04-10-2008, 04:51 PM
Jan and others, I’m very sorry to post twice. Being new I have no right. I apologize now. But this thought won’t go away.
I won’t make a habit of this I promise.
What is the bail out bill for? I know it seems like a stupid question. But everyone I know and read is of the opinion that it cannot work.
It will not restore confidence in the markets. There is still far too much bad paper out there on and off balance sheets. There is still far too much leverage. There is far, far too much fear about the size and stability of the Credit default swap market.
Do Paulson, Berneke and the leaders of the big investment banks not see these things? It is amusing to deride them all as stupid. But I find that difficult to believe.
Is there another possibility? The idea, and it is only the germ of an idea, came to me when I thought about the way the ‘Great Powers’ had all roped themselves into a web of alliances before WW1. It was designed to make the chances of war unthinkable. But of course it had the effect of making the whole system unstable.
Here is my thought. This isn’t about liquidity. It isn’t even about solvency. It isn’t about confidence. I think it’s about instability, specifically, creating instability.
Could it be that the Paulson/Berneke plan is not primarily about saving the system, nor primarily about bailing out the banks. Too many prominent people have pointed out other ways of doing those things that are less burdensome than the plan that is going to be enacted. I feel sure Paulson, Berneke and others are aware of the other ideas. So why have they ignored them and argued so single- mindedly for their risky and politically almost suicidal plan ? I say suicidal on the basis that when voters realize there is no money for welfare help, or Obama’s CHANGE – because it has all been spent on bailing out the bankers there will be civil unrest – and they must know it. Why are they advocating a plan that makes the American tax-payer foot the bill for a global bail out? Risk civil unrest. Black mail by the Chinese? Frightening, but is that enough? Shock therapy? What for?
If we start from the assumption that these are not stupid people and they have fashioned their plan do achieve a goal – then what is that goal.
OK it’s not a simple bail out - It won’t work. We know it. Let’s assume they know it. It risks crashing both the dollar and the international bond market as well. High stakes indeed. So what does it achieve?
I think the Paulson/Berneke plan is geopolitical more than financial. It is about creating more systemic risk not less.
America does not want to save a system if the cost, is they loose their pre-eminent position in that system. There is a risk if the system is re-capitalized or reformed in certain ways that the dollar might no longer be the reserve currency and economic power might shift from the dollar to the Euro, or a new Asian reserve currency.
By getting the American tax payer to foot the bill, in the form of a huge increase in American debt bonds, they effectively rope everyone even more firmly to America. It would be painful indeed for America to default on their debt. How much more unimaginable IF institutions and nations buy another $700B bail out bonds on top of $800B in Fannie and Freddie bonds?
If we buy any of this new debt we are roping ourselves to a man already carrying an anvil and we are all on thin ice as it is.
The danger the Paulson/Berneke pan averts is the possibility that someone might not get pulled in if America fell into the crevasse. This plan ropes us all together. If America goes, this plan assures that everyone gets pulled down. This is Mutually Assured Destruction for global finance.
If we buy-in we’re doomed.
I won’t make a habit of this I promise.
What is the bail out bill for? I know it seems like a stupid question. But everyone I know and read is of the opinion that it cannot work.
It will not restore confidence in the markets. There is still far too much bad paper out there on and off balance sheets. There is still far too much leverage. There is far, far too much fear about the size and stability of the Credit default swap market.
Do Paulson, Berneke and the leaders of the big investment banks not see these things? It is amusing to deride them all as stupid. But I find that difficult to believe.
Is there another possibility? The idea, and it is only the germ of an idea, came to me when I thought about the way the ‘Great Powers’ had all roped themselves into a web of alliances before WW1. It was designed to make the chances of war unthinkable. But of course it had the effect of making the whole system unstable.
Here is my thought. This isn’t about liquidity. It isn’t even about solvency. It isn’t about confidence. I think it’s about instability, specifically, creating instability.
Could it be that the Paulson/Berneke plan is not primarily about saving the system, nor primarily about bailing out the banks. Too many prominent people have pointed out other ways of doing those things that are less burdensome than the plan that is going to be enacted. I feel sure Paulson, Berneke and others are aware of the other ideas. So why have they ignored them and argued so single- mindedly for their risky and politically almost suicidal plan ? I say suicidal on the basis that when voters realize there is no money for welfare help, or Obama’s CHANGE – because it has all been spent on bailing out the bankers there will be civil unrest – and they must know it. Why are they advocating a plan that makes the American tax-payer foot the bill for a global bail out? Risk civil unrest. Black mail by the Chinese? Frightening, but is that enough? Shock therapy? What for?
If we start from the assumption that these are not stupid people and they have fashioned their plan do achieve a goal – then what is that goal.
OK it’s not a simple bail out - It won’t work. We know it. Let’s assume they know it. It risks crashing both the dollar and the international bond market as well. High stakes indeed. So what does it achieve?
I think the Paulson/Berneke plan is geopolitical more than financial. It is about creating more systemic risk not less.
America does not want to save a system if the cost, is they loose their pre-eminent position in that system. There is a risk if the system is re-capitalized or reformed in certain ways that the dollar might no longer be the reserve currency and economic power might shift from the dollar to the Euro, or a new Asian reserve currency.
By getting the American tax payer to foot the bill, in the form of a huge increase in American debt bonds, they effectively rope everyone even more firmly to America. It would be painful indeed for America to default on their debt. How much more unimaginable IF institutions and nations buy another $700B bail out bonds on top of $800B in Fannie and Freddie bonds?
If we buy any of this new debt we are roping ourselves to a man already carrying an anvil and we are all on thin ice as it is.
The danger the Paulson/Berneke pan averts is the possibility that someone might not get pulled in if America fell into the crevasse. This plan ropes us all together. If America goes, this plan assures that everyone gets pulled down. This is Mutually Assured Destruction for global finance.
If we buy-in we’re doomed.
Now could you tell the second thing which came to your mind?