Unless you’ve been sleeping for the last couple of days, you’ve already heard about financial bailout by the U.S. government. But you probably haven’t been told how this is going to wipe out every American in this nation.
In “Paulson goes all in“, Peter Schiff describes it like this:
Moving beyond the guided munitions of selective bailouts, the Government is now trying the financial equivalent of carpet bombing (for AIG, Merrill Lynch, and especially Lehman Brothers, this gives new meaning to being a day late and a dollar short). To continue with the military analogies, Paulson’s bazooka turned out to be a nuclear tipped ballistic missile.
When the U.S. government owns all mortgages, the real estate market will be completely subject to political, rather than financial, concerns. Will foreclosures be outlawed? Will loan term easements and principal reductions become standard campaign issues?
While it is dizzying to predict how this plan will be implemented, it is fairly simple to foresee the macroeconomic consequences. The U.S. dollar will be shattered beyond repair. The government simply has no means to make good on the trillions of new liabilities. Interestingly, while both Paulson and President Bush acknowledge that the plan will put “significant amounts of taxpayer dollars on the line,” they did not mention any tax increases. Given the politics, no such move is forthcoming. The printing press is their only solution.
The government has also decided to insure all money market funds, adding trillions more in unfunded liabilities to the Federal balance sheet in the blink of an eye. Of course, since bad real estate loans are not the only toxic assets on the balance sheets of financial institutions, we will also need to absorb other classes of asset-backed securities, such as those backed by credit card debt and auto loans. So while the move ensures that depositors will not lose money, is does insure that the money itself will lose value. Is the trade-off really worth it? Washington thinks so.
Further, since I assume the plan will apply to all mortgage debt, U.S. taxpayers will also be on the hook to bail out foreign institutions that loaded up on the financial sludge. However, once the government takes them off the hook, do not expect them to re-invest the windfall back into other U.S. dollar denominated assets. This get-out-of-jail free card will likely scare them straight. The global mass exodus from the U.S. dollar and Treasury debt is about to begin: do not get caught in the stampede.
I think my own position on this issue is crystal clear — this is financial ruin and disaster for the entire country. Rather then let these bad debts die a well-deserved death and protect the remaining asset value in place (throughout the entire country), the inflationary cycle this ridiculous bailout plan will create will literally explode inflation by flooding the entire economy with even more bogus money.
And this does not address at all what it is going to mean to have the U.S. government your mortgage / debt holder. I think this alone bears a separate blog entry.
Here’s what could happen: It will take a truckload of money to buy a loaf of bread. The world has seen these financial disasters before, Zimbabwe is experiencing over 1 million percent of inflation right now, and it really does take a truckload of money to buy a loaf of bread.
Either we have the stupidest Congress the world has ever seen (very likely) or we have some very, very greedy (and stupid) bastards pulling the strings. It’s probably both. Our dollars are now going to be even more worthless then before. This stupid attempt to prop up prices will only send the dollar to the very bottom.
So here’s my unasked for advice: if you’ve got any money, spend it wisely now, as in immediately. It’s about to be exploded into little bitty worthless pieces.
The US Treasury Secretary, Hank Paulson, in collusion with the US Congress, is about to commit an act of blatant treason. Instead of doing the right thing, which would have been to place the system in administration (bankruptcy reorganization), he has decided to make the United States itself bankrupt. The bankers are laughing up their sleeves. What Paulson has announced is this: he will establish a Federal agency to buy up what will amount to trillions of dollars of bad debt. The debt will become the liability of the US taxpayer. The bankers will get off scot free. The US will also insure investors in US money-market funds, which have seen significant withdrawals in recent days. The End of The United States
Could this last act by Bush and the banking system be the coup de grÃ¢ce, the final financial blow that will drive the American people into impoverishment and the country into collapse?
Holy crap! I just found this link — makes my above prediction DEAD ACCURATE.
(Good advice, but you should buy your food from me — that goes without saying, I’ve been selling food a lot longer then most of these companies).