Posted on 03/21/2008 11:05:54 PM PDT by bruinbirdman
No, not really. But why are we trusting the bankers who got us into this mess to sort it out?
Apparently many of you have been worrying about the so-called credit crunch, and the banking crisis, and a possible housing market collapse, and the fact that share prices have sunk lower than the chances of Barack Obama picking his pastor, Jeremiah Wright, as his running mate if he gets to race against the Republican nominee for the White House (“I said God damn McKKKain!”).
Haven't you heard the good news? Yes, that's right - the world financial crisis is over!
The bad news is that I'm lying. It's not really over. That was just my little joke, ha ha ha! Then again, that's pretty much the sort of joke the US Federal Reserve and Bank of England have been playing this week, too (Monday: “We've fixed the problem. Just required a little of what we finance experts call �liquidity'. All's fine again now. Sleep easy everyone!” Tuesday: “Ha ha ha, we were just kidding yesterday. It's actually WAY worse than we thought”).
You know what? We suspected as much. Because in real life there is no problem that's made better by the addition of liquidity; largely on account of “liquidity” sounding, at best, like a burst pipe in the upstairs bathroom and, at worst, like a euphemism for “wetting the bed”.
Actually what the Fed means by injecting liquidity is cutting interest rates in order that everyone can borrow as much money as they want, and thereby - mutatis mutandis (literally, “fingers crossed”) - lubricate the engine of the economy so that it starts motoring smoothly again. As a result, money today is what economists call “cheap”. Know what the catch is? This handy new supply of “cheap” money turns out to be cheap only if you can prove to the financial authorities who are suddenly dishing it out that you are so financially feckless that you can't be trusted with any sum of cash larger than you could fit into a pistachio shell. If you can prove that, then you can lay your hands on billions.
If, on the other hand, you're the kind of person who pays off their bills each month, you'll find money isn't so cheap. Mortgage lenders and credit card companies aren't interested in knowing you. You're as likely to bag a five-year fixed-rate loan in your high street this afternoon as a Bear Stearns employee is to find an insurer willing to offer him loss-of-employment cover.
Here's the other catch: this rescue strategy means that we're entrusting the job of trading the world out of the financial mess to the same people who traded us into the mess in the first place. It's like getting the surgeon who just ran you over while twice over the legal alcohol limit to perform roadside surgery to treat the injuries he just inflicted on you.
The screenwriter William Goldman said that in Hollywood “nobody knows anything”. Is it any different in the City, or on Wall Street? We're talking here about banks who tried to make their loan books look cute by handing out buy-one-get-one-free mortgages to hobos in Knoxville with the same credit rating as a jellyfish, and by then camouflaging their risky lending by reparcelling it and offloading these disguised debt packages in unsuspecting financial markets around the world. It's like Eliot Spitzer thinking he could get away with concealing his $5,000-an-hour Emperors Club habit from prying eyes just by masking his real identity under the codename “Client 9”.
Here's another worrying reason why we might be wary of entrusting our salvation to the finance professionals who landed us in this mess. If, say, Broker A is advising his clients to buy a stock on the ground that its price is going to go up, these clients will only be able to get their hands on these tipped shares if Broker B at a rival firm is simultaneously telling HIS clients that this same stock stinks and so they should sell their holdings to the first sucker they can find who'll buy them - in other words, to the clients of Broker A. Logically, for any stock transaction to take place between someone keen to buy and someone else eager to sell, half of these hotshot Wall Street analysts must have got their hunches wrong, mustn't they?
The trouble is we don't know which half. So entrusting these people with the task of steering us out of the swelling chaos feels a bit like betting our future on the 50:50 outcome of the flip of a coin: heads we survive, tails we all become so pitifully destitute that, possibly as early as next Friday, Angelina Jolie might be considering adopting us.
It's enough to make you feel like you've just stepped into a pile of liquidity, isn't it?
In another four years, nobody in the US will need an explanation of what ZIRP means.
Its insanity to believe that because Bear Stearns collapsed, we somehow have reached some capitulation bottom. The credit crisis is just getting started and the fed is running out of silver bullets aka fund rate reductions.
The fact that the US had to go begging hat in hand to Singpore and the Arabs this week speaks for itself.
The begging was translated as “Please don’t liquidate our T-bills and start banking runs, we will bend over accordingly to your impending demands.”
I just read an article in the Financial Times about the possibility of the central banks buying ALL the worthless mortgage-backed securities WITH PUBLIC FUNDS to try to stop the downward spiral in values.
They’re in the discussion stage at this point, but to even consider this kind of desperate move is stunning. Of course, the hard working taxpayers get to put up the funds!
I think one of those Islams bought a chunk of BSC before it tanked.
yitbos
If you think *this* is a ‘credit crisis’, wait until millions of Americans start to feel seriously squeezed by rising food and energy costs, and start cutting back on - or skipping - or defaulting - their payments on their maxed-out credit cards....
You ain’t seen nothin’ yet....
And don’t forget the government. They have been maxing out the credit card spending for the last 60 years, and they have no intention on cutting back.
Nonsense, what makes you think zero is the end of the line. They can start PAYING the banks, and now the broker-dealers as well, to take money.
I wish I was kidding, but I'm afraid they'll find a way to do it, even though they'll describe it in a more obfuscating manner than I just did.
We might as well. At this point, if we don't, we're definitely totally screwed, and if we do, there's a chance we'll be only partially screwed.
I don't give a rat's a$$ if a big bank goes under...if a big industrial giant goes under financially, will this be OK too and the US taxpayer to foot the bill for its rescue?
I think not!
People make bad investments and decisions all the time....do we bail out everyone who makes a mistake?
The gov was in on this crap to begin with.....that's the problem and that's why the gov is not hesitant to cough up more dough.
The problem is our federal government and the states need to balance their budgets first by cutting spending and then cutting the tax burden...then the economy will recover, tax revenues will rise and the US federal debt will have some value as something to invest in.
One doesn't have to be a nuclear physicist to figure this one out.
And they have. There's been hundreds of bankruptcies. Tens of thousands have lost their jobs. And hundreds of billions of dollars in write offs.
Central banks have plenty of reserves to use without going to the taxpayer. Our own Federal Reserve has never received appropriations from congress. In fact, it makes a profit every year and pays that into the treasury.
It's almost certain that central banks will get great deals on these mortgage backed securities, and when they make a profit on them that money will be going back to the taxpayer.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.