Us Bailout Plan Being Torn To Shreds

[salamander]

remember the good old days, when the F&F bailout put a floor under the problems .... er, 2 weeks ago.

Oh yes, such happy times [sigh]. I remember them well

[howarden]

Can anyone actually explain why this won't work?

Making everyone cover their short positions only works once.

Creating an institution to buy assets at greater than market value (i.e. at a value where they are loss making because they don't yield a large enough amount to cover the cost of the management, administration, risk and inflation) means that it will need to be subsidised for years.

The case for it not working is that they will bottle it at the last minute and end up just paying market value for the assets.

The first case for it 'working' is that we'll just have massive inflation and the assets will be quickly worth the same nominal value in the open market, but because you need to beat inflation to break even you've really been making losses anyway.

The other case for it 'working' is that it doesn't matter if you have to subsidise it for years and saddle the next couple of generations with debt because technical advances will be so fantastic it won't matter, as kindly pointed out by Peter Tasker, a Tokyo Based Hedge Funder in FT Alphaville earlier this week.

http://ftalphaville.ft.com/blog/2008/09/15...ies-and-bankers

Forget about moral hazard. Somebody has to take the credit risk. Future generations are the best candidate because they’re going to have a better life than us, with all kinds of cool gizmos and hobbies. They won’t notice, really.

[Guest Steve Cook]

As people think about this plan over the weekend they will come to the conclusion its a load of ******** and the markets

will start crashing on Monday. Then what?

The gloves come off

And we get to see in the harsh economic light of day whose interests are really served by whom

Edited September 19, 2008 by Steve Cook

[Guest Steve Cook]

Well the BBC are definately under orders to do positive spin on this. After the last few days I am under no doubt that the BBC should be renamed the Brown Broadcasting Corperation. Its not right. Also I did not think I would ever see a government show so much power, riding over its own rules and systems to promote, encourage and allow a massive takeover to save its own ass. Ie Gordon the morons.

The government seem to be untouchable, is this a democracry>?

no

But then it never was

Edited September 19, 2008 by Steve Cook

[Guest Steve Cook]

Another item on the news tonight talked of how peaceful it was becoming in Iraq. That's because of the ethnic cleansing which has driven 5 million of the poor sods to other countries. It's the peace of the grave, although you wouldn't guess that from the Polyanna BBC.

I saw the Prince of Darkness, with his Staff,

Standing bare-headed by the Cenotaph:

Unostentatious and respectful, there

He stood, and offered up the following prayer.

'Make them forget, O Lord, what this Memorial

Means; their discredited ideas revive;

Breed new belief that War is purgatorial

Proof of the pride and power of being alive;

Men's biologic urge to readjust

The Map of the World, Lord of Hosts, increase;

Lift up their hearts in large destructive lust;

And crown their heads with blind vindictive Peace.

The Prince of Darkness to the Cenotaph

Bowed. As he walked away I heard him laugh.

Edited September 19, 2008 by Steve Cook

[1929crash]

I saw the Prince of Darkness, with his Staff,

Standing bare-headed by the Cenotaph:

Unostentatious and respectful, there

He stood, and offered up the following prayer.

'Make them forget, O Lord, what this Memorial

Means; their discredited ideas revive;

Breed new belief that War is purgatorial

Proof of the pride and power of being alive;

Men's biologic urge to readjust

The Map of the World, Lord of Hosts, increase;

Lift up their hearts in large destructive lust;

And crown their heads with blind vindictive Peace.

The Prince of Darkness to the Cenotaph

Bowed. As he walked away I heard him laugh.

Your creepy poem conjured up an image of Tony Blair.

[lufc]

Can anyone actually explain why this won't work?

The debt that the treasury take on will have to be backed by treasury bills that they in turn have to sell on to foreign investors. Once the still solvent Middle and Far East stop buying ........ that will be that ....... the FED will default on its debt.

[Smedge]

The debt that the treasury take on will have to be backed by treasury bills that they in turn have to sell on to foreign investors. Once the still solvent Middle and Far East stop buying ........ that will be that ....... the FED will default on its debt.

But the implosion of the USA would be bad news for both those places. The middle east countries would have less people to sell oil to, the far east would have less people to sell goods to. So, provided the foreign investors are looking at the big picture (which I acknowledge is by no means a given), why would they do something which amounts to trashing one of their most important markets?

[UndercoverElephant]

The debt that the treasury take on will have to be backed by treasury bills that they in turn have to sell on to foreign investors. Once the still solvent Middle and Far East stop buying ........ that will be that ....... the FED will default on its debt.

..and then?

I still don't see how this ends. US defaults on its sovereign debt?

[lufc]

But the implosion of the USA would be bad news for both those places. The middle east countries would have less people to sell oil to, the far east would have less people to sell goods to. So, provided the foreign investors are looking at the big picture (which I acknowledge is by no means a given), why would they do something which amounts to trashing one of their most important markets?

Middle east etc can't go on bailing out the USA forever, would you buy bonds, treasuries or gilts that you knew were worthless ..... globalisation is done for IMHO.

[lufc]

..and then?

I still don't see how this ends. US defaults on its sovereign debt?

Eventually yes, I can see no other end. The Fed have just nationalised all of their banks bad debt,

[Smedge]

Middle east etc can't go on bailing out the USA forever, would you buy bonds, treasuries or gilts that you knew were worthless ..... globalisation is done for IMHO.

Their worth would be in the fact that they kept a source of income afloat if you bought them, IE the USA. I'm not saying foreign investors definitely would keep on propping up the USA, just that they wouldn't definitely stop, because they have a vested interest in doing so, for the time being at least. All imho, obviously.

[sikejsudjek]

If it was as simple as printing money, this would work. It won't. Why ? Because the US taxpayer can't be taxed enough, and the debt will simply be added to at an ever increasing rate plus interest. First there will be a downgrade of the US credit rating, then at some point a default. The maths don't add up.

[lufc]

If it was as simple as printing money, this would work. It won't. Why ? Because the US taxpayer can't be taxed enough, and the debt will simply be added to at an ever increasing rate plus interest. First there will be a downgrade of the US credit rating, then at some point a default. The maths don't add up.

I don't think direct tax will ever be increased ....there would be hell to pay for governments .... I think it will play out in the bond markets way before then.

[lufc]

Their worth would be in the fact that they kept a source of income afloat if you bought them, IE the USA. I'm not saying foreign investors definitely would keep on propping up the USA, just that they wouldn't definitely stop, because they have a vested interest in doing so, for the time being at least. All imho, obviously.

All government sponsored now, what a couple of months ago would have been considered "risky debt" is now all on the plate of Mr Paulson .... GOD BLESS HIM.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

But what about Derivatives?

[StainlessSteelCat]

Your creepy poem conjured up an image of Tony Blair.

Eerie. I got the same picture.

[Errol]

Can anyone actually explain why this won't work?

Read Schiff -

Paulson Goes All In

[AteMoose]

Print money, trash the currency, everything is imported, no-one can afford to buy anything, everyone still dies.

The law of unintentional consequences.

Buy stuff while you can, prices are about to double.

amen

[jonpo]

Ok look im going to start a market running CDS spreads for 5 years of protection on US 10 year treasuries in mini lots of $10,000, what are your bids ?

im wanting about 200 basis points right now !!

[injustice]

But what about Derivatives?

This is one view

[_w_]

So, provided the foreign investors are looking at the big picture (which I acknowledge is by no means a given), why would they do something which amounts to trashing one of their most important markets?

The foreigners have every incentive to keep buying, the US is the goose. The problem is they probably won't be able to. To buy ever more US debt you need to have ever more money and they're starting to have their own little deflationary problems.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Go Bunning!

http://www.kentucky.com/211/story/530273.html

And !Thanks! Injustice - for the link

Edited September 20, 2008 by gruffydd

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Read Schiff -

Paulson Goes All In

So Paulson is explicitly aiming to increase real estate prices.

[_w_]

The LloydsHbos merger was a good move, its not cost taxpayers anything and raising money will be less of an issue for the new entity. I'm moving money into Lloyds now and out of Santander owned banks.

Ah ha! The slight problem is that Loyds is probably very poorly capitalised itself and buying HBOS probably just made it worse. If I was S&P I'd be itching to do a ratings review on Lloyds.