In a totally unlikely and unforseen turn of events, markets are not responding favorably to government bailouts and inflation.
NEW YORK (AP) - The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That's the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won't be able to afford.
To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.
Biden: "When the stock market crashed, Franklin D. Roosevelt got on the television and didn't just talk about the, you know, the princes of greed. He said, 'Look, here's what happened,'" Barack Obama's running mate recently told the "CBS Evening News."
Yeah, that's what he did alright. Then Abe Lincoln got on his cell phone and reminded Biden that FDR didn't take office until 4 years after the crash. Oh, PS: the first television station didn't exist until 1941. I guess FDR was thinking the people of the distant future needed reassurance that the crash of '29 was being taken care of. (143,839)
This is a ^%%*(( power grab if ever there was one. Next thing, Comrade Paulsons will start buying all Libertarians one-way Amtrak tickets.
p.s. if anybody has a good handle on how to get IE6 to read CSS layouts correctly, drop me a line - I couldn't get the EndBailouts layout to display correctly in IE6, so I had to break it temporarily. (121,890)
I never thought that this day would ever come. Well, it's way, way worse than we had even supposed.
For mumbled, muttered reasons that really boil down to the fact that our national government exists to protect not any thing but the interests of large corporations and their officers, the Federal Reserve Bank elected to 'bail out' the tanking pseudo-insurance dodecapus American International Group.
What this means is that eighty-five billion public dollars -- that is, your tax money -- is being used to prop up the "Weekend at Bernie's" style corpse of AIG in 'exchange' for 80% of AIG's shares of stock. So what you get, pal, is a gigantic liability in addition to an immense amount of worthless stock.
Sounds like a pretty good deal, huh? Well, I've got a better one. Overthrow the government.
See, what we have here is a crime. I'll spare you most of the Econ 101 lecture, but here's the basic problem : this government spends a lot of time trumpeting the wonders of the free market (at least the domestic market -- recall 'trickle-down' theory from the 80s?) and adopting policies both social and economic that are putatively designed to allow that market to operate in a way that is minimally hindered. This includes making sure that feisty entrepreneurs have incentive to take the risks that drive business activity by allowing them to keep a pretty good cut of the rewards if their risks pay off. Market activity for profit is gambling, speculative activity doubly so. The incentive to make the smartest, shrewdest choices in the market is provided by what generally happens when risks don't pay off -- one loses one's investment. If you don't think it through when evaluating risk, you find yourself more 'highly exposed' to the risk -- in essence, you can lose a whole lot on a stupid bet. That's what happened here. The mops at AIG gambled on financial products that few understand and nobody ended up profiting from -- mortgage-backed security bundles and so-called 'derivatives,' which are sort of like a bet on the outcome of other bets -- and lost their stupid, slave-made shirts. And that's how it ought to be, because in a market, there are always winners and losers, and sometimes when folks don't use their heads, there are really really big losers.
Now, the government has justified its meddling in the natural workings of the market that it so loudly promotes by saying that AIG was just tooooo big to fail. Too bookoo! Too big! Too big and too enmeshed in the so-called 'financial system' and if they get wiped out, there will be widespread suffering not limited to our own economy, but others in the global market as well. What the deuce, say you? AIG held a lot of insurance policies on bank deposits and other financial accounts, and was involved in apparently innumerable portfolio capers that are so wide-reaching that if they weren't around to guarantee those investments and manipulate those portfolios, your head might catch on fire! Or your dog might turn into a knife and stab you in the spine. Whatever would happen, it'd be real, real, bad. That's why the national government needs to give away your money to these swine.
The really cool thing about this bull feathers justification is that, since the 'Fed' says that firms of a certain size are 'too big to fail,' everybody now has tremendous incentive to :
1) Grow as large as possible to increase the chance that they, too, will be 'too big to fail'
2) Involve themselves in complex investment transactions of high risk with little regard for the risk levels -- in fact the bigger the risk, the better.
See, if you win on a big risk, you usually win a lot. And if you lose on a big risk and you're 'too big to fail,' well, no big deal! Jim and Edna Taxpayer will slip you a little of their bountiful extra cash to chill them individuals out so you can wait for the cavalry.
Don't buy a word of the barf oil that Paulson is spewing about why he done what he done. If we're going to operate on market principles -- good! Free markets usually do, as the slavering yaks of government have been crowing for years, provide the most good for the most people -- 'utility'-- in the long run. Even if some people get hurt along the way. That, buddies, is why when your bondage shop or panaderia fails and you lose your invested life savings on top of innumerable labor hours and maybe even some of your other personal assets if you were dumb enough to commingle them with your business, the general line is "oh too bad, we feel sorry for you, but that's tough -- that's the market." Likewise when your adjustable-rate mortgage goes ape and you can't make the payments on what is now a double-digit interest rate and you default, ruining your life : tough! Shouldn't have taken on that risky ARM. But don't act like we're maintaining a free market if this applies to anybody -- except giant corporations, who have nothing to fear ever. This recent bare-faced turn makes clear two things : the government is not for you, and Henry Paulson is a whore.
Unless you like paying for the bad debts and dumbass moves of coke-snouted corporate goons, you need to write every on of your legislators and call the White House. Do everything you can think of to let the swine know that you don't much care for their plan. If the government is going to put you on the hook for the liabilities of any firm of size "X" or bigger, that's not a free market. The logical response to that situation is that, since it is obviously not acceptable for the taxpayer to have to foot the bill for failed idiot companies, firms must not be allowed to achieve a size that's too big to fail. We shouldn't allow these horses to have it both ways -- free market when it's profitable, Communism when things get dicey. That's rubbish and it's a crime.
The government's not doing what we pay it to do. Instead, it's giving away your money and doing away with your rights. The Federal Reserve and its cow of a Treasury Secretary are paid henchmen that sneak crimes by you behind closed doors and then lie like Oriental rugs about the reasons they steal. Enough of that. It's time to overthrow that criminal order. Overthrow it. You're going to need every right you have left. (127,995)
Presidential candidatin' time once again, and for some people, it's time to ignore what actually matters and pick the dumbest issue possible to vote on.
In 2000, it was re-introduction of Pogs as a national trend. In 2004, it was gay marriage.
Now, it seems to be the economy. Except not. No it's about Change... no wait, it's about Hope!
That's it, hope!
Can you tactilely feel hope? Can you unfold some hope from your wallet and buy bread when it costs $40 a loaf?
As we're seeing, people chosen to head government agencies like "The Fed" have a bigger impact on your life than your perception of the president.
Unfortunately, that will have no bearing WHATSOEVER on who is elected in November.
Let's do a summary of economic policy from the 2 (3? No) frontrunners:
Obama's economic policy (at least, from his website) is an unending litany of nonsensical and mostly nonspecific populist cliches and exploitation of common economic misconceptions. It's kind of like a checklist of stereotypical democratic voting blocks.
I'm not going to go through all of it. Just bring it to any econ professor who's a fan of monetarism (PS, Alan Greenspan's a monetarist). Bring tissues, it'll be emotional.
Meanwhile, you have McCain who will probably soil his adult diapers and have a stroke in an inhuman surge of glee and vomit if he ever gets elected. Mainly I see him as retaining the Bush policy for the most part but I don't see the budget expanding by as much. This would mean four more years of stupidity and keyensian tomfoolery.
Hillary's out so I'm not going to bother looking up her stated views on the subject. Not like it'd matter anyway, as it's probably a lot of BS.
Neither candidate will balance the budget. Neither will fix the Fed.
What matters more than the president is going to be the people he puts in his cabinet, especially in the treasury and federal reserve. The current people (Bernanke, Paulson) are like a couple of 10 year olds trying to salvage a pot of spaghetti sauce they just drowned a cat in. Since it's pretty much a crap shoot, and hard for either of these idiots to be worse than it already is, I simply don't care.
If you need me November 4th, I'll be at the bar. (65,778)