[excon]

Hello:

I watched ALL the Sunday morning news shows. I heard everything... I was struck by what I DIDN'T hear. Not one pundit, not one reporter, not one Treasury Secretary, not one Mayor Bloomberg, asked: Where's the money going to come from?

THAT, in my view, IS the question. I guess it's assumed by everybody, and I mean EVERYBODY, that we just have it sitting there waiting to go to work. It ISN'T and we DON'T!

They're going to print it. Without sounding too pompous, I'm going to try to explain about inflation in a couple sentences, because inflation is the real enemy.

Let's say the total of our money supply is a billion $$$'s. That means all the goods and services we have total up to a billion $$$'s. Let's say YOUR piece of that pie is a hundred thousand.

Now, lets say the government printed another billion $$$'s and gave it to the banks to lend. That would mean that the total of all the goods and services is now worth TWO billion. Without a proportionate doubling in the supply of goods and services, YOUR piece of the pie is now worth $50,000. In other words, you LOST $50 grand, and the government TOOK it. That happens immediately, but it takes about 18 months to two years before it works its way through the economy and shows up in higher prices and wages, and a corresponding falling of the dollar that naturally follows - All of which LOWERS YOUR net worth.

Our government is about to print another TRILLION $$$'s. What this means to YOU, is that when the government PRINTS MONEY, it is a direct TAX upon YOU - an UNCONSTITUTIONAL tax.

What happened to create this crisis are banks creating wealth, where there was none. Bailing out the banks by creating wealth where there was none, is the exact thing we did to CAUSE the problem in the first place. It is NOT solving the problem. It's just kicking the can down the road a couple years - kind of like an addict. As a matter of fact, free money IS an addiction.

Now, everybody is looking for a bad guy here, but nobody goes back far enough. Ok, it's Nixon. Before him, our money supply was backed by gold. That PREVENTED inflation - pure and simple. Let me say again, that tying the dollar to the price of gold PREVENTED INFLATION!! Nixon ended the relationship so he could inflate to pay for HIS war. Remember the massive inflation of the 70's? Now you know where it came from.

Now, you know where the inflation that's just on the horizon, is going to come from.

Buy gold.

excon

[asking]

I heard someone on the radio say that the money would be "borrowed" from Social Security--you know, the well-known financial safety net for ordinary citizens, the fund we've been advised to put into private investment, solid reliable companies like AIG and Lehman. No worries!

[excon]

Hello asking:

The SS account is already broke. What WAS in there, has BEEN borrowed LONG ago.

But, they WILL borrow it. That's how the mechanics of inflation works. The Fed creates a T-Bill or a Treasury bond OUT OF NOTHING, and sells it on the open market.

The Chinese and the Arabs are the biggest buyers of our paper. Those aren't the people we'd particularly like owning our debt, no?

excon

[asking]

As for ferners owning us, too late to cry over spilt milk. Didn't I read that american paper makes up 10 percent of the chinese economy? They need us to thrive as much as we need them to not pull out. The global economy has a silver lining.

But I agree that between the war and the mortgage crisis, we are going to be digging out for a long time. Hard thing to tell my kids. Uh, sorry about all that debt... I'm telling them to study Chinese.

America is not going to remain the dominant economic power it was in the last few generations. We'll have to settle for a bit less of the global pie. A friend tells me that global economic collapse occurs when the price of oil hits around $150/barrel. I'm just happy that hasn't happened. :)
Cheers.

[asking]

Yet

[Skell]

When I watched the news yesterday on this I couldn't believe it either. Not one person mentioned how this trillion dollar bail out is going to be paid for. You'd think that would be the first question asked.

You know the more I think about it, if I were McCain or Obama I think I'd prefer to lose this election. Whoever inherits this awful mess from Bush is going to cop the blame and have to try and sort it out. Good luck!!

[excon]

Hello Skell:

You might be right. It ain't looking good.

excon

[tomder55]

here is the proposed legislation

Check out sec. 8 and Sec 10

Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.
(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

http://uk.reuters.com/article/market...34655520080920

This legislation bypasses the one thing that I have been most critical about this entire "crisis" ;the lack of accountability. Congress should not pass this as is unless there are provisions for accountability .

Yuval Levin at National Review writes :

Even if Hank Paulson were the all knowing god of economics, would it make sense to give this kind of power to the treasury secretary for the next two years just forty days before an election? Shall we go through our mental list of who an Obama administration (or a McCain administration for that matter) is likely to put in that post? And doesn't it make sense to establish some kind of process for deciding how specifically to use the money? To put in place some criteria of prioritization? Some real-time oversight? Isn't transparency crucial to the proper functioning of our modern financial system? And how is everyone in both parties suddenly satisfied that this approach is the only one that could work?
Most of us are in no position to question the view, espoused by just about every economist heard from in the past few days, that some serious action is called for and soon. But the way this is all being pushed through, and the character of the proposal itself, are deeply disconcerting.

http://corner.nationalreview.com/pos...TYyYTgyYzM3NjA=

[tomder55]

Just a question about inflation

Inflations is too much money pursuing too few goods. But as I understand it ;the problems were that credit had dried up that there was cash hoarding . That would lead me to believe that there was not enough money in circulation . So an injection of currency if used properly could be the cure ,so long as it is used properly . There is an argument that this injection would create stability and not hyper-inflation as is suggested in the thred ;but would instead prevent a rapid deflation similar to what happened during the Great Depression.

I am open to any argument here so let's hear them.

[excon]

just a question about inflation

inflations is too much money persuing too few goods. but as I understand it ;the problems were that credit had dried up that there was cash hoarding . That would lead me to believe that there was not enough money in circulation .

Hello again, tom:

You're absolutely right. IF, however, they didn't increase the money supply (inflate) there would be the same number of goods and services as there is money.

Therefore, there is ALWAYS enough money in circulation.

If the amount of goods and services increases WITHOUT a corresponding increase in the money supply, prices will drop. That ain't bad. The difference THEN, would be attributable to efficiency and productivity. THAT would raise the standard of living for everybody

excon

PS> Number #8 above is TOTALLY unacceptable!

[ETWolverine]

The "non-reviewable" clause of the legislation is scary as hell. It would make Paulson the single most powerful man in the world, more powerful than the President, economically speaking.

Paulson has not been elected to any office, and he should not have that level of uncontrolled power. Even the President can be impeached.

I agree with excon on this. It is unacceptable.

THat's twice in one week. :)

[excon]

Hello again,

It should be noted that the approximate retail value of the securities WE are about to assume, as reported by the Bank of International Settlements, is ONE QUADRILLION, ONE THOUSAND ONE HUNDRED FORTY FOUR TRILLION $$$$'s - a tad larger than $700 billion we put up. Now, if some people pay their bad mortgages, and/or we get some value from the properties when WE sell them, the number will be smaller. But, how much?

Buy gold.

excon

[excon]

Hello:

Thought it was over, huh?

This afternoon, General Motors had its issuer default rating downgraded to CCC from B- with a negative outlook at Fitch Ratings. The downgrade was prompted by diminished liquidity and lack of access to capital.

They want to line up at the cash window too. GE is next. Should we let 'em? What's another 100 billion $$'s or so?

excon

[speechlesstx]

I also agree that no. 8 is unacceptable, there is no way a cabinet member should have that much unchecked power. Which reminds me, whatever happened to the Dems PAYGO rule they boasted about re-establishing last year? Did they not really mean it?

[Galveston1]

At some point all the indebtedness will have to be written off. I wonder what happens then.

[asking]

Things get worse.

I'm against this whole thing myself. But I guess they are going to railroad it through this week because it's an "emergency." What happened to "We can't afford health care for Americans and we can't afford to do anything about unemployment"? How about if Exxon and Halliburton bail Wall Street out, instead of us? They've been doing handsomely the last few years.

Just call me grumpy today

[BABRAM]

The Dems, to their credit, want provisions on Dubya's approved (no oversight) of the Secretary of Treasury "Paulson" 700 billion dollar bailout plan. Republicans are now split on this issue. McCain "the now born again regulator," that has voted with Bush ninety percent of the time, seems to want to re-invent himself every week since the economic crisis came to fruition. I wish Paulson would get his story straight as well. Paulson, like McCain, gave the economy a thumbs up before choking on his own words. Henry Paulson, as recent as last week, said there was nothing to worry about and then turned around and gave a grave description of the economy before the bailout proposal.

[tomder55]

This has not been McCain's finest hour. His proposal to dump Chris Cox is wrong and uncalled for .Even worse ;on 60 Minutes he said he would like to appoint Democrat Andrew Cuomo (former HUD under Clintoon and current NY AG) to the position.

BAAAAAHHH ! Cuomo is elbow deep in the cause of the collapse.
This from the liberal Village Voice :

There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.
Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded "kickbacks" to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons.

Andrew Cuomo and Fannie and Freddie - News - Village Voicepage 1 - Village Voice

However ; McCain is not a "born again regulator" . He has a history of supporting regulations and that is part of the reason that he has so often been at odds with his own party.

Not enough regulations is not what has brought us to this point . Mandates by the government is the big culprit ,along with lax enforcement and oversight .

[BABRAM]

lax enforcement and oversight .

There will only be less oversight if Dubya has his way. He wanted Congress (both the Dems and Pubs) to look the other way and pass Paulson's plan unquestioned asap without provisions or oversight. Very few things has McCain sided with on using regulation in his career, however this one current issue has been a good one for the Arizona Senator to wrap himself around. Understandably Dubya with his biases and non-partisan attitude has been out of touch with the Dems for two terms, but he's grown further out of sync with his own party. I know ex-Pres Bill Clinton thought he was untouchable, but it's been obvious to me for years now that Pres Bush appears to think of himself as above reproach, as well.

[tomder55]

Very few things has McCain sided with on using regulation in his career

That is just a rewriting of history . Pertinent to the current issue ;as McCain was calling for reform of Fannie and Freddie ;Obama was cashing their checks.