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Ratowitz: "I embrace the conservative banner!"
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Friends don't let friends Scozzafava. Ratowitz in 2010! |
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America's Cup Finally Coming Home
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Congrats to Larry Ellison. The guy has been chasing the America's Cup for years. Great to see him finally accomplish his goal. I'm not a fan of the trimaran though. It's just not cricket. |
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Illinois Should Declare Bankruptcy
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"In bankruptcy, there are two types of creditors; secured and unsecured. The secured creditors are unlikey to accept any haircut, these are mostly General Obligation bond holders. But there are any number of unsecured creditors, these are creditors that do not have collateral tied to their debt."
Unless of course your are Chrylser Bond holders. In that case, unions come before tier 1 bond holders. |
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On Bailouts and Sen. Bob Bennett
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TARP has not saved us, it has just kicked the can down the road. TARP was never used to buy up toxic assets which is what Bennett voted in favor of. Instead TARP gave direct capital infusions to the banks while FASB was muscled into changing Mark to Market accounting rules to what can best be described as "Mark to Myth." The Fed did the dirty work of buying up over $1.25 trillion in toxic assets, which now are the assets that back the US dollar (Mortgage Backed Securities and Commercial Real Estate loans). In the end, TARP was a Trillion dollar LINK card for Bankers who just aren't that good at what they do. Sure they paid us back. Borrowing money from the Fed at %0 interest and buying treasuries isn't hard to do.
Now The Fed is trying desperately to fend off a deflationary death spiral by holding onto all the bad assets, financing US government spending through a zero interest rate policy AND NOW by bailing out Europe through the IMF and their nifty "Currency Swaps." Some financial blogs are reporting that the US Treasury is rolling over $500 billion in debt redemptions a month. A lot of that is short term debt and the day our foreign buyers stop showing up to auctions is the day the dollar dies and we are in trouble.
The EZ-Credit ponzi will work until it doesn't and at some point, when the European bailout doesn't work, Europe will have to cut spending on their socialist programs creating more civil unrest, decimating their GDP and launching them into a depression.
As Europe stops buying our exports and China's economy overheats because of their Real Estate bubble, who will be left to buy up US Treasuries? The Fed, of course. It is at that time when will have to deal with the consequences of the biggest credit expansion in history. Deflation, Inflation or both... we are going down unless we address our trillions in debt and unfunded liabilities immediately. The only way to do that is to stop spending. But politicians don't have the political will to address the real problems of OUR socialist programs (Medicare and Social Security). Ipad's, Green Jobs and Cash for Caulkers wont save us.
TARP was a Faustian bargain that many Politicians took. Obama, Ben Bernanke, Tim Geithner, and Steve Boulton can claim that TARP has saved us, but it hasn't. It was a fool's bargain and instead of his soul, Bob Bennett paid with his political career. He is the first political casualty of the financial crisis, but this crisis is by no means over, and he won't be the last. |
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On Bailouts and Sen. Bob Bennett
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FASB changed that rule, not Obama. I agree though, if they were marking to market, they would be gone. That's what we need to end this crisis. Liquidation and a fresh start. |
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On Bailouts and Sen. Bob Bennett
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I understand. Liquidating bad assets would be painful and would likely shrink GDP due to the bankruptcies of the TBTF's. But this correction would be quick, would allow folks to open new accounts in regional and local banks (through FDIC insured deposits) which would create a massive influx of deposits in these good banks that would stimulate lending and get the economy going again. I'm not saying it wont be painful, just that it would heal the economy much faster.
But the more we bail-out the TBTF's, the harder the eventual day of reckoning will be. A truly conservative leader might consider taking the pain now, managing the consequences and getting the country back on sound economic footing rather than extend more bailouts and pretend that we can grow our way out of this problem. The more we delay, the more we will spend on stimulus, which wont pull us out of this deflationary death spiral but will hasten the eventual collapse of the entire economy due to a currency crisis. |
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On Bailouts and Sen. Bob Bennett
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"The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history. " - Ambrose Evans-Pritchard
Steve, if you want to defend TARP as an emergency measure that saved us and is making a profit for the country, you are just wrong. This crisis is by no means over and Citibank (and other TBTF's) is still insolvent without the government's intervention and the change to Mark to Market accounting. Foreclosures are going through the roof and if Citi still has exposure to sub-prime mortgages, they are going to be in trouble again. TARP didn't save us, it has only kicked the can down the road. The reckoning is coming and we will be bailing out Citi again (cuz’ that's what politicians do).
On the fiscal spending, this is linked to saving the banks just as much as the TARP was. TARP shored up Capital requirements to keep the banks solvent. The other half of the problem is to get banks lending again. The only way Keynesians know how to stoke the economy is to have the government spend, A LOT. The Stimulus was intended to boost aggregate demand, which it has for the past few months. But, this massive stimulus was not sustainable because it did not focus on small business, the biggest creator of jobs in our economy. As a result, Banks aren't lending to small business because they found it easier to simply finance the stimulus by borrowing money from The Fed at 0% interest to buy US treasuries. Free money for the banksters and a contraction in M3 for the economy. Exactly the opposite of what Ben Bernanke, Larry Summers and Tim Geithner wanted.
Now, if you want to criticize me for mixing Monetary emergency measures with fiscal stimulus, fine... but the bigger theme I am trying to explain is that ALL of this insane Keynesian intervention is bad for the country in the long run. The banksters get saved while taxpayers bend over and accept the risk, the debt and the ultimate downturn in the economy related to... all the INTERVENTION!
This is not a Democrat or Republican thing. This is how our system works. Nixon said, we are all Keynesians now. We are... and unfortunately, this system of plugging holes in a leaky ship is starting to fail!
Whether we are talking about TARP, Fed Policy, Stimulus bills, Cash for Clunkers, Fannie and Freddie, FHA, failed regulatory schemes, domestic spending programs, quantitative easing, and now interventions in foreign economic crisis, the premise is the same. All of this intervention is facilitated through the manipulation of money and credit by the Federal Reserve.
Before The Fed, sure there were economic shocks and banks runs. The Fed was supposed to cure all of that and save us from these economic panics and shocks. However, since 1913 the National Bureau of Economic Research lists the following number of recessions: 1918–1919, 1920–1921, 1923–1924, 1926–1927, 1929–1933, 1937–1938, 1945, 1948–1949, 1953–1954, 1957–1958, 1960–1961, 1969–1970, 1973–1975, 1980, 1981–1982, 1990–1991, 2001, and 2007. Over that time, the dollar has decreased in purchasing power by 97%.
Each of those downturns were accompanied by Federal Government intervention EXCEPT the depression of 1920-21 which nobody talks about because no steps were taken by the government and the situation self corrected within a year.
To sum things up, I think people are beginning to ask themselves if the Fed has really done the job it was supposed to do? They are also asking whether going deeper into debt to try to plug the holes in this ever sinking ship that is our economy is wise or not. Printing money won’t solve our problems. Adhering to sound economic principles will. People are waking up to this message and are seeing through the propaganda that The Fed is good and will save us from disaster. Today, more and more people are beginning to realize that The Fed is the cause of the disaster.
RECOMMENDED ACTION: STOP intervening, liquidate bad debt and wind down the TBTF's which are insolvent. Let the free markets correct, which will be painful but quick and the economy will repair itself.
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On Bailouts and Sen. Bob Bennett
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AND VOTE THE POLITICIANS WHO SUPPORT THINGS LIKE TARP OUT OF OFFICE! |
