rigorousintuition.ca

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.

http://www.democraticunderground.com/di ... 89x4144043

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?

Why do they hate America?

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.

.

Heh, buying US junk paper held by China and Japan is one way to keep them in T-bills.

Double down, baby! All in!!!

.

September 28, 2008
Day of Reckoning
Print By Patrick J. Buchanan

How did the United States of America, the richest nation on earth, whose economy represents 30 percent of the Global Economy, arrive at the precipice of a financial panic and collapse?

The answer lies in the abject failure of both America's financial elite and the political elite of both parties - the same elites now working together to determine how much of our wealth will be needed to bail the nation out of the crisis of their own creation.

Big Government is riding to the rescue - saddlebags full of our tax dollars - to save us from the consequences of the stupidity and folly of Big Government. New York and Washington, the twin cities responsible for the crisis, are now being hailed by the media as the 7th Cavalry, coming to rescue a beleaguered nation.

Had there not been a steady and constant infusion of easy money and credit into the U.S. economy by the Fed, for years on end, a housing bubble of the magnitude of the one that has just exploded could never have been created.

Had the politicians of both parties not coerced and pressured banks, S&Ls, Fannie Mae and Freddie Mac to make all those sub-prime mortgages, then to tie this rotten paper to good paper, convert it into securities and sell to banks all over the world, there would have been no global financial crisis.

Had they seen this coming and acted sooner, the Federal Reserve and U.S. Treasury would not today, like Henny Penny, be crying, "The sky is falling!" and the end times are at hand, unless we give them 5 percent of our gross domestic product to buy up suspect securities backed by sub-prime mortgages.

Consider what the "Paulson Plan" of Treasury Secretary Hank Paulson, against which Sen. Richard Shelby and the House Republicans rebelled, entails.

Since Americans save nothing and have to borrow from abroad to finance our trade and budget deficits, wars and foreign aid, what the secretary proposes is this: that Congress authorize the Treasury to spend $700 billion to buy up the toxic paper on the books not only of U.S. banks, but of foreign banks operating in the United States. According to The Washington Times, the Treasury would also be authorized to buy up securities backed by rotten auto loans, student loans and credit card debts.

Thus America would be borrowing from China, Japan and the Middle East to tidy up the balance sheets of the banks of China, Japan and the Middle East. And all the rotten paper will be offloaded onto U.S. taxpayers, who hopefully will be able to recoup some of their losses, because some of the paper will be good.

Why should we do this? Because otherwise there will be a financial panic, followed by a market collapse, wiping out pensions, 401Ks, portfolios and defined benefit plans of Middle America, forcing millions into bankruptcy and millions more to put off retirement and continue working until they drop.

In a democracy, it is said, you get the kind of government you deserve. But what did the American people do to deserve this? What did they do to deserve the quality of financial, corporate and political leadership that marched them into this mess - and that today postures as their rescuers?

Consider what this mess has already cost taxpayers: $29 billion to buy the rotten paper of Bear Stearns so J.P. Morgan would buy the investment bank; $85 billion for 80 percent of AIG to nationalize it; $150 billion in a stimulus package to flood the nation with cash; perhaps $300 billion to bail out Fannie Mae and Freddie Mac; and now $700 billion to begin taking the toxic paper off the hands of America's big banks.

And even if this is passed, say Paulson and Fed Chairman Ben Bernanke, there is no guarantee this will resolve the crisis. If the $700 billion is not provided and the toxic paper is not pulled off the books of the world's banks by U.S. taxpayers, however, we face an almost certain collapse, surging bankruptcies, rising unemployment, a shrinkage of GDP and a recession, if not worse.

Yet, the fellows who tell us we face a financial mushroom cloud over every American city if we do not act at once to provide the $700 billion did not see this coming and can make no guarantee that this will succeed and end the crisis.

Nevertheless, it must be done, and done now, as collapse is imminent.

Looking at all the money being ladled out by the U.S. government to prevent a collapse, and the diminished revenue coming in, it is hard to see how America avoids future deficits that reach $1 trillion a year. These will imperil both the dollar itself and the ability of the United States, which saves nothing, to borrow from the rest of the world.

The downsizing of America is at hand.

Yes, indeed, we have arrived at the Day of Reckoning for Uncle Sam.

barracuda wrote:Why do they hate America?

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.

Denninger pointed this out: http://www.youtube.com/watch?v=GqIFoBXGizc.

This has to be the biggest swindle in the history of the world.

JackRiddler wrote: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.

Well of course there's the lie - right there.

The big lie being hawked by the swindlers, and swallowed like dumplings by the proles.

No fucking wonder they rule and we gawk.

On edit. And for what its worth America, its also happening in Britain ( the home of this great swindle) and NO ONE is batting a fucking eyelid.

And here was I, thinking that the british would never stand for such crap.

Theyre worse than anyone else.

Buchanan wrote:Had the politicians of both parties not coerced and pressured banks, S&Ls, Fannie Mae and Freddie Mac to make all those sub-prime mortgages, then to tie this rotten paper to good paper, convert it into securities and sell to banks all over the world, there would have been no global financial crisis.

This is bullshit!

The pressure and coercion to overturn the New Deal regulations separating commercial banks from investment banks, to lower reserve requirements, to allow imaginary accounting practices, and to unleash unsupervised multiplication of MBS, CDS and derivatives was applied in exactly the reverse direction: by the banks on the politicians. Not that much pressure was required in getting Rover to do the Master's will, but there is no disputing the record on this. This is what the banks wanted, because they calculated that it would give them the best return for as long as the money-go-round could be kept in motion (something which certified economists assured would be perpetual).

Buchanan for his usual ideological reasons wants to invoke the specter of "Big Government" as the root of all evil, and ignore the reality that this government is today even more "the executive committee" of the capitalist class than it was in Marx's time. His idea of a solution, like Ron Paul's, is to give even more power to the corporations, to let them drop any facade and just be the government.

EDIT: Buchanan also resonates with the not-very restrained racism of the current right-wing talking points on what caused the crisis: liberal do-gooders forced the banks to dole out money to the poor and the black, who defaulted cos they can't help it, it's in their shiftless nature. Yeah, all those zero-percent initial APR letters and ads were apparently the result of Big Government strong-arming the hapless banks to sucker burger-eaters in Arizona, who thought they could make a forturne flipping houses while using these same houses as ATMs, into taking utterly usurious flim-flam credits with 14,000 pages of small print. No doubt Big Government was also coercing Moody's into sticking AAA labels on the resulting securities before these were sold as gold to naive Korean grocers.

ROFL!

JackRiddler wrote:

Buchanan wrote:Had the politicians of both parties not coerced and pressured banks, S&Ls, Fannie Mae and Freddie Mac to make all those sub-prime mortgages, then to tie this rotten paper to good paper, convert it into securities and sell to banks all over the world, there would have been no global financial crisis.

This is bullshit!

The pressure and coercion to overturn the New Deal regulations separating commercial banks from investment banks, to lower reserve requirements, to allow imaginary accounting practices, and to unleash unsupervised multiplication of MBS, CDS and derivatives was applied in exactly the reverse direction: by the banks on the politicians.

Buchanan for his usual ideological reasons wants to invoke the specter of "Big Government" as the root of all evil, and ignore the reality that this government is today even more "the executive committee" of the capitalist class than it was in Marx's time. His idea of a solution, like Ron Paul's, is to give even more power to the corporations, to let them drop any facade and just be the government.

EDIT: It also resonates with the not-very restrained racism of the current right-wing talking points on what caused the crisis: liberal do-gooders forced the banks to dole out money to the poor and the black, who defaulted cos they can't help it, it's in their shiftless nature. Yeah, all those zero-percent initial APR letters and ads were apparently the result of Big Government strong-arming the hapless banks to sucker burger-eaters in Arizona who thought they could make a forturne flipping houses while using these same houses as ATMs into taking utterly usurious flim-flam credits.

ROFL!

This is the amazing thing about characters like Buchanon. They will literally blame a problem on the very thing that was put in place to prevent it and that they have destroyed, that is, regulation. And they will continue to do it even as their own financial well being is being compromised. These folks literally live in their own little fantasy world. It makes one wonder when the medical establishment will invent a drug to treat this condition. Oh, that's right, they use the same tactics to blame the patient for their own foul-ups. It's endemic, isn't it?