Bush bailout for Dummies

[mongon]

I was thinking about how the Treasury must have absolute confidence that the Chinese will finance this bailout. The U.S. gov is not likely to impose a tax increase, especially during a downturn. In fact they are talking in Congress about another stimulus package I guess because they genuinely love piling it on. So there is no money sitting around in the U.S. for a bailout. Its really up to the Chinese whether they want to continue funding bailouts, deficits and stimulus packages.

 

I suspect the Chinese chicoms will continue to do it under all circumstances. If they let the U.S. fall into a recession/depression, so goes the Chinese economy. While the leaders might be willing themselves to put China through a recession to solve the problem, the people of China may not be so willing. The communists welcome in Beijing might run out if the Chinese middle class are not able to meet their expectations. So to be absolutely certain to maintain their grip on power, the chicoms have to continue propping up the sick man in North America with his debt addiction. Even though it now has become detrimental to China's long term development.

 

So this debt situation in the U.S. can continue until China experiences a change in government. Which means the U.S. gov has an interest in propping up the communists because a new gov might take a dim view of continuing the cycle.

 

Since we are globalized, a worldwide cataclysm - political and economic - would seem to be in the cards. As in a house of cards.

 

Don't mind my ramblings, everything will be OK.

[kamui]

Don't mind my ramblings, everything will be OK.

 

Yep, of course. Everything will be fine soon.

 

 

PS: I have just decided to cancel my Christmas trip to LOS. Instead I will use the money to speed up to repay some loans.

You'll never know...

[Faustian]

Mongon, I've enjoyed your recent posts. You've been balanced and fair. Thanks for your interesting insights and comments.

[chuckwoww]

Can you explain it to/for us?

 

I am well aware the fallout of their collapse would be fierce and far reaching' date=' but I mean all the subtle crap the rest of us don't get.[/quote']

 

OH, hereâ??s an example. Businesses large and small lose their pension plans, 401K holders lose their retirement savings, companies canâ??t get insurance. Individuals and businesses find it increasingly more difficult to obtain credit. Since airline travel revenue is heavily dependent upon business travel, an airline will see itâ??s passenger loads decrease (a la post-9/11); leisure travelers who often use credit cards will not use their precious credit for what is a discretionary expenditure. This will further decrease revenue for the airline. Less tickets purchased means fewer boarding passes printed, so printers will either end up laying off employees or folding. With fewer passengers transiting the airports, those who work in the stores may find themselves out of jobs due to insufficient revenue to keep those bandits in business. Luggage companies will sell less luggage and shut down/reduce production or lay off employees at the manufacturing, wholesale and retail levels. Cabbies will have fewer fares at the airports. Airline personnel will be affected due to decreases in passenger miles. People losing jobs may mean they canâ??t afford their mortgages or car payments and lose their two most-coveted assets. I could go on and on and on. Just used the above to bring it closer to â??homeâ?Â.

 

That is just for starters. People can forget about all these promises Obama and McCain are making now as to health care, green jobs, tax cuts, etc. They won't be in the works for the next presidential term. After Uncle Sam is finished buying up all the paper it appears poised to purchase, there won't be any money in the bank to carry out the initiatives "promised". That's not to say that Uncle Sam will lose all of the money it's putting into these portfolios. It might just happen that some, if not a substantial amount of monies will eventually be recovered. In fact, some "experts" have gone so far to say that some paper may turn out to show a positive return.

 

I'm just saying that there are so many cynical, sad old men (SOM's) here that just bitch, complain and blindly blame Bush and others for every "crisis", that it's almost embarassing to be associated on the same board with some of them.

If I were a cartoonist, I'd have a field day with some here.

 

HH

 

Sorry Hugh but is that the best you can do? I thought you had an explanation. Really you're just describing what is obvious to all. No of course Bush isn't totally to blame...in fact he's as much a hostage to events as the rest of us. But he's been a lousy president and that's a big part of the problem.

 

[chuckwoww]

You're right mongon. Social stability in the US and China are now critical. I'm amazed at the docility of Americans. If turmoil starts in China all bets are off.

 

It would also be a big help if the future US government cut back on the confrontational talk. The world isn't in the mood to listen to more lectures about freedom and democracy from pea-brained evangelists who live on credit.

[Bangkoktraveler]

The USA brings in from personel income taxes less then 1.3 trillion per year.

 

What is the ripple effect of this action going to be for the rest of the world?

 

So far, no relief for people who are losing their homes. No help for the 'little guy', and for those little guys losing their homes, there is the swift kick in the ass and the acknowledgement they have to pay for the mess.

 

Big business is rewarded for fucking up and doesn't have to pay for the bailout. FAIR?

[kamui]

So this debt situation in the U.S. can continue until China experiences a change in government. Which means the U.S. gov has an interest in propping up the communists because a new gov might take a dim view of continuing the cycle.

 

Currently China is relatively stable and a change of the government is not in sight. But the country has a lot of unsolved grave problems (environmental pollution, corruption, an army of migrant workers, e.g.). Now the Chinese economy is showing signs of slowing down, if this comes together with other negative trends...

[Bangkoktraveler]

So this debt situation in the U.S. can continue until China experiences a change in government. Which means the U.S. gov has an interest in propping up the communists because a new gov might take a dim view of continuing the cycle.

 

Currently China is relatively stable and a change of the government is not in sight. But the country has a lot of unsolved grave problems (environmental pollution' date=' corruption, an army of migrant workers, e.g.). Now the Chinese economy is showing signs of slowing down, if this comes together with other negative trends...[/quote']

 

 

China is not the worst debtor nation in the world. The USA holds that position.

 

China on the otherhand is the largest country in the world with the largest cash reserves.

 

 

The difference between China and the USA can be likened to the family who has a junky car that lives in an extremely modest house but have no bills on credit.

 

Whereas across the street lives a family with several new cars, a beautiful home with a swimming pool, and two hands full of credit cards. They have so many cards that they routinely use one or two cards each month to pay some of the bills on some of the other credit cards.

 

 

[shygye]

If the guys posting on this subject knew 1% of what they think they know about finances and economics, I'd pay attention. All I've read is ignorant flapping of lips without one sentence that demonstrates any clue of the significance of the problems or the way to address them. Of course, not understanding the ramifications of the failures of some of the companies is the main problem. To just point fingers (and usually in error) demontrates that "dummies" wouldn't understand anything other than a cartoon. Carry on reading your comic books geniuses.

 

HH

 

Mortgage brokers: Peddled toxic mortgages with a teaser rate of 1% for 2 years then ballooning to 12%. It is okay because house prices always grow by 15% or more per year. The broker gets higher fees for pushing these loans. Everything is good.

 

Banks: We can sell these toxic loans to Fannie and Freddie and investment banks. We get a good profit now. Everything is good.

 

Investment Banks: We can slice and dice these toxic loans, and no one will be able to tell what the hell they've really bought. The fees we earn are huge and we get huge bonuses. Everything is good.

 

Investment banks, commercial banks, Fannie & Freddie, AIG, mortgage brokers, and rating agencies made huge profits off these toxic loans. All based on real estate prices increasing at double digit rates forever. A ponzi scheme that would make Nigerian scammers proud.

 

It is the middle class taxpayer, whose income has barely moved, that is going to get poisoned by these toxic debt instruments. They never saw any of the huge bonuses, but get all 6 trillion of new debt interest payments right up the arse.

[Steve]

Okay, I'll gladly accept critique of this position in the interest of open debate, but I am totally against the bailout.

 

First, we are AGAIN told doom and gloom of not doing anyting. That isn't certain. Of course there will be pain but again, I think we're all falling for the same doom and gloom predictions said as if its certainty when we were sold on a myriad of things: Iraq, etc.

 

I don't want to make this a party or ideological issue. I'm saying its done by both sides. Either we have faith in capitalism and free markets to correct itself or we don't.

 

I think it would all work out. I do not believe that 401(k)s will all of a sudden go bust. What better way to get the American people behind it than to say it will.

 

The top 5 firms were given special dispensation to increase its leverage from 12 to 1 to 40 to 1. That is a big part of what happened. Let them fail. Let AIG fail. All this bullshit about money market accounts failing. MMAs are all backed by short term money instruments, 3 month TBills, overnight loans between banks, etc. and other finanical instruments with less than a year. Mortgages aren't a part of it. Its cash and cash equivalents, short term instruments.

 

We are falling for the same lies and being misled.

 

NOTHING will change. The government will still waste hundreds of billions in many different ways, the dollar policy will still be a failed one.

 

You know how you instill confidence in the economy domestically, with foreign central banks, with investors in the market? You have an American government that starts acting responsibly. THAT will do more for the market than any bailout.

 

Its an election year. The politicians on both sides are worried they will be thrown out in this and the next election so we do what we always do, come up with a quick plan that will end up costing more, with unforseen consequences.

 

Its estimated it will cost 700 billion. When has ANY government plan EVER come in at cost? When? The only question is will it be 2, 3 or 4 times the estimated amount. It WILL cost way more than 700 billion and if Vegas had a line on it, I'd sell everything to get in on that bet and I'd take any wager from anyone willing to show me their money and I'll show mine and we bet on it.

 

Its all bullshit. This will be an excuse for our government to do all kinds of things.

 

These 'crisis' will ALWAYS happen because of the fundamental, endemic and systematic problems with the government. EVERYTHING stems from it. Wall Street, Main Street, etc. It all comes from that. If that isn't fixed, these issues won't ever be as big as as they are or will be averted.

 

I'm sorry, I can't believe a government (collectively both parties) that has gotten it wrong every time and now think they have the solutionj right. The ones that got it wrong are telling us they will fix it.

 

New blood is needed. Blood from neither party or ideology. If from either party, those with integrity.