There were obviously a lot of mistakes made on the way to Wednesday.
But there is no way that allowing the entire financial system to collapse could ever be considered a solution.
It wasn’t hard to STOP that disaster. Even if in a month they say “we worked really hard, but we couldn’t put together the RTC to get through congress”, we might be beyond the crisis, because in the interim people might have been scared enough to start straightening things out.
Sometimes you need a time out.
Of course, I fully expect they’ll pass something. And we won’t like it. But it might work anyway.
Yesterday and today proved that this is not the case. Investors have looked at the announcement and said to themselves: "Wow! The government is going to protect financial institutions against losses - even to the point of Money Market Funds, and they're going to keep other investors from shorting absolutely any financial company? Let's jump out and buy lot's of that - there's no risk!"
They made lots of money if they were day traders, but the investors (speculators) jumping back in for a long-term hold are in for an unpleasant surprise.
I disagree. Allowing the markets to fail is a perfect technical solution and may ultimately prove to be the only solution. It eventually clears all of the excess debt from the system and does it in a minimal amount of time. The problem is, it is exceedingly painful for those out of work. For those who maintain employment all through the deep, massive correction, life is not that bad. You scale back but not horrendously.
I hope and pray that we can avoid clearing out all the excess debt, which MUST happen, in one sharp correction by allowing markets to crash. I can only hope that RTC II® will do the trick. It is VERY unlikely that the excess debt will be wrung out of the system if RTC II® is successful. If it is successful, I would expect it to allow us to return to business as usual — too much credit and debt — ending in the necessary market crash to clear the excess debt. RTC II® may buy us 40 years time for all I know, but it seems to me that at some point in time the markets will have to fail in a crash in order to reset the credit/debt game and start over where we need to be.