Friday, Apr 18, 2008
And now for the costs of the bailout -- socialized, of course
The Times: Treasury bond scheme depresses gilts prices
As Treasury bonds decline on fears that the government will flood the market with debt in order to bailout mortgage lenders, the cost of government borrowing is rising. This cost will have to be made up through higher taxes or reduced government spending on other priorities.
Posted by richc @ 11:42 AM (579 views) Add Comment
11 Comments
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1. Sneaky said...
Higher taxes will choke the economy. So will government spending cuts.
Tax revenue will fall either way - bigger slice of a smaller pie.
So either solution will just make the problem worse.
The answer is to stoke GROWTH but the government seems to have no ideas on this. Don't spend what you already have, focus on earning more. And don't let the government copy what got consumers in this hole in the first place. Government debt is just depersonalised credit card debt, with another name.
Generally the best way is to CUT taxes, and wait for a smaller slice of a BIGGER pie.
Just look at the roar-away success of the new flat-tax economies for evidence.
2. uncle tom said...
The possibility exists that the borrowing requirements of the BOE and Fed will exceed the investment funds available to the extent that Gilt and Treasury prices fall significantly.
This in turn could provoke a flight to equities (especially by the sovereign funds) pushing up the equity indices while bond prices fall further.
If bond prices fall, yields rise, and interest rates are forced up..
3. whiteknight said...
This is a nonsense plain and simple. An absolute nonsense. I defer to Jim Rogers video comments posted below.
Also note his examples of what happens when this nonsense ends. People come out efficient, innovative and fighting with new stuff - exactly as they have to do.
4. inbreda said...
“No one should think that we're going back to the Halcyon days of 12 months ago, when credit was cheap. The mortgage market will still be more difficult to access.”
"Banks said that further restraints could be applied to consumer lending, such as the sale of mortgages with rates substantially above their standard variable rate or adding fees ..."
So basically, even with massive intervention by the glubberment, spending our tax pennies, house prices are still fugged, but we're also going to lose the purchasing power of what money we have been able to save.
So the only winners are the banks (that caused the problem in the first place). the government achieves nothing else. Is this the dictionary definition of incompetence?
5. techieman said...
Im none too sure about this. If the banks are allowed to borrow Gilts v. MBS - then what will be the valuation, how will taxpayers be insulated against losses and how much will the Govn have to pump in? What Gilts - a special issue, that are only tradeable by Banks or something else? NR had added £100million to the Balance Sheet? eh? It all sounds like a non starter to me, i mean GB wants the banks to lend. Also if this were the answer then why would RBS bother with a rights issue? "there are more questions than answers" - lets see the detail next week.....
6. tyrellcorporation said...
The main focus of GB right now is to alleviate the lending log-jam using tax-payers money. But he'll do it in a way that pushes the problem into the future (as with PFIs and the groaning public sector pension burden). It is ALL about putting off the day-of-reckoning and looking good today.
7. uncle tom said...
tyrell is right, GB wants something that will save his neck today - and to hell with tomorrow.
In particular, he wants to pull something out of the hat just before the local elections that will make it appear that he's fixed the whole problem. He probably knows that anything he attempts will not pass detailed scrutiny, so expect a dramatic announcement - but lite on detail - on about April 30th...
8. sold 2 rent 1 said...
tyrellcorporation,
"It is ALL about putting off the day-of-reckoning and looking good today."
Very good point.
The problem is "tomorrow" used to be decades away; then it became years away.
Are we now only months away?
The house of cards is close to collapsing.
9. tyrellcorporation said...
S2R what's your take on the biggish fall in Gold today? (Currently $913 t/oz, $40 drop since yesterday). I would have thought with the current equities rally would point to higher inflation as Central Banks will surely over-do the liquidity injections creating the talked about inflation spike which is headed our way.
10. sold 2 rent 1 said...
"S2R what's your take on the biggish fall in Gold today?"
As long as the price range is 880-950 then it is Elliott wave 4 consolidation.
IMHO we are looking at Elliott 5 wave starting end of April or beginning of May.
Any price of 900ish should be seen as a buying oppotunity.
1500+ by late June/early July.
11. alan said...
We need growth, we need industries, we need a country where ideas get rewarded, we need some good role models as "captains of industry".
We need sound leadership and integrity...did you hear that Captain Darling?