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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Tue Sep 23, 2008 9:10 am Post subject: |
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http://bigpicture.typepad.com/comments/2008/09/request-for-urg.html
SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP
DEAR AMERICAN:
I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.
I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.
I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.
THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.
PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO [email protected] SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.
YOURS FAITHFULLY MINISTER OF TREASURY PAULSON |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Sep 23, 2008 10:56 am Post subject: |
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| bacasper wrote: |
| mithridates wrote: |
Here's Ron Paul's commentary today on CNN:
http://edition.cnn.com/2008/POLITICS/09/23/paul.bailout/index.html
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| I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality. The bailout of Fannie and Freddie, the purchase of AIG, and the latest multi-hundred billion dollar Treasury scheme all have one thing in common: They seek to prevent the liquidation of bad debt and worthless assets at market prices, and instead try to prop up those markets and keep those assets trading at prices far in excess of what any buyer would be willing to pay. |
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The man's a genius. God, how badly we need him right about now!
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He's a Prophet of Doom.
If America doesn't absorb the bad debt, it loses investment. In a recession, real people begin to suffer on a substantial level. In some ways RP reminds me of Marx, hankering for things to get worse so they can get better.
But I suppose some people are happy. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 11:02 am Post subject: |
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That is nonsense. This is like a bandaid. Do you want to pull it off fast or slow. Or, do you want a severe recession or depression.
Add to this, Kuros, that we have only touched a very small portion of this problem. We have now seen the implosion of about the lower 30% of the mortgage market. To come is "prime" mortgages, car loans, student loans and then the big boom...credit cards. All these have been securitized (chopped up) and passed as excellent securities. All are garbage. Do you think the government can bail out all of that too? How many dollars do you want a can of coke to cost? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 11:15 am Post subject: |
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| Kuros, what caused this is an inability to tolerate recessions. You are wanting more of the same. Recessions are necessary and the longer you put them off, which is the goal of this massive "bail out", the bigger the crash will be. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Sep 23, 2008 11:27 am Post subject: |
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| mises wrote: |
| Kuros, what caused this is an inability to tolerate recessions. You are wanting more of the same. Recessions are necessary and the longer you put them off, which is the goal of this massive "bail out", the bigger the crash will be. |
Like Ontheway, you fail to account for the Argentina factor. If America defaults, it gains a stigma.
RP is coming out and asking America to default.
$700 billion is a bargain, considering that not all the money will be lost, to retain America's credit rating.
You can shout slogans at me all you want, it doesn't change the fact that RP is asking us to accept a fate we can still fight. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 11:37 am Post subject: |
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Like Ontheway, you fail to account for the Argentina factor. If America defaults, it gains a stigma.
RP is coming out and asking America to default. |
What are you talking about?
The investment banks aren't America. They are private firms. If they go under the bankruptcy courts divide them up and we move on. There are dozens of smaller ibanks that can take their place.
When the American government absorbs this debt then and only then is America at risk of default.
You have this 100% backwards. The United States is at risk, acute risk, of default and a full blown run on the currency not because of Goldman's level 3 assets but because of the fundamental mismanagement of the currency. This 700billion will not come from higher taxes or decreased government spending. It will be digitized/printed.
By supporting the bailout it is YOU who are asking the United States to eventually default.
| Quote: |
| $700 billion is a bargain, considering that not all the money will be lost, to retain America's credit rating. |
How in the world do you think that America taking on this debt will improve her credit rating? If you are bankrupt and go buy a new house via a 100% mortgage does your FISA score improve? |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Sep 23, 2008 11:39 am Post subject: |
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| mises wrote: |
| Quote: |
Like Ontheway, you fail to account for the Argentina factor. If America defaults, it gains a stigma.
RP is coming out and asking America to default. |
What are you talking about?
The investment banks aren't America. They are private firms. If they go under the bankruptcy courts divide them up and we move on. There are dozens of smaller ibanks that can take their place.
When the American government absorbs this debt then and only then is America at risk of default.
You have this 100% backwards. The United States is at risk, acute risk, of default and a full blown run on the currency not because of Goldman's level 3 assets but because of the fundamental mismanagement of the currency. This 700billion will not come from higher taxes or decreased government spending. It will be digitized/printed.
By supporting the bailout it is YOU who are asking the United States to eventually default.
| Quote: |
| $700 billion is a bargain, considering that not all the money will be lost, to retain America's credit rating. |
How in the world do you think that America taking on this debt will improve her credit rating? If you are bankrupt and go buy a new house via a 100% mortgage does your FISA score improve? |
I understand the difference between the public sector and private firms.
Try not to be distracted by your own strawman.
Those mortgages they hold? Those are the mortgages of real homeowners.
Edit: Here's my position.
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| I'm in favor of a bailout, not this bailout, which I'm so far against. |
Also this position:
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| There seems to be a center-based consensus that some form of bailout is of vital importance to the nation's economy, to its image, and to the global financial system. I agree. But important national projects are worth paying for. |
Last edited by Kuros on Tue Sep 23, 2008 11:51 am; edited 1 time in total |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 11:50 am Post subject: |
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How specifically do you think that the American government will improve the perception of her credit worthiness by absorbing all this debt.
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| Those mortgages they hold? Those are the mortgages of real homeowners. |
Who took ALT-A liars loans, speculated on real estate etc. They bought things they could not afford and cannot afford now and will lose the homes to the banks. The banks will then put the homes back on the market at market prices and those people can then save 20%down and buy the homes at a reasonable price. Those who bought homes they could afford have absolutely nothing to worry about, unless they are forced to foot the bill for their speculative 30k-milli neighbors.
This only becomes a full economic crises if the government makes it one. Wall Street is convincing the rest of the country that it is needed for economic growth and development. In reality, Wall Street is a parasite on the real economy. We need a recession, a significantly smaller financial services sector and Paul Volker.
The only role the government should have in this is in the bankruptcy courts. The financial press has gotten it wrong at every turn. The FP, FT, WSJ, NYT and even Bloomberg (The Economist has been particularly terrible) totally missed the formation of this crises, the expansion of this crises and have absolutely no clue about what is next in the crises. They are parroting the lines given to them by their coveted 'contacts' on Wall Street. This is much like the parroting in the build up to the Iraq war. The only people who have been consistently correct about this from day 1 is the Austrian Economists. Then, as now, their advice should be followed. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Sep 23, 2008 11:58 am Post subject: |
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| We need a recession, a significantly smaller financial services sector and Paul Volker. |
We'll get all these things.
| mises wrote: |
| The only people who have been consistently correct about this from day 1 is the Austrian Economists. Then, as now, their advice should be followed. |
What's that phrase you always see on mutual funds abstracts? Ah, yes, prior performance is no guarantee of future success. There's no reason to go to the Iraq War on this discussion, although I'm tempted to make my own comparisons as well.
America has to look after its own, because nobody else will. I'm serious. Right now we don't even know what the bailout will look like, because the Democrats are still negotiating with the administration. But Chris Dodd has returned to the administration with his own plan.
In a recession, some government intervention is what is needed. The fact that the other $9trillion of our debt is the problem doesn't get past the fact that we'll need to spend more to get out of debt. I expect to pay higher taxes for this, and I also expect inflation to hit the US, but that will happen anyway. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 12:05 pm Post subject: |
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| Quote: |
| There's no reason to go to the Iraq War on this discussion, although I'm tempted to make my own comparisons as well. |
My comparison is only that the press then published the opinions of their contacts in the administration as truth, just as the press is doing with Wall Street now. We have Wall Street's side of the story as the official story. I can't even stomach the FT anymore. Let along the walking disaster that is The Economist. They are shrills for their buddies on Wall Street.
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| America has to look after its own, because nobody else will. |
I totally agree. Don't give the world a damn good reason to rewrite the global financial order and bring the US to her financial knees.
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| In a recession, some government intervention is what is needed. The fact that the other $9trillion of our debt is the problem doesn't get past the fact that we'll need to spend more to get out of debt. I expect to pay higher taxes for this, and I also expect inflation to hit the US, but that will happen anyway. |
The government spending to stimulate the economy could come from many different areas. Build nuke plants, mass transit, sponsor green tech etc. Don't throw good money after bad at these devilish banks and their toxic securities. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Tue Sep 23, 2008 12:28 pm Post subject: |
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Some people are apparently confused. This $700 billion - $1.5 trillion bailout will NOT bail out any real homeowners who are defaulting on their mortgages, it will bail out the lenders, and those who have bought packages of loans.
Homeowners who are NOT in default or behind on their payments are in no danger if their lender fails. They will just end up paying whoever ends up owning their loan.
Homewoners who ARE in default will still lose their homes if they can't make the payments whether or not their lender fails.
But, since the Fed is now promising to issue another trillion dollars to bail out lenders, investors etc. we do know that the money supply will again ratchet upward, inflation will spiral dangerously out of control, and overseas bond holders and dollar holders will look for any opportunity to dump their dollars and bonds.
This will send those dollars crashing back home. Result, the continued collapse of the dollar, hyperinflation and more bank failures and financial industry defaults.
Eventually the US Government collapses.
To avoid this disaster, we have to suffer the coming recession.
If we reinflate everything, we postpone the disaster, but make it far worse.
Some kind of recession/depression/total collapse is inevitable now.
The more we inflate, the worse it will be. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Tue Sep 23, 2008 1:01 pm Post subject: |
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| Homeowners who are NOT in default or behind on their payments are in no danger if their lender fails. |
You are ignoring the reality that when a recession happens, real people lose their jobs...and then can't make payments on cars and homes. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Sep 23, 2008 1:07 pm Post subject: |
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| Okay, I'm convinced. Bailout is bad. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 8:06 pm Post subject: |
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Yata is right. People will lose their homes in a recession due to lost jobs. However, the avoidance of recession (which is little more than building up recessionary forces within the economy to be unleashed later) is not good policy. I can totally support various government interventions to make a recession less rough around the edges for the people, but the economy must be allowed to contract.
Anyways, I suppose you're being sarcastic Kuros.
Here is another estimate of how much is needed for a bailout:
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Treasury Secretary Henry Paulson's $700 billion plan to buy devalued assets from financial companies is ``a joke'' because it doesn't go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc.
Ohmae, nicknamed ``Mr. Strategy'' during his 23 years as a McKinsey & Co. partner, called for a $5 trillion ``international facility'' to be made available to financial institutions. The system could be modeled on one used by Sweden during its banking crisis in the early 1990s, he said.
``This is a liquidity crisis,'' Ohmae said at an investor forum hosted by CLSA Asia-Pacific Markets, the regional broking arm of Credit Agricole SA, in Hong Kong yesterday. ``The liquidity has to be so big that people won't get panicky.''...
Ohmae, 65, is the author of management books including ``The Mind of The Strategist,'' ``The Borderless World'' and ``The End of the Nation State.'' Business Breakthrough, founded in 1998, provides online management training.
One way of funding the $5 trillion facility would be through contributions from foreign exchange reserves in China, Japan, Taiwan, the Gulf states, the European Union and Russia, Ohmae said.
An international relief effort on that scale might be difficult to coordinate, said Robert Howe, founder of Hong Kong- based hedge fund manager Geomatrix (HK) Ltd., which oversees $32 million. ``I doubt the practicality of getting international cooperation on something like this,'' he said.
Ohmae compared the current financial crisis with Japan's 15- year economic decline that began in 1989. Both started with a property bubble, which wiped out companies' equity when it burst, and like in Japan, the current one could lead to escalating bankruptcies as banks worried about their own survival rein in lending, he said.
The financial-market upheaval may lead to slower growth in China and the reversal of the commodity boom as ship orders are canceled and steel supply dumped, said Ohmae. What Ohmae called Japan's ``Viagra'' economy and Australia's ``dig and deliver'' boom may also fizzle as China weakens, he said.
Against the backdrop of a potential global market panic, Paulson's plan is insufficient, said Ohmae.....
``He wants to fix problems one by one as if he were still the chief executive officer of Goldman Sachs,'' he said. ``He has to take his CEO hat completely off and come up with a systemic solution as opposed to a one-by-one solution.'' |
The international part I bolded suggests that the US would be in the "bottom" position in the international community on this one. Similar to Thailand or Indonesia. Naked Capitalism explains:
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Ken Ohmae, former head of McKinsey's Tokyo office (disclosure: I have a passing acquaintence with him and he was enormously well regarded in his day despite being a tireless self-promoter) says that the Paulson program is grossly inadequate and the magnitude of the US crisis is so large that a $5 trillion international facility is necessary.
The quid pro quo of any international program is that the US would be put on a short leash, probably not as severe as the one to which Indonesia and Thailand were subject to in the Asian crisis. But the US is not good at austerity and has never been in the position of not being in the driver's seat, so this sort of initiative would no doubt be rejected until it is too late for it to have much impact. |
http://www.nakedcapitalism.com/2008/09/5-trillion-needed-to-stop-bank-crisis.html
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8DIq9yO0vzY
So, this 700 million will possible need an additional 4.3 trillion to be effective. Perhaps be need an ideological paradigm shift here. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 23, 2008 8:37 pm Post subject: |
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And it could be worse that even I think. Glen Greenwald from Salon interviewed a Notre Dame economist today who argued that it is only the speculative end of the banking/financial industry that is in crises. He put the probability of a total meltdown at less than 2%. Which then would mean Paulson is manufacturing a systemic crises with his words to the benefit of his positions on Wall Street.
Last edited by mises on Wed Sep 24, 2008 10:23 am; edited 1 time in total |
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