So I am going to lay out a couple of facts some of you will find hard to swallow:
- The "Paulson Plan", or whatever you want to call it, is NOT a bailout plan.
- It IS legislation proposing a massive liquidity injection into the SYSTEM.
- The fat cats already GOT their ridiculously excessive compensation, they are not getting "bailed out", nor do "they" need to get bailed out. They are already rich.
- The plan is an "everything to gain, nothing to lose" plan. If housing prices continues to sink, the economy and the US$ will collapse COMPLETELY. With the "plan" (injection of liquidity), you at least have a shot of avoiding that outcome. Without it, you are almost assured a surreal ass kicking, i.e. massive unemployment, fuel and food inflation, credit deflation, political upheaval - really, really bad stuff.
- With all of that, even if the plan IS fully funded, it still might not work! The consequences of that outcome are almost unthinkable.
The average American, and the average American politician voting on the plan on Capital Hill, has NO IDEA what the hell is going on - but, boy, do they have an opinion! (Not that I am always correct in my assessments, either. But if you are fighting a war, hire a General.) Hank Paulson might have been the BOSS at THE firm that demolished the credit market, but he is as competent as it GETS at this (nobody said he was perfect, noble, ethical, etc... just competent in the extreme). Obama or McCain? Not a clue. Not one. NAFC.
There are some unintended consequences, of course. One of these nasty consequences was pointed out to me by the Mad Scientist... Look for a $200 billion bailout, and this one REALLY will be a bailout, for Detroit. Now THAT will be about the dumbest thing we could possibly do, which means it will happen for sure. Can you imagine the Feds doing something intelligent, like using the $200 Billion to build electrified rail between the major cities on the East Coast? Again, NAFC.
Mentatt (at) yahoo (d0t) com
9 comments:
Looks like a lot of people make out on this.
The fat boys' club of elite Republicans in Congress get to bail their cronies at the investment banks and insurance companies. These are the good legislators who thought it a wonderful idea to repeal Glass Stigall. Call it an injection of liquidity or what ever you want, the irresponsible bankers get to stay in business when they otherwise wouldn't.
The elite Socialists in Congress get government ownership of 2,000,000 houses that will NEVER be re-sold. The power to buy votes by passing these out in return for loyalty at the polls is too great. Also, the government gets equity interest in the institutions that it bails. These are the jerks that think that the CRA is a good idea. Just the right guys to run banks.
The people that bought houses that they couldn't pay for will get to stay in them by some means that will surely raise my taxes.
All in all, it looks like a giant circle jerk where all the guilty get a big reward and us slobs that obey the law, pay our bills and taxes, and work for a living catch it in the ear once again.
I'd hold my nose and take it if I thought this plan stood a chance, but it doesn't. Our problem is a supply side problem in the sense that our economy is producing less than it consumes. We purchase the difference ($650B/yr)from foreign countries. The US Government sells about the same amount of debt abroad. All this plan does is buy a bit more time while expanding the T-Bill bubble. It is ultimately just pouring gasoline on the fire.
I can be poor if I have to, and it is pretty much a certainty either way. Let 'm go to hell!
Greg-thanks for your great input and honesty. It's much appreciated.
The really spooky aspect of this downturn is the potential depth- and the fact that the peak oil grizzly will be waiting on the other side.
And the two presidential candidates are talking massive new intrusive military involvements all over the globe......yikes.
And then think of all the electrified rail and wind turbines that 2 trillion USD could build.
Opinions are like ..... and I have a few:
1) The "massive liquidity injection" is NOT what we need. The problem isn't liquidity -- it is solvency, like Mish says. There is LOTS of credit in the system, but the banks are hoarding it -- they don't think they'll get the money back. You can make money available to banks, but there is no law saying anybody has to borrow it. And if borrowers think they can't pay it back, they won't borrow.
2) The bailout plan is not "everything to gain and nothing to lose." We are asking the U.S. children and grandchildren to accept more national debt on their shoulders to pay for the mistakes of the present. $2 trillion more in national debt (on top of 10 already) still is a large obligation, to be paid for by the newest citizens of the U.S. who are gonna have enough trouble buying hamburgers for their families in the future already.
3) No one sees this national/world financial problem because no one is educating the difference between the equity and credit/debt markets. The stock markets are down but not collapsing, so no one sees the problem. The credit/debt markets are not as well publicized (where do you find the TED spread?), so no one sees an issue, till they try to use the ATM someday and nothing comes out.
4) America is awash in massive commercial overcapacity. How many Home Depots, Jimmy Johns and nail salons does one country need? We are producing plenty -- way more than we need. Someone has got to tell the people of America that they all aren't gonna be able to own their own businesses, and that working in an office (like I do) is indeed boring and unfulfiling -- and so what? America needs office workers doing dull activities. :)
Submitted for your consideration ....
>America needs office workers doing dull activities. :)<
Why do we need more office workers who require salaries, health care plans, retirement resources, housing, transportation, child care, education etc etc etc?
How about more electrified transportation & energy refits to housing? Both projects only marginally helped by office workers.
We have too many unproductive people at the imperial "peak"- lawyers juggling power around, lobbyists prejudicing public issues, large public education bureaucracies who are producing millions more non-productive ignoramuses.
And so-called "investors" who produce no real wealth but just constantly rearrange their chips around with computer clicks- which probably includes all of us here.
Addendum to anon above-
OH and we can't leave out the biggest category of all for nonproductive people- that is the legions and legions and legions of media and PR folks that exist in every area of American life.
The basic business of these folks is to produce colorful media lies to obscure, mispresent, play on ignorant prejudices, and hide painful realities. In other words to produce colorful cloaks of lies for their clients to hide behind.
Ever wonder why so many Mercans essentially have replaced at least 50% of their thinking with fantasy?
That's your answer.
I said the office can be dull and unfulfilling (and it is!) Didn't say the work was unneeded. :) It took very little credit to get me started in my office (old govt. desk, etc.) Starting a business of my own, on the other hand, would take LOTS of credit (which has to be paid back to bank/family/friends).
Late stage empires are brought down by a bad case of stupid, with a good dose of arrogance. When the president is selected because he hold regular conversations with God or seems like he'd have a beer with me in my back yard. Or a potential president is selected because she can gut a moose and talks to God. Stupid has won.
And don't worry about productive jobs, growing your own food supply in your community garden allotment at the edge of the city will keep you employed.
Oh, and if you want a happy story. Look up the implications of the melting of the sub Artic methane hydrates melting. That makes the financial mess down right insignificant.
Bureaucrat:
Sorry, Mish ain't perfect and he's got this one wrong.
The system needs the injection, or we don't need a Fed or a Treasury.
Finally, the whole "leaving debt to our Grandkids" thing? Read my next couple of Blogs
Dear Anon@4:09am
Well Said!
Post a Comment