Rekjalhew

September 22, 2008

$700 Billion In Magic Money And Who Knows What Might Be Nationalized Next.

by @ 1:08 am. Filed under Business

An interesting article, best read in full.

Greenspan’s sins return to haunt us

Back in 2002, when his reputation as ‘The Man Who Saved the World’ was at its peak, Alan Greenspan, former chairman of the Federal Reserve, came to Britain to pick up his knighthood. His biggest fan, Gordon Brown, now the UK prime minister, had ensured that the citation said it was being awarded for promoting ‘economic stability’.

During his trip, Mr Greenspan visited the Bank of England’s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses. Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan’s face as he answered: ‘European insurance companies.’

Six years later, AIG, the largest US insurance company, has in effect been nationalised to stop it blowing up the financial world. The US has nationalised the core of its mortgage industry and the government has become the arbiter of which financial companies should survive or die.

Financial markets have an enormous capacity for flexibility, but market participants need to be sure that there are rules, and a referee willing to impose them. Permanent damage has been done to the financial system, despite the extraordinary measures of Messrs Henry Paulson, the US Treasury secretary, and Ben Bernanke, the Fed chairman, to address the problems that stem from the actions of their predecessors. As Mr Paulson has suggested, he is playing a hand dealt by others.

Basically now the government is trying to head off a collapse it knew was likely to come. And to head it off, the government gains more control and places more burden on taxpayers. But wait, taxpayers can’t afford America’s debt. Well, that’s why other nations are buying up America. See any of the many articles such as China eyes Morgan Stanley but fears US resistance. Sovereign wealth funds, with who knows who actually behind them are what is really picking up a tab the American tax payer could not even afford before the $700 that is being proposed. Where’s American money come from? It’s printed up and has no hard backing under it. So the economy slides, the government has more money printed and says all is going to be OK. Well as the MPC member who questioned Alan Greenspan knows, somebody has to pay for all this mess. And other nations including America’s enemies will pick it up by buying more of our nation, for pennies on the dollar.

Well what can be done to stop it? As Paulson stated, he’s playing the hand as he was dealt it. And he was given the job because it was known he’d play the hand as he’s playing it. We’re way past the point of talking about stopping. This nation’s economy stands on a magic foundation, but you already knew there’s no such thing as “magic”.



15 Responses to “$700 Billion In Magic Money And Who Knows What Might Be Nationalized Next.”

  1. Albertadude Says:

    You know, its times like these I wish I had paid closer attention to those Economic and Financial courses I was taking in my Post Secondary education whilst becoming an Accountant!! Lol…

    Honestly, I haven’t a clue what is going on and I have never understood how wallstreet works or anything economic..

    I know the basics….keep taxes low…do not spend what you do not have…that’s about it..

    But in my research this past week on Conservative Blogs and Political sites, the consesus seems to be that we are in grave trouble…and I am hearing that from secular folk..not just Christians..

    I heard one person compare this to our economic 9-11!! Yikes…some are saying this could BE worse then the fall of 29….

    I don’t know myself…but I do know this…if things do take a horrible course economically, along with everything else, you can be darned sure the World will be crying out for some Wise Leader to lead us out of the current mess we are in…

    In otherwords, a perfect setting for the Anti-christ isn’t it!

    For the first time in my life..my 44 years, I have a bad feeling that we are in for some life changing events and I don’t mean the good kind..

    For us who know the Blessed Savior, we know what is coming….but Oh Lord…there is going to be some bad times for us who stand for the Truth…

    Dev

  2. KyleAndrews Says:

    Let me brake it down for you.

    GDP = 13.8 Trillion

    National Debt = 10 Trillion +5.3 Trillion (Fannie Mae)+85 Billion (AIG)+ 700 Billion (Bail out) – 16.085 Trillion.

    Our current Debt of 16.085 trillion exceeds our Assets (GDP) of 13.8 Trillion.

    The USA is now functionally bankrupt. Do the math. Debt exceeds assets.

    But the problem gets worse. These newly printed dollars have to go somewhere. This is monetary inflation which will result in massive price increases across the board for everything. However it gets even worse. We no longer manufacture anything and are dependent upon other countries to produce our goods. In essence that means we can no longer grow out of the problem. We are now slaves to debt creation and the subsequent buying of that debt by foreign countries to maintain our standard of living. But here is the problem. Countries are not going to buy our T Bills with such low rates of returns. This will cause the Fed to have to increase interest rates in order for foreigners to want to buy our T bills. Let me explain. If inflation is running at 6% and your rate of return on our T Bills is 2% your left with a 4% decrease. So in essence countries looking to buy our T Bills will want a greater return on their investment thus we would have to increase our bond rate to at least 7%. We in essence would have to increase our interest rates higher to make this appealing for foreigners to purchase our T Bills. So what does that mean to us. Well, it means it is going to make borrowing domestically MUCH more expensive. This will dissuade people from borrowing at all thus a contraction in the economy or deflation which could result in an recession or even worse a depression.

    So what the Fed has decided to do is cause rampant inflation. In essence they are attempting to not let the patient(The US economy) die. But by doing this and devaluing our dollar so much and causing inflation they are dissuading others from buying our T Bills. So this is the catch 22.

    Do we A: Continue to inflate to cover our losses. Impoverish the citizens of the US. Dissuade foreign purchases of T Bills. Increase taxes on the US populace to make up for the budget shortfalls.

    The above results in immediate higher taxes, hyper-inflation, and reduction in our standard of living. We in essence become a 2nd world country in a couple of years.

    OR

    B: Increase interest rates to make foreign purchase of T Bills more attractive. Have these Foreign countries increase their Sovereign Wealth Funds even more. Restrict growth because of domestic high interest rates. Cause deflation resulting in an immediate recession or even worse a depression. We immediately collapse.

    B is actually best. It is more painful in the beginning and there will be much suffering but we can return to prominence like England did after WWII. A is just delaying the inevitable and causing a L O N G downhill spiral and an inevitable collapse.

    Let me make one more point. A is what we are going to do. Why? Read Revelation 6: 5-6

    When the Lamb opened the third seal, I heard the third living creature say, Come! I looked, and there before me was a black horse! Its rider was holding a pair of scales in his hand.
    Then I heard what sounded like a voice among the four living creatures, saying, A quart of wheat for a day’s wages, and three quarts of barley for a day’s wages, and do not damage the oil and the wine!
    This verse has been wrongly interpreted to mean famine. Nowhere is famine implied. It’s common sense. Balances equal a form of measure. A quart of wheat = a days wage. That is not famine that is price inflation. Wake up people!

    As a side note these scripture verses are a description of hyperinflation with a “parable” attached to the end,”do not damage the oil and the wine” does not mean you can get drunk on the cheap. This last part of the verse is actually a mini parable implying that the Church is present in tribulation but will NOT incur Gods wrath. (Do not Damage = Do not harm, Oil = Holy Spirit, and Wine = Blood) These are those who are filled with the Spirit and covered by the Blood. We are not to be harmed via God’s wrath. However, we WILL incur the Antichrists persecution.
    Yeah! Very profound parable indeed. I was reading this scripture verse one day and it smacked me in the face. I was leveled. Jaw dropping.

    Kyle

  3. johnkaniecki Says:

    Kyle,

    Hi hope you are well.

    There is one more option. That is we don’t pay back the money loaned to us. Bush stated something to this effect once. That would of course destroy the world economy.

    Love,

    John

  4. IndependentConservative Says:

    That is we don’t pay back the money loaned to us.

    That would also result in war against America by several nations, if not that sanctions against America which would make matters worse economically speaking. And I suspect suddenly we’d see way more Islamic terrorist acts on US soil. I figure some who approve of terrorism figure there’s no need to destroy what you can own, but if they don’t feel they’ll get anything in return…

  5. IndependentConservative Says:

    Albertadude,

    Here’s some statements you made that really connect the dots.

    …do not spend what you do not have…
    …if things do take a horrible course economically, along with everything else, you can be darned sure the World will be crying out for some Wise Leader to lead us out of the current mess we are in…

    In otherwords, a perfect setting for the Anti-christ isn’t it!

    This post is one that goes along with several others, that you should read and especially see the comments in those posts. (I’m not sure if all the audio/video referenced still works, but there should be enough to help you along some. It was a bit too late when I made this post to reference them as “related posts”, I needed some sleep.)

    Muslim Nations Gain a Foothold in Western Markets. Nasdaq and Borse Dubai Make OMX (of Sweden) Takeover Deal. Qatar Acquires 20% of London Stock Exchange.

    Arab Muslims Continue Buying Up America. Citigroup Makes Abu Dhabi one of its Largest Shareholders.

    Uncomfortable Truth About America’s Banking System, the Federal Reserve. What’s Behind the Economic Issues? Fiat Currency.

    CNN Starting to Report the Truth About the Economy Online. Your Dollar COULD become WORTHLESS.

    Analysis of the Money Situation.

    Credit Cards and Usury in America

  6. IndependentConservative Says:

    And one other good one:
    America: Freedom to Fascism, A Movie Worth Viewing.

  7. IndependentConservative Says:

    Thanks for your input Kyle.

    So if there’s food, but I’ve got to work all day just to get some, that’s sort of like being in famine from the perception of the worker. Although it’s not “really” famine. Your view of it maintains the reality that there will be a rich class existing, which is more consistent than claiming everybody will be poor. But I think for those experiencing it, they’ll recognize the fulfillment as the Holy Spirit guides them.

    Of course option B has a lot of unknowns, given it involves America being sold off at an even faster rate. Would the nation really rebound, or become the slave of other nations? It’s possible option B would not go as it might have gone in the past, given this nation does not produce a lot of the things it used to.

    And with option A, this nation going down some economically may not result in others buying debt, but they will buy up the hard assets on the cheap.

    No real pretty options and way too late to turn back.

    The pulpit pimps’ game will be an interesting sight as this all moves forward. But it won’t be the first time there have been pimps in the middle of a bad economy. They seem to always keep a following.

    Well we might start getting the feel of the early church soon, complete with the poverty. While some will keep worshiping money, those who call on the Lord in truth and not the riches of this world won’t be disappointed. And pleasure for those in truth does not come in the form of man’s dollars. Not that anybody deserves Him of any doing of their own, but blessed are those who find the narrow gate.

  8. KyleAndrews Says:

    IC,

    Here is an article that confirmed what I was saying in regards to the two choices the Fed can make.

    Pay attention to the first few paragraphs. The latter ones are a pitch for Gold. Nonetheless this article does confirm there are only two options and it is the hyper-inflation option that they are going to choose.

    http://www.safehaven.com/article-11328.htm

    Kyle

  9. IndependentConservative Says:

    Kyle, Watching these guys debate the matter on TV, I’m convinced they’ll go the way you’ve mentioned AND it’s gonna be at least $1 Trillion by the time they’re done with it!
    (That’s just my personal opinion, nothing more.)

  10. johnkaniecki Says:

    Kyle,

    I looked at the link.

    I am certain that the economy is being propped up until the end of the election. I know the car business has be slow. One man said it is the slowest that he has seen it in fifty three years. Also the malls around here are empty.

    Many people wanted to follow Milton Freedman. He basically said let the market have freedom. Actually that is a mistatement. He wanted the market to have liscense. For example freedom as we know it in America is that we can speak our minds, gather together and a free press. Liscense would be that anything goes like stealing and murder.

    Because of this Freedman’s economic theory the markets had no supervision. Thus there were no over sights. So people were sold mortgages with the seller knowing that there was no possibility that the buyer could pay the depts. That is why there are a record number of forclosures. Also the people who sold the mortgages in turn sold the deals to others. Thus the middle man walked away with a nice profit. The buyer of the house lost his house and the buyer of the deal now has to deal with forclosures.

    It is amazing how these ‘conservatives’ were screaming to let the market be free. Laissez faire and the invisible hand. Why doesn’t wall street keep to their philosophical ideas that government should stay out of business. Why? The answer is of course that they are now the ones in need. The 700 billion comes out to thousand dollars for every American citizen.

    Finally as my wife and I were driving home from church we heard a man on the radio saying that what was happening is such a great tragedy. Please people are being gun down on the streets, there is genocide in Africa, there abortion clinics murdering the unborn and this is a tragedy.

    Also those high executives are going to get their million dollar salaries and their buy outs. Despite the fact that under their supervision they ran the company bankrupt. How unfair is that.

    Love,

    John

  11. KyleAndrews Says:

    Amazing! 9% of people support this 700 billion dollar bail out and yet they are still going to ram it down our throats. Peter Schiff is a very wise man and knows what is going on. He says this is going to be a inflationary depression or severe stagflation. We are done! I’m sorry but like I said earlier our GDP is 13.8 Trillion. Our current debt with the bailout, Fannie Mae, and AIG our current assets (GDP) is equal to our current debts. WE ARE INSOLVENT PEOPLE. THINK! WE CAN ONLY INFLATE FROM THIS POINT ON. WE HAVE NO OTHER CHOICE. USE YOUR HEADS. 70% OF OUR GDP IS CONSUMER DRIVEN. IN OTHER WORDS IT IS “NOT” BASED ON PRODUCTION BUT RATHER CONSUMPTION BASED ON DEBT CREATION. BUT NOW OUR DEBTS ARE EQUAL TO OUR GDP. WE ARE INSOLVENT.

    Kyle

  12. IndependentConservative Says:

    Kyle, with all the additional “bail out” they want to add into the bill, my personal suspension (which is nothing more than my personal opinion), that the package would be $1 Trillion or more may likely become a reality. And then there’s the oversight controls that are being added in. This is going to also bloat the size of our government even more.

    With all the SCARE in the news, I’m sort of surprised 91% realize the “bail out” is not the safest option.

    If we really had a “free market” the politicians would see these companies crying for help, tell them they brought their own demise on themselves and go home.

  13. KyleAndrews Says:

    This is tyranny. We have NO representation. It’s official. The House and Senate have a plan and will now send it to the Pres. All of them smiling on stage as they drafted this bail out bill. Sickening! I will never vote again. I’m shocked at all the times on these blogs where the sheeple always bray how much better their candidate is over the next guy. NONESENSE! Both McCain and Obama are all part of this too.

    Kyle

  14. IndependentConservative Says:

    Well Kyle, I pretty much figured out what you’re saying now regarding “representation”, when they didn’t properly address the illegal immigration issue.

  15. johnkaniecki Says:

    Hi hope you are well. A very good point about our representation. But look what is happening. Everybody I know is against the bail out money. I know people with many different political philosophies to. You see how everyone is bickering. Now the people are challenging the president’s dire warning that if nothing is done immeadiately there will be a disaster. They compare this to the lead up to the invasion of Iraq and the supposed weapons of mass destruction. Just goes to show you that in this world you’d better not mess with people’s money or they are going to get irate and do something.

    I would love to have a viable third party whether on the left or on the right.

    Finally this is reminiscent of papa Bush’s bail out of the savings and loans. We didn’t learn our lesson their and the deregulation of the money industry led up to this crisis.

    Also what about the golden parachutes. This is the multi million dollar exiting packages these executives desire. Why should the people who led their companies into bankruptcy get rewarded! Would the government give money to you or me if we had small businesses that went under.

    Let’s bring it back to where it is real and that is Jesus Christ our Lord. God is working. He’s shaking things up. Anything not built on the Rock is going to fall. Just like the tower of Babel fell so will the New World Order. God allowed the tower to get just so high and then in an instant it crumbled. I believe without a doubt is that Jesus is preparing for the institution of His kingdom on Earth. We will go through the tribulation first but the sun will rise and a new day will dawn.

    Let us encourage one another in Christ and focus on God.

    Love,

    John

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