As soon as China and the few others resolve to halt propping the dollar up and no longer purchase our treasuries we’ll default in no time. Our debt is unthinkable to pay back (especially with our current financial policies) and China, Japan and the Saudis know this. They also recognize that ditching the dollar would hurt them in a major means, so the grudging support for the dollar. This will end at one spot and we’ll be in vast disorder. We are the hugest debtor country in the Earth!

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Doug Ramsey

Thanks, that’s in interesting read…

The pending election politicizes the issue and impedes clear thinking. But clear thinking is paramount. One of these two opinions is closer to the truth, and economic public policy must be based on truth, not emotion. The forensic evidence points to centralized planning. Let’s look at whose fingerprints were left behind.

The failed institutions were among the most highly regulated industries in the country. If the subprime meltdown was the result of greedy capitalists, you would have to assume they were awfully inept to have lost so much money. The markets are smarter than that. Only feel-good legislation could be so naive.

They also say, “Given that socialistic impulses got us into this mess, it isn’t likely that further socialization will help matters in the long run. “

But, from what I’ve read on what the Dems want to do, that’s just the direction they want to head.

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[...] of “The Perfect Storm” on the combination of events that led to this mess, followed by the possible unintended consequences and then the only existing draft as a starting point for the proposed legislation, I suspect [...]

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this has been fun but i think the deal is done and our comments won t make much difference to anyone.Every month , and more often if needed the fed injects reserves, cash, into the economy by buying bonds from reserve system banks.They do in fact and have since the 1790 s have the authority to put cash in banks, or take it out by either buying or selling bonds. there is no change in the fed s balance sheet because they exchange an asset for equal value either way.
Had our leaders understood the banking system a little better in 1929 and the thirties, and pushed liquidity into the banking system, as we are going to do this week, instead of pulling it out,we might have avoided the depression, (which would have been instead a recession of a few quarters) with all the horrors it spawned.think about it, no dust bowl,no 25 % unemployment, nosoup kitchens,no Hitler in Germany,and all the other horrors of the 20 th century might have been avoided.The rallying cry, by the way for those who destroyed the financial system was “sound money” and inEngland, Churchills cry(he was the Sec of Treasury) the pound will look the dollar in the face.Stupid policies, stupid slogans.The road to hell etc.

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This article shows some of the regulatory causes for the problem and explains why more regulation will make the problem worse in the long run.
Really great analysis at:
http://www.emarotta.com/article.php?ID=303

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It’s their “job”??? I dunno, John. It seems to me you are broading Article I Sect 8 of the US Constitution, guy. They can coin money and regulate value. But they can’t draw cash from the Treasury except by lawful appropropriation (which is why Congress has to pass a law in order to pull this off..).

And for Congress to draw from the Treasury to purchase market assets? This is unprecedented.

I understand that $700 bil is a high figure for any one person. However multiple enterprises and pools of companies most certainly can handle a huge bulk. And, just using your figures i.e., if we’re talking $650 bil for assets that will be transferred to citizens (assuming most are mortgages for dwellings), I don’t see much reason why the majority can’t be sold via private enterprise, with a temporary govt loan on the rest to be paid back by the bank industry when they sell the rest.

We do not need the asset values raised. If you go to my original post, “the perfect storm” on this, you’re going to see some graphs of home prices over the past 33 years. Beginning in 1997 (when rates were still higher) the housing prices started rising with the influx of risky buyers after Clinton’s revamping of compliance for the CRA.

By the year 2000, when the rates dropped and then in the wake of 911, the housing prices soared at an unsustainable rate. This is way out of ratio with income and cost of living, John.

These values are still overpriced (despite the “decline” we’ve had since 2007) by as much as 15-20% in many areas, and less in others. The last thing we need to do is keep these values. Housing prices need to come down to a realistic level. As I pointed out in that post, we would have been able to weather the foreclosures if the homes were worth the note’s value.

But the price of homes was becoming so out of control that there was no way to play with loan rates as a check for inflation because the average person couldn’t afford the housing price tag on current income averages.

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comments accepted and considered.First Sam … the Japanese govt did just that for over ten years… let the markets deflate , and then could not get it moving again.Once confidence is lost banks won t lend people won t borrow. Unemployment out of sight, currency drifting slowly lower.The depressionof 1930-1941 was caused , see MIlton Freedman, by a collapse in liquidity. As banks around the country collapsed , the New Deal passed all kinds of laws preventing csh into hwhere it was needed. Freedman says it better
Next .. why the US govt.?Its their job. its in their job description.Fiat money creation when it is needed and where.Next, no one else has that kind of money.Warren Buffet said this morning in response to that question why the govt, ” if I had that kind of money Id do it in a second.”
Economics is based on what people will probably do in response to economic and other stimulus.It is not a newtonian science, where given the initial states and the changes i can predict the future state.My guess is that as soon as the Fed starts buying these assets there will 1/be people who will see a good deal and try to outbid the Treasury.2/As the prices of these assets go up, due to the bids,the marking to market will start to raise asset values( mortgages) making the entire system more liquid.

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Let the financial markets collapse. Let’s go into a recession. The country is 20 years too late. If the ecoonmy grows because of trickery, irregardless of the intrinsic problems we have, then no amount of bandaging will get to the root cause. let prices reach an equilibrium. let’s suffer and then recover. this will be no depression

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We are buying assets and loans from banks in order to put liquidity in the financial system.Thats what Feds and Treasuries everywhere do

John, where is it written it must be only “private white Knight”? They sold the notes to the secondary market in packages. Notes can be repackaged and sold to many “white Knights”. Why must the government be the sole buyer, and not multiple private enterprises… each looking to capitalize on what you think is a portfolio that may be 20% under value (assuming your top value of 85% of debt, and the buy in at 65%)

I think my point is I agree that we those assets and loan need to be sold for the liquidity for the market. But I disagree that the buyer should be the American taxpayer.

I’m also seeing the nerves frayed around the globe. And what I’m really not liking is the devaluation of the dollar as part of this. And that’s anticipating the government rescue package.

And BTW, thank you for your counterpoints. As I said, this bashing about of the alternatives is helpful.

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At about 1130 am all the worlds markets were tanking A number of them were down30 to 40 % for the week and shut down entirely.At this point some bright guy in London,may his tribe increase,announced a moratorium until January on shorts on financial firms.The Dow went up 200 points in about 20 seconds.Someone at last had noticed that the bus was going over the cliff.The point is this real. We are all in trouble. If you think you deserve 20% unemployment and bread line s again then ignore it. The money is not bailing out wall street firms, ( a side effect at best)it is providing the liquidity which we all need to get mortgages, buy inventory make payrolls hire harvesters. This is what the Fed and the Treasury was created for.( See Alexander Hamilton remarks on the Nat Debt)was created for.We are buying assets and loans from banks in order to put liquidity in the financial system.Thats what Feds and Treasuries everywhere do.

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