Posted on 09/25/2008 10:00:38 PM PDT by solfour
New data and analysis demonstrate that the proposal before Congress for a $700 billion financial industry bailout is too little, too late to end the massive U.S. debt crisis; and, at the same time, too much, too soon for the U.S. Government bond market where most of the funds would have to be raised.
[... Lots of detail in the pdf file]
(Excerpt) Read more at moneyandmarkets.com ...
Their figures and opinions in this white paper should be considered seriously.
This is the mother of all financial crises.
Any propping up of the Ponzi scheme should involve an unavoidable path to end the Ponzi scheme.
As long as the ‘RATS are going to pull crap like putting in a wad of money for the criminals at ACORN, this thing will never get passed.
I don’t know if you listen to Glenn Beck, but he believes Congress has no intention of solving our problem with the bailout, he just thinks they are trying to make sure that the inevitable crash happens slowly instead of quickly.
Bump for later read.
I agree with Glenn Beck's analysis, but as Weiss & Larson point out...
This bill, approaching $1 trillion, is so extreme, it is undeniable thatOf course, we've accumulated obligations of $3 trillion for our adventure in Iraq, and our debt is many trillion more than when George W. Bush took office.
- It could double or triple the federal deficit in a very short period of time.
- Such a dramatic increase in the deficit would drive up the cost of borrowing not only for the U.S. Treasury, but also for other bonds and for millions of Americans seeking a mortgage or other credit, since Treasury yields are the benchmarks against which most borrowing is based.
- To the degree that the Federal Reserve purchases U.S. government securities for its own account to help support bond prices, it would devalue the U.S. dollar, risking a dollar collapse and the flight of much-needed foreign capital from the U.S.
- Ultimately, either of these outcomes — sharply higher U.S. interest rates or a U.S. dollar collapse — could seriously aggravate the very debt crisis that the bailout plan seeks to address.
The big lesson is...TANSTAAFL.
>“The US will lose its status as the superpower of the world financial system. This world will become multipolar” with the emergence of stronger, better capitalised centres in Asia and Europe, Mr Steinbrück told the German parliament. “The world will never be the same again.”
http://www.ft.com/cms/s/0/1d6a4f3a-8aee-11dd-b634-0000779fd18c.html
Nuts. That’s the second time I’ve had to use an acronym dictionary because of Free Republic today.
" The notional (face value) amount of derivatives held by U.S. commercial banks is $180.3 trillion."
"One single institution, JPMorgan Chase (JPM), holds $90 trillion, or 49.9% of all derivatives held by U.S. commercial banks, a concentration of risk that is unprecedented in modern U.S. history."
So this why Chase is getting all the sweetheart deals from the Fed.
Probably. No doubt Chase is the first one on the promise list for bailout money too. I thought it was going to be WAMU... Well I guess it still is really. The president and CEO of JPM just happens to have a seat on the NY FED. His name is Jamie Dimon... One of the 25 highest paid men.
Giving the big boyz time to quietly unwind their positions without triggering a panic. While tempting small investors back into the market to make those unwinds more lucrative.
Maybe, but for those of us in the know, it’s time for us too.
True, my plan is to hold the portion of my 401K which is still in stocks until bailout + 3 days. Then I’m gone like a greased weasel...
“he believes Congress has no intention of solving our problem with the bailout, he just thinks they are trying to make sure that the inevitable crash happens slowly instead of quickly.”
As far as I know, Glenn is correct. How can you solve the problem with inflation if the problem is inflation? In order for there to be economic growth, we need to have enough investments along profitable lines to make up for all the trillions of dollars of unprofitable investments that have been made. It’s extremely difficult to do that without liquidating useless capital and saving money for future investment. And that takes time.
Meanwhile, the federal government is ready to pump more money into unprofitable ventures, which would both eat up more savings and prevent investment along other lines. Not allowing the currency to crash is good, but the only way to do that is to further debase the currency, which only makes the inflation problem worse.
What everyone’s looking for is a “soft landing.” I can’t help but worry that we’re going to go on inflating while we slip into recession, which would give us that wonderful stagflation.
I think I would say "later rather than sooner". But releasing the pressure later rather than sooner generally leads to a larger explosion, or in this case implosion.
But, if it does happen before the election, it will be blamed on the Republicans, (bad economic times are almost always blammed on the party that holds the White House at the time) and there already too little time to make the case as to who the real culprits are.
Probably something worse than that. Not sure what the term would be for price inflation while real GDP, and jobs, drop like a stone.
The house of CarDS needs to be brought down before it will be possible to see where money is needed. For the fed to inject 700 billion into the market while the house of CarDS is still standing would be to throw good money after bad.
They're trying to delay the crash, not make it happen more slowly. For the latter approach, I'd suggest requiring that credit default swaps be publicly reported before they can be paid, and limit the speed of payouts based upon the leveraging ratio. That would provide some balance in payouts.
So what's better? Short and sharp or moderate and long-lived?
Stuff should drop in a sufficiently-controlled fashion to avoid the arbitrary allocation of funds that would occur in an uncontrolled crash, but the printing of new money to inject must be minimized to avoid lingering problems.
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