Bailout Supporters: Why do you hate the Dollar?

[JackRiddler]

The plunder plan foresees the US government borrowing $700 billion dollars (as it is already deep in deficit for a comparable sum, and refuses to raise taxes on anyone or anything to finance the plan). That's about the size of the current Pentagon and war budget, which have already wasted the domestic product. Again, it's greater than the present record-setting US government deficit and interest payments.

This money is to be spent in purchasing mortgage-backed securities that have gone bad as a predictable consequence of being bad (and over-issued) in the first place. Everyone issuing these securities understood that the game would end in a crash, and they played in the hope of reaping fortunes and getting back into cash and solid assets before the other players did.

It might make sense for the US to buy equity in the banks involved, but what we're going to get is an awesome flood of trash they cannot sell on the open market, where the prices of most of these securities are never going to go up again. (The government can then foreclose on the mortgage holders, so that everyone can blame the government for that instead of the banks.)

Underplayed in discussions on this is that the $700 billion will be raised by holding the largest single set of T-bill auctions in history. What if, for the first time, an insufficient number of buyers appear? What happens to the dollar then? What happens to the government's credit rating?

The scaremongering has gone entirely to the favor of the plunder plan, with warnings that credit markets will collapse overnight, Sonic won't get credit, etc. etc. But the far likelier fear scenario is that the dollar will receive a deathblow thanks to the bailout.

First of all, what do you think the financials who receive the real money in exchange for their junk are going to do with it in the present world economic situation? Are they going to reinvest it in the industrial economy, or the energy conversion? Ha ha. They will cover other bad bets in derivatives and CDS. They will disappear everything they can offshore, put it into euros and gold and solid commodities, and enjoy their final getaway cash as they watch the dollar fall, hundreds of banks fail anyway, and the US goes into depression.

(No oversight can control this, short of actually buying equity and sitting on the boards of these banks and having a policy that directs how these banks invest money and issue credits. None of that is in the plunder plan proposal.)

Look at it from the perspective of large foreign institutional investors who might buy the $700 billion in T-bills to finance this plan: why should they? They see a US government already near insolvency adding the largest increment ever to its debt, not using it for anything productive, exchanging it for a bunch of trash in the hope that this will forestall economic crisis by a few months.

Regardless of whether the T-bills are subscribed, the US government will then have to pay the interest on the $700 billion forevermore - generally, to many of the very same actors who a) caused the problem in the first place and b) received the bailout! We are in effect not only giving money away to this sector, but paying interest to it for the privilege. This will run hundreds of billions more.

Of course, soon enough those hundreds of billions will be worth jack, along with the dollar. I suppose that's a silver lining: since the debts of this particular banana republic are denominated in its own currency, it can relieve the debt burden by melting down that currency.

So I guess, applying the same sky-is-falling tactic of many of the pro-bailout posters on this board, this means that the plunder plan supporters desire hyperinflation. Bring it on?

And then, they can blame China and Japan and the Arabs and Europeans for not lending the $700 billion. We can scapegoat the world - maybe have a war with all of it to fix this mess. That always worked before, right?

So, bailout supporters, using your own form of argument: Why do you support hyperinflation, depression, and world war?

[JackRiddler]

1. To be clear: This is in response...

to the flood of DU posts from the crowd who say, support the bailout (plunder plan) or credit will immediately freeze forever and the world will promptly end and it will be your fault for having desired a crash and a great depression, you'll all be thrown out into the street, etc. etc.

I do fear the scenario described above more! Unfortunately, it's near certain that we will see whether it's valid, since the plunder plan will be railroaded through soon enough.

[Virginia Dare]

5. So what do you think will happen without a cash infusion?...n/t

[JackRiddler]

8. Quite possibly more or less the same crash...

But probably with less pressure on the dollar, and more resources for the government to do something useful afterwards.

The $700 bn is peanuts compared to the unwinding of the CDS and derivatives markets. The market has screwed the pooch, and the market will find a way to dealing or not dealing with the consequences on its own. Large-scale failures and temporary credit freezes are preprogrammed.

Now I get a question: What do you think will happen to the $700 bn in real cash once it's traded for toxic paper and ends up in the hands of the proposed recipients in the financial sector? What will they do with the $700 billion? Do you think it will be used to free credit markets, and to what end?

[Virginia Dare]

10. I don't see any good options..

I guess it goes to the old saying it's the devil that you know. I realize that by infusing the market with cash and buying these toxic debts that we will kill the dollar and we'll be talking about massive inflation. The big unknown to me is what happens if we don't do that, and we let the market correct itself, which it will. Are we talking about DEflation? To me, that's worse. I don't know, and since none of us have a crystal ball that works, it's impossible to say. Do you want to hang or be shot?

[JackRiddler]

Shot, no question!

;0

[sweetroxie]

61. Here's another view and another option

This comes from a financial newsletter I receive:
http://www.moneymorning.com/2008/10/02/senate_bailout_bill/

Thursday, October 2nd, 2008

Heads I Win, Tails You Lose: Why the Senate Bailout Bill Will Fail Taxpayers
By Shah Gilani
Contributing Editor
Money Morning

My sister lives in a landmark building in Coral Gables, Fla. There was a fire in one apartment in the building. After that fire was brought under control, the fire department - for some unknown reason - dropped a hose in the burned apartment, and left the water running … for hours.

That inane maneuver destroyed many apartments, crippled the building’s infrastructure and resulted in the building being temporarily condemned. The entire building was closed down for many months. Every person who lived there had to relocate. My sister, fortunately, had the wherewithal to take up temporary residence in the world-famous Biltmore Hotel.

But others weren’t so lucky.

With the banking-system bailout plan, formally referred to as the "Emergency Economic Stabilization Act of 2008," the financial-crisis firefighters at the U.S. Treasury Department are proposing a similar maneuver - and we can expect a similar outcome. Unfortunately, for the U.S. taxpayer, there’s no Biltmore in which to seek temporary shelter. There’s only one U.S. economy, and we have to stay in it, condemned or not.

Treasury’s Eight-Point Plan - for Failure

In plain English, here’s what’s wrong with the proposed plan and what alternatives should be immediately vetted and constituted into a new plan.

The Treasury plan was originally predicated on buying $700 billion of collateralized residential mortgage-backed securities that banks could not unload. The idea was that the banks would get the money, which they could then turn around and lend to keep the credit markets open and credit flowing throughout the economy. In the meantime, the Treasury Department would sit on the securities until it is able to sell them, hopefully at a profit. The idea, from a theoretical standpoint,isn’t stupid. It is, however, impossible to implement to any degree that will result in its intended effect.

Here’s why:

There are more than $1 trillion worth of subprime collateralized mortgage-backed securities out there - and that’s just one type of problematic derivative security. The bottom line: $700 billion isn’t enough. Period.
The purchase plan is not limited to just residential mortgage-backed securities. Surprise! What else will Treasury buy?
Who’s going to fight off the lobbying groups out to influence the managers that the Treasury Department hires to direct money to their masters? Did we mention that $700 billion wasn’t enough?
The government plan is even more under-funded than people realize, for it doesn’t authorize the full $700 billion: Indeed, it starts with only $350 billion, leaving an even greater shortfall. Did we mention that $700 billion wasn’t enough?
Treasury is going to hire banking-industry managers to manage the process. Those managers are going to serve themselves - just as they served themselves to get us into the crisis.
There is no defined mechanism to determine what price the Treasury Department will pay for what it buys. For argument’s sake, even if Treasury were to only buy the problem securities its leadership speaks of in public - residential mortgage-backed securities - there are problems if it prices them too low: If that happens, some holders won’t sell them, taking the chance that if they hold them long enough they will be worth more than Treasury is willing to pay. How will those financial institutions regain liquidity if they won’t sell the securities needed to make this happen?
Since Treasury can’t buy all the problem securities, if it prices what it’s going to buy too low, all remaining holders will have to mark down their holdings and take more write-downs and losses. How will that create confidence and facilitate "liquidity"?
However, if the Treasury Department prices the securities too high, several problems quickly emerge: Hedge funds will rush to sell their current holdings, and may very well speculate by buying up more securities to sell them at a higher price (profit) to Treasury, meaning that the Treasury Department plan won’t necessarily be helping banks directly. What’s more, if those securities are priced too high, and the market for them continues to fall, taxpayers will eat the losses - a reality that likely will lead to an end to further program funding.
The "Heads I Win, Tails You Lose" Bargain

How are the Treasury Department and the U.S. Federal Reserve going to be able to conduct objective, responsible policy regarding fiscal matters and interest rate decisions when they will have to simultaneously "manage" the government’s portfolio of securities? There will be conflicts and there will be fallout for the U.S. dollar and fallout with regard to American interests vs. the rest of the world, with whom we trade and partner with in all manner of ways, not the least of which involves our own national security.

While the idea that taxpayers should get warrants and ownership in the entities that we buy securities from is theoretically a good idea, there are some issues. Let’s take a look at some of the biggest potential pitfalls:

Foreign banks aren’t going to be thrilled about that; yes, they are included in the list of whom the Treasury will buy from.
Are taxpayers going to be limited partners in hedge funds? What if those hedge funds implode?
The U.S. Treasury Department could end up in control of our banks. Considering how well they run the government’s fiscal house, is that what we want?
Who is going to decide when to sell any of government’s ownership interests, should they turn out to be profitable? Will we own these businesses forever?
Is government going to control private enterprise? Is this a ruse? Are we heading into an era under the stewardship of a socialist government?
There is no direct support for homeowners in the plan and no support mechanism for falling home prices. And yet, these twin evils are the root causes of what has happened.
Now the U.S. Senate has rushed through a modified plan. It’s just another hose from the same firefighting gang that can’t shoot straight; which will further douse the prospect of a directed approach.

What do the following Senate and House proposed additions to the plan actually do to address the credit crisis, and what do they have in common?

Extend unemployment benefits: That’s super - so when we’re all out of our houses, we’ll have enough unemployment to stay at the Biltmore for a day or two.
A $1,000 tax deduction for homeowners who don’t itemize. Great, I can buy a cheap inflatable raft to float away on the red ink that flows out of my house.
A reduction on the tax on dividends repatriated from foreign earnings. What?
Economic stimulus measures - such as spending on transportation projects. That will actually help; if they build canals around my house, when I float away on my red-ink raft, at least I won’t end up in uncharted waters.
Increase Federal Deposit Insurance Corp. (FDIC) deposit-insurance-coverage per bank account from $100,000 to $250,000. That would definitely calm nervous bank depositors, especially all those who have more than $100,000 in their many accounts. Personally, I wish I had that worry. Do you?
What is the common denominator to all these add-ons? They are meant to be added up so that Congress can say: "This is how much we’re going spend to help fix the problem that will benefit you, not just the $700 billion going to Wall Street." Don’t buy into this.

However, my very favorite proposal is the push to do entirely away with fair-value - mark-to-market - accounting. This is being pushed by none other than the American Bankers Association and, guess who else - the Securities and Exchange Commission (SEC). The same SEC that presided over the demise of The Bear Stearns Cos. (now part of JP Morgan Chase & Co. (JPM)), Lehman Brothers Holdings Inc. (LEHMQ), and American International Group (AIG). It’s the same SEC that eliminated the up-tick rule. And it’s the same SEC that handed over to the exchanges the authority to decide who should be on the "do-not-short" list.

The truth that needs to be front-page news it that if there wasn’t Fair Value, mark-to-market accounting we would never have seen this crisis coming. Doing away with mark-to-market accounting does not change the value of problem securities. Period. Doing away with mark-to-market will only bury the bodies under the rubble. The stench will eventually suffocate us all…to death.

A Real Solution

On top of the list of solutions should be an immediate address of:

Regulation.
The nature and existence of problem securities.
A means of accurately and transparently pricing those problem securities.
A cleanup of attendant problem instruments (credit default swaps) that are massively contributing to the problem and - in and of themselves - are sinking the U.S. economy.
The need to facilitate an accounting aide - short of eliminating mark-to-market accounting - by directly addressing how banks can still hold these problem securities and not have to incur unrealistic write-downs and losses.
A means of allowing problem securities to be used as collateral when borrowing from the Fed.
A method of helping homeowners directly.
A strategy that will support the housing market with sensible tax and capital gains policies.
The problem right now is that we’re being force-fed a political solution in the immediate glare of an election, instead of a sound economic, market-based solution to a financial crisis.

The 228 House Representatives who on Monday put aside political pressure to heroically vote against a flawed plan need to take the lead in this firefight and offer up an alternative plan. It just so happens there’s a good one out there. The problem is that it doesn’t serve the "Masters of the Universe," the lobbyists, or the politicians who are paid off by both.

[neverforget]

2. Spot on! For every action there is an equal and opposite reaction.

[chicagoexpat]

3. Gosh! I didn't kow Obama, Warren Buffet, etc, were all warmongers! Thank U! UR brilliant! &

& also want there to be a depression and inflation and the sun to go out!

Good Work! The McCain campaign & their internet forces appreciate your efforts -- http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x7269132


But please, don't go out w/o ur tin foil helmet... them black helicopters are probably circling ur house

[JackRiddler]

4. Illogical, diversionary nonsense post.

McCain also supports the plunder plan, which Bush and Paulson proposed, so by your logic I guess you're working for them.

I talk about the issuance of T-bills to cover the $700 billion, and the impact this may have on the dollar; and I mention none of the nonsense keywords you inject in an effort to prevent the use of brain cells (in this case: your own).

& Thanks for establishing that you have no actual argument.

[chicagoexpat]

28. Will u pleez jump into the prez race? An idiot like Obama will surely lose!

[Greyhound]

37. Case made.

It is good that you leave thinking to those with the inclination and talent to do so.

[chicagoexpat]

53. yessss,, koochie is such a respected and effective leader... what was the last bill he got passed,

anyway>

that's why the dems nominated him, cause he makes such good choices.

& why they all hate Obama

[Greyhound]

71. So, whaddayathink? 14 years old in his Mommy's basement on Lake Shore? n/t

:rofl:

[SammyWinstonJack]

74. !

:spray:

[depakid]

6. Well gee, in the midst of all this, the dollars been making very healthy gains

against other currencies.

Care to explain how that jives with your theory?

[JackRiddler]

9. Did I miss something?

Did the government put up another $700 bn in T-bills for auction yet? Please remember this when the time comes.

For now, capital has fled from the stock market to T-bills, shoring up the dollar. You should be asking, where will it go next?

[Virginia Dare]

11. Once interest rates start rising, that will reverse though...n/t

[JackRiddler]

12. Yay! We can have the 1970s and the 1930s at the same time! nt

[Virginia Dare]

14. Get out your top hat and tails AND your platform shoes!...n/t

[depakid]

13. and other nations lower rates

and are already suffering contractions. Much about currency markets has to do with relative economic measures.

[JackRiddler]

15. True that it's relative...

At the same time, if the government backing a particular currency should be judged insolvent, relative goes out the window - along with its currency.

[depakid]

18. Here's a curious note- the Aussie was close to parity in July

Since then, with only one small rate cut and no cuts on the US end, its fallen to close to 78 today (from a high of 98 in July).

Note: a 4 month CD in Westpac pays around 7.5% per annum.

[girl gone mad]

23. Europe and Australia had worse bubbles..

than we did.

It's Asia that we need to worry about.

[girl gone mad]

22. This Fed wants to lower, not raise.

They refuse to raise under any circumstances.

[Virginia Dare]

41. They don't have a choice, it's out of their control now....

they kept it artificially low for so long, now we'll see it explode.

[ww2player]

26. I'd say it is a downpayment on a kickback.

Dollar Intervention Risk `Meaningful' on Volatility (Update3)

By Ye Xie

http://www.bloomberg.com/apps/news?pid=20601083&sid=a.bfBX1EE59Q&refer=currency

Sept. 29 (Bloomberg) -- A growing number of currency traders and strategists are starting to speculate that finance ministers from the world's biggest economies will join to support the dollar.

Volatility in currencies is the highest since 2000, when the so-called Group of Seven nations last intervened in the foreign-exchange market. The dollar weakened 2.5 percent on a trade-weighted basis in the past two weeks as the turmoil on Wall Street intensified. It had the biggest one-day drop against the euro since 2001 a week ago.

While the dollar strengthened 9 percent from its record low against the euro on July 15, wider price swings threaten to undermine confidence in the U.S. currency just as government borrowing rises and U.S. lawmakers prepare to vote on Treasury Secretary Henry Paulson's plan to bail out the nation's banks. The greenback is still down 23 percent since 2005.

``We're getting closer to the right conditions for authorities to step in and prop up the dollar,'' said Maxime Tessier, who manages $151 billion as head of foreign exchange in Montreal at Caisse de Depot et Placement. ``The nightmare scenario will be a wholesale loss of confidence in the dollar.''

The dollar rose to $1.4337 per euro at 8:26 a.m. in London from $1.4614 on Sept. 26 after weakening 2.7 percent in the previous two weeks. The broader U.S. Dollar Index was at 78.202.

Even a hint that finance ministers might influence exchange rates may be enough to set a floor under the currency after efforts by the Federal Reserve, European Central Bank and Bank of Japan failed to revive investor confidence by injecting more than $1 trillion into the world financial system.

more at link.........

[JackRiddler]

34. Guess this answers my question...

Sounds like the central banks intend to make sure the $700 billion in T-bills is bought and, as you imply, expect to get a large chunk of it back by having their own financial sectors unload toxics on to the US Treasury. Even if so, where does it go after that? And what happens the next time the US gov has to issue T-bills? Will it be for another kickback of this kind? How long does the money-go-round go round?

[RainDog]

7. this summer I assumed the dollar wouldn't fall further

but, as of this bail out that seems will pass, I no longer think that.

[truedelphi]

16. BUt the Sky is falling!! And only by handing Paulson a large number of Hefty Bags

Filled with the entire monies for the entire Federal budget for the next fifty years can we avert its fall!!

Our Congressional leaders know what they are doing. Don't you remeber how they saved us from the Eastern seaboard being covered in Saddam Hussein's mushroom clouds!?!

[JackRiddler]

17. Well, if you buy whatever US junk paper the Chinese hold...

That's one way to encourage them to stay in T-bills...

SEC. 112. COORDINATION WITH FOREIGN AUTHORITIES
4 AND CENTRAL BANKS.
5 The Secretary shall coordinate, as appropriate, with
6 foreign financial authorities and central banks to work to
7 ward the establishment of similar programs by such au
8 thorities and central banks. To the extent that such for
9 eign financial authorities or banks hold troubled assets as
10 a result of extending financing to financial institutions
11 that have failed or defaulted on such financing, such trou
12 bled assets qualify for purchase under section 101.

Double down, baby! All in!!!

[Virginia Dare]

19. I suspect the Chinese are more than just casual bystanders....n/t

[AntiFascist]

35. I've heard that recently they've threatened to start unloading...

this is what we should really be afraid of. Paulson, in his Bush-like unitary decider way, just wants the damage to be double bad.

On edit: I refer you to the Great Depression. Many feel that the Fed made-it-happen-on-purpose in order to consolidate banks, and for the super-wealthy to be able to buy up valuable stuff for cheap. The People be damned.

[Virginia Dare]

38. If Congress gives him this money..

they better make damned sure they are in control and not him and not the Fed. I hope we aren't doomed to make the same mistakes again.

[truedelphi]

45. In our funny little Banan republic, it it not that we are condemned

To make the same mistakes, it is that our elected "leaders" are bought out to make them. Again and again.

And Paulson and the Fed having all this money will just provide that much more money for that mcuh more purchasing of votes in Congress.

[LanternWaste]

20. odd that we appear to have...

Odd that we appear to have so many more secular preachers these days, experts in economics all of 'em, telling us with fist raised in indignation, what is or is not in the absolute best interest of humanity, and to refuse that commandment is to spend an eternity in hell. Telling us who we hate and who we love.

Even telling us who the pharisees are, and who the True Prophets are. Prophesying in a manner that would make the Apostle Paul jealous in both form and function, of the End Times-- full of the hyperinflation (and rumors of hyperinflation) we are creating for ourselves. Giving us the choice of doing it their way-- the way to peace, or any other way (and here there be dragons).


Amen, Hallelujah, and pass the beans.

[JackRiddler]

21. I don't believe in end times and I'm not certifified in economics...

which may be advantageous to seeing clearly, since I know class war when I see it.

[LanternWaste]

24. Everyone's an expert in something these days...

Everyone's a self-acknowledged expert in something these days...

[ww2player]

27. Most - not all-of the experts were bought off

or they were part of the crooked system to begin with.

It is time for common sence to reign. Our system is screwed. Pooring more money down a drain isn't going to solve the problem till the plumbing is fixed. And they say they will "fix" the problem "AFTER" they spend the money.

[truedelphi]

30. Big Welcome with warmth and extended arms

And plenty of my extended opinions

I certainly agree that common sense has not been in a huge supply over the last thirty years.

And the people with honesty and common sense have been shoved aside in favor of the well dressed mob with their lies and their financial "expertise"

[fla nocount]

31. As acting chair of the Surly Curmudgeons @ DU I bid you WELCOME

from both of us. Flushing again before fixing the plumbing is the best analogy I've heard in a long time.

[LanternWaste]

62. And you know which...

"Most - not all-of the experts were bought off..."
And you know which are the pharisees and which are the prophets, I take it? That little irrelevancy of yours aside...

I imagine applying the layman's common sense to Particle Physics would be just as valid as applying it to Economics-- as both are very complex, very esoteric, and very in-depth.

And although the lay person can quite easily deal with basic dollars as well as basic motion, I imagine the layperson who does not comprehend "distributed information as it applies to new institutional economics" or the precise validity of post-war interventionist monetary and fiscal policies, would not comprehend the relations of electrons to absorption, spontaneous emission, and stimulated emissions either.

As I don't like to appear stupid, so I readily admit to having little to knowledge of either...

Common sense is just that-- common. Applying the common to the esoteric assists us in advertising our ignorance more often than not.

[JackRiddler]

72. Are you pretending the various economists and "analysts" don't have dogs in this fight?

Almost all of the analysts on TV are employed either by a network to do the same schtick over and over, or else a bank or a corporation or a think-tank with an explicit interest. Very few are independent academics. So please! Economics cannot be compared to particle physics in terms of objectively measurable, repeatable inputs and outcomes. Contrary to misconceptions of the Heisenberg principle, what people think and feel -- or panic about, or create fear over -- does not directly affect particle behavior, in the way that it affects markets. There are no particle physicists who control more particles to affect outcomes, the way the wealthy and big institutions possess greater capital with which to try to effect their will in markets. This is not to say that the world of physics is immune to politics, ambitions, and false paradigms, but if particle physicists try to fake results, the way governments fake growth and employment figures, they will be caught quickly and with near certainty. Particle behaviors, either now or 10 billion years ago, are not subject to institutions that arose through the vagaries of recent human history. In short, economics is more like an arena of battle among conflicting interests, rather than a discipline studying the natural world, although the latter aspect also exists. But if you wish to apply scientific principles, then the first thing you basically have to do is disqualify the majority of certified economists who developed and approved, or celebrated and did the hard-sell for the financial practices that predictably led to the current predicament. And if they became rich thanks to these practices, that doesn't make them experts but again, partisans of their own interest. Unlike the majority of investors, certain economists may know how outrageously complex lending systems and bizarre derivative vehicles work -- making it all so complex was part of the problem, obviously, and became a breeding ground for scams -- but that doesn't leave any single one of them immune to the simple question: Whose side are you on?

[LanternWaste]

73. I'm confident enough of my ignorance

I'm confident enough of my ignorance to understand that I don't have absolute knowledge of the inter-related concepts, the players involved, or even what side I'm on.

I'm forced to conclude that the vast majority of DU'ers have either a) a phd in economics, or b) complete and absolute knowledge of each persona dramatis, their agendas, and their intent.

Bully good for all of you who have that absolute knowledge. Bully good for all of you for standing at the pulpit, putting on the collar, and preaching to us-- the apostates and heathens who don;t pretend to understand.

But again, please forgive me if I don't put a couple of bucks in the collection plate as it passes, because as confident as I am in my own ignorance, I have even more confidence in the ignorance of others.

[JackRiddler]

77. Funny that the one who most sounds like a preacher here is you...

Claiming ignorance, but implying deep psychological knowledge of others anyway; repeating same points you came in with, regardless of what is said in reply. Claiming ignorance is often seen as a way of professing greater wisdom, leaving questions in "god's hands."

Anyway, if this is all so tough to understand, so unknowable, that's an argument against rushing the bail-out -- especially when so many of the experts who supposedly know so much better are also against it.

[soulcore]

25. You sir, are spot on! n/t

[fla nocount]

29. What we have here is the classic S/Delta response pattern.

Behavior responding to abstract hopes, fears, threats and promises of pleasure/pain, gain/loss, contentment/anxiety, etc. ad nauseum. House cats have perfected it and prostitutes use it to pay the rent.

The solution is to simply not play, just ignore aberrant, destructive, negative behavior. Starve it by ignoring it, it will go away. The world has grown too small and we too many to support the notion of "the many" maintaining the "special few."

It is class warfare and the koolaid quaffers here wanting our grandchildren to fund what is at best a stop-gap measure to perpetuate an effed up situation that has been escalating since the Reagan administration are playing Squealer's role to Snowball's needs to the detriment of Napoleon.

Some people were neglected as children, the character allusions are to Orson Welles' "Animal Farm"

[Spike from MN]

76. Class warfare indeed.

This whole thing is just another way to shift money from the poor and working class to the rich.
That's been their goal from the start.

Bush’s tax cuts and other measures favoring the rich led to the biggest redistribution of wealth from poor to rich in American history. The result was that the wealthy—the investment class—had more money to invest, or lend, than there were people and businesses looking to borrow.

The easiest way to bring more borrowers into the system—and to create more of a market for money—was to promote homeownership in America. This is precisely what the Bush administration did, touting home ownership as an American right. Of course, they weren’t talking about home ownership at all, but rather pushing people to borrow money tied to the value of a house.If people could be persuaded to take mortgages on homes, real estate values would go up for those already invested (like land trusts and real estate funds) and banks would have a market for the excess money they had accumulated.

...

Lots of people take out mortgages, and housing prices rise. This is used as evidence to convince more people that real estate is a great investment, and more people buy into the housing bubble. Lots of these people put little or no money down, and buy mortgages whose interests rates are going to change for the worse. But they believe the price of their home is inevitably going to go up, and pin their futures on the idea that they can refinance their mortgage before their rate changes. Since the house will be worth more, the mortgage for what they owe should be easier to get; it will represent a smaller percentage of the new total cost of the house.

Of course, this was dumb. Banks didn’t really care (because they weren’t holding the bad paper) but the people investing in those “mortgage-backed securities” were slowly getting wise to the fact that many of the borrowers were in over their heads. What to do? The credit industry went ahead and lobbied Washington to change the bankruptcy laws. While corporations could claim bankruptcy and stop paying for their retirees’ health coverage, individuals would no longer be able to claim bankruptcy, and even if they did, they would still owe their creditors the money they borrowed, forever. The credit industry spent over $100 million lobbying lawmakers for the new provisions.

http://www.boingboing.net/2008/09/30/riding-out-the-credi.html#more

Apparently, just getting MOST of our money wasn't good enough for them. Now they want ALL of it. And if the bailout bill passes, they'll get it.

[Donald Ian Rankin]

32. Actually, dogmatism in factual matters makes far more sense than in religious ones.

In science-side subjects like the crunchier parts of economics, right and wrong are actual objective, testable criterion. Prognosticating about the future is a perfectly reasonable enterprise, and one can - if one knows enough economics - work out who are the "false" and "true prophets".

[depakid]

33. random events can play havoc even with Nobel Prizewinners

as the guys at LTCM found out the hard way!

[LanternWaste]

66. And there are so few who do

"...if one knows enough economics"

And there are so few who actually do, and yet many who profess to.

I imagine it takes a lot of faith to separate the chaff from the wheat in these instances when so many of us state, with an absolutism worthy of the pope as to who the money-changers are...

Prognostication is a fine endeavor. However when that prognostication is stated as fact as is done so often with these esoteric disciplines we have little knowledge of, it becomes the same, tired shtick many fortune-tellers use. And should be, I think afforded the same credibility-- no more nor no less.

[KG]

36. i've got my wheelbarrow to tote my millions to buy a loaf of bread!

[Virginia Dare]

39. I'm going to go out and purchase one of those bread making thingies..

that's got to be cheaper doesn't it?

[fla nocount]

42. Buy a used Kitchen-Aid on E-Bay, incredible what it will do.

You can probably fit enough money for flour in a back-pack.

[Virginia Dare]

44. Thanks for the advice, I will look into it..

not that I eat that much bread, but you never know what we'll be faced with.

[fla nocount]

48. The gentry will buy hand made goods. I'm doing it now at a rather

upscale farmer's market in Orlando Metro. This has been coming for a long, long time. Bread, jams, jellies, folksy stuff that commissioned associates want to display at your booth...you get to dip your beak...be fair.

My goal is whatever you need at a fair price with old time value and service under a really big tent...my tent, where I supply the infrastructure and make my living from dipping my beak.

Sounds like the same old shit doesn't it? Except I'll be fair, if I'm not I'm toast. People that make their livings with their own hands suffer fools lightly and will screw those who screw them. Be fair, be different. Only the unfair and the unskilled face a holocaust, it will be THE END OF THE WORLD, as THEY know it. We just want to be there to suck up the wealth they have left selling them the things that they could provide for themselves.

[debbierlus]

40. Shhhhhhsh - Didn't you know - we are now Obamabots - unable to question anything he supports

A slap on the wrist for you.

Bad.

[fla nocount]

43. Ten points from Slytherin. n/t

[sniffa]

51. Weird to see a post like this on DU at this time

[JackRiddler]

52. These are weird times.

[scarletwoman]

46. I catch a little TV news in the morning while I get ready for work. I listen to NPR on the way

to work. At work, CNN is on the TV in break room. I listen to NPR again on my way home from work, and then I watch the evening TV news at home.

So, anyway, one of the refrains that I've been hearing repeatedly is that if the credit markets aren't rescued, soon small businesses will fail because they won't be able to get loans. And college students won't be able to get student loans. And ordinary people won't be able to get mortgages to buy homes, won't be able to get car loans. Etc.

And I keep wondering -- why not put some of that $700 billion into the SBA and put together a program that would assure that small businesses can borrow what they need?

Why not put some of that $700 billion into the Sallie Mae student loan program that would guarantee that students could get the college money they need?

Why not put some of that $700 billion into the FHA so people could continue to get mortgages?

Why not use some of that $700 billion as a capital infusion for community banks and credit unions so they can confidently grant car loans and loans for other big ticket purchases and home improvement and such?

Why does help for Main Street HAVE to go through Wall Street?

I really hope someone will explain why, because it seems to me that if Paulson, et al were REALLY concerned about the economic repercussions of the credit freeze for Main Street, they could simply put the money directly into the programs that benefit Main Street.

sw

[JackRiddler]

47. Excellent points, all...

At best, it's the trickle-down mentality still ascendant. Which is often a codeword for the hidden motto: All for me and none for everyone else!

As you say, if they want to assure liquidity for Main Street, they can do that by providing liquidity to Main Street!

It's occuring to me that the hidden international pressures might be overwhelming. Contrary to my initial thoughts, the bailout is a dollar killer, but perhaps not immediately. For the moment, the internationals have to go along in the hope that they can effectively trade some of their exposure in toxics for T-bills. But the next debt issue that rolls around, or the one after that, they're going to chuck. The fundamentals are going to be made that much more unsound after this...

[scarletwoman]

55. Thank you. In case you're interested, I turned my post into an OP

I have some questions about the "economic crisis" that I haven't seen anyone ask.

The thing about the dollar -- I'm not quite sure what to think. Look at the way it's tied to oil. Will OPEC, at some point, decide to stop trading oil in dollars? If the dollar ceases to be the world's default currency, what then?

sw

[BzaDem]

49. That is exactly the same argument RWers use to attack any form of government spending/intervention.

Inflation! Inflation! Inflation! We want our 10 billion to remain 10 billion!

(I think McCain even once said the only problem with health care is inflation.)

[JackRiddler]

50. No, it's not.

You'll probably admit they invoke that argument with any sum for any program they don't like, in other words, pretty much everything except the Pentagon.

In this case, we're talking about a total as great as the entire Pentagon budget. And this total isn't going into infrastructure, investments, wages, relief or other potential pump-priming, or anything that benefits the real economy and thus provides a return in the form of taxes; it's not even going into missiles! The sum is also highly unlikely to provide a return through the resurrection of the toxic assets purchased. All this makes for a huge quantitative and qualitative difference, especially given the already difficult situation of the US economy and the dollar.

So depending what they say, some Republicans might be right about this, insofar as issuing infinite money that is thrown down a bottomless hole and provides no return will, in fact, devalue the dollar -- as it has, until now, with the money thrown down the other bottomless holes of the Pentagon and the Repbulican deficits.

[roamer65]

54. Jobs are more important than any currency.

If you are so concerned about preserving wealth, go buy gold. Gold is the "uncorruptable currency".

[JackRiddler]

56. Okay, please explain how purchasing junk MBS paper will perserve jobs.

Thanks.

[JackRiddler]

58. Well?

[depakid]

57. Food for thought:

The dollar rose against the euro, approaching a one-year high, after the Senate approved a $700 billion bank-rescue bill, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets.

The U.S. currency also gained on increased demand for dollar funding outside of the nation, reflecting the reluctance of banks to lend to each other. The euro traded near a two-year low versus the yen on speculation European Central Bank President Jean-Claude Trichet will say the shortage of credit reduces the need for higher interest rates at a meeting today.

``Market consensus is that the U.S. bill will eventually pass in some kind of form, while Europe hasn't yet taken steps in a unified manner,'' said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan's fifth-largest bank. ``The package is likely to reduce worries over the U.S. and bolster the dollar.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=awd79Y7IdQ10&refer=home

[JackRiddler]

59. Daily shifts in markets don't always signify for the long term

[depakid]

64. It's a trend, not a daily shift

[JackRiddler]

68. Some trends go for weeks, others for years...

How's the dollar done since 2005? We can split hairs about this all day. The point is that with the Paulson plan in current form the deficit will be doubled (plus) and interest payments will rise for the taxpayers, all for a purchase of failed securities, and the recipients won't be reinvesting that in economic recovery. Want liquidity? Want pump priming? Inject it yourself, in the classic New Deal fashion that actually worked. Don't trust Goldman Sachs and Co. to do it for you.

[depakid]

70. One would think- yet the data shows different

Relative economic power- or perception of it seems to be driving the trend, oddly as that seems.

[JackRiddler]

60. Will T-bill sale suck capital out of credit markets?

An interesting further take prompted by a reader comment on the Krugman blog.

http://krugman.blogs.nytimes.com/2008/10/01/bailout-narratives/

First of all, if this passes, there won’t be an Obama rescue, because there won’t be money left in the Treasury. Secondly, the Paulson plan will directly worsen the fall into recession (depression, actually, based on the A2/P2 spread). The current problem is a dire shortfall in working capital at useful durations (30 days or more). Issuing 700 billion in Treasuries will pull capital out of all markets. The Fed will then use it to buy mortgages securities, lifting the price of MBS and drawing credit into that market. All other credit markets will have less, including the working capital market and the credit card market. If we’re to blow our last 700 billion at least spend it on something that does some good.

In recent days T-bills have been a flight of first resort for much of the capital draining out of the stock market. Ironic if they will seem to be a better place for banks to stick it in lieu of providing the credit to the real economy that this "bailout" is supposed to prompt.

[daa]

63. Straw man argument

Care to explain to us how you have hyperinflation with deflating housing prices?

[JackRiddler]

69. Asset deflation and consumer inflation are sadly not incompatible.

[gravity]

65. The dollar has been gaining considerable value this week

[Javaman]

67. I hate HATE the dollar because it's sooooooo over rated!!!

:rofl:

[Marrah_G]

75. I also hate America and our Freedoms !

:eyes:

[JackRiddler]

78. Dollar rallies to 13-week high...

http://www.reuters.com/article/usDollarRpt/idUSN0329357520081003

FX OUTLOOK-Dollar rally to continue next week as crisis spreads
Fri Oct 3, 2008 4:13pm EDT

U.S. bailout plan passes, investors take profits | Video
Oil falls as demand concerns outweigh bailout
Stocks drop on economic concerns despite bailout
More Business & Investing News...

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 3 (Reuters) - The U.S. dollar is likely to continue rallying next week, with investors expected to snap up the currency in a safe-haven bid as the credit crisis spreads further around the world.

The global credit crunch will remain the dominant theme in the currency market even as the House of Representatives approved a revised $700-billion U.S. rescue package on Friday and President George W. Bush swiftly signed it into law.

The dollar fell after the passage of the plan and traders said it was more to do with investors paring safe-haven bids on the greenback as risk appetite improves. The dollar index on the ICE Futures Exchange, however, was still up 3.8 percent on the week, on track for its best weekly gain in 16 years.

...

[JackRiddler]

79. C'mon, isn't anyone going to come mock me about this?

;)

[JackRiddler]

80. kick