming in red ink.

And again the central government is important to the economy. Just look at all the people in Wall St. and elsewhere looking to the central government at this time of crisis.

So basically, big deficit spending is just transferring the problems of Wall St, the auto industry, etc. to the central government.

Holistically, a deficit spending plan will not work in actually repairing the economy because there actually must be a healthy redistribution of wealth, a reversal of the redistribution of wealth that has occurred over the last 25 years. Debt spending does not get that job done.