Monday, September 22, 2008

Just When You Think They Can't Get Dumber

Remember the good ol' days, when the Fed, the President, and everyone else who was hoping nobody was paying any attention kept lying about the US economy being solid? Seems like only a couple weeks ago. Oh yah... IT WAS.

Of course, now Paulson and Bernanke go to Congress and talk about how the economy is just days away from a collapse and they need fast, decisive action... to the tune of $700 billion to buy bad debt instruments from failing banks.

Now, this is a sliding $700 billion. It isn't to exceed $700 billion, but as soon as they sell off some of the bad debt, they can replace it.

But that's not the kicker. The proposal has a line that says the money is to be used solely at the discretion of the Fed, with NO POSSIBLE COURT OVERSIGHT OR POWER. In other words, "trust us with the money, we'll know what to do."

Is that even fucking legal?

Except these fuckers have proven time and again that they don't have a damned clue! It's like backing a losing poker player with everything you've got after he nearly bankrupt you, and not having any say over how he spends it!

Then you've got morons like Barney Frank talking about how they'll be able to forgive mortgages and stop foreclosures because the government will OWN ALL THE BAD MORTGAGES! For fuck's sake! What are these people on????

And Chris Dodd suggests the bailout should extend to CREDIT CARD DEBT?? Hey! I lent a buddy $50 once and he didn't pay me back, can we include that too? What the fuck happened to personal responsibility? Let's make ALL debt go away! Americans are debt free and it only costs a few trillion dollars of taxpayer money!

Of course, the country is swimming in debt, devaluing the dollar again, and shooting themselves in the face.

There is ZERO reason for the fed bailouts and this $700 BILLION proposal. They'll have spent over a TRILLION dollars on bailouts, most of it in less than a month! But Congress is about to end for the election, so they have to rush through these plans without thinking about them! It's like handing your drunk friend your credit card as you run out the door because you don't have time to think about it. And I don't think anybody other than the government is that idiotic.

Toss in Goldman and Morgan now becoming BANKS to have access this money, and it was another interesting weekend. Goldman Sachs and Morgan Stanley can now take deposits and be your local branch apparently, instead of just investment banks. This puts them under Fed regulation, which will limit their ability to lose money... and conversely MAKE money with higher risks.


Here's the problem. These companies all have stockholders, they all have bondholders, and most have preferred shareholders as well. If you buy stock in a company, you are an OWNER of that company. You take on the risks and rewards of that company when you buy in. You can get out whenever you want by selling your stock. If you have a bond in a company, you own nothing, but they owe you before anyone else. They've promised a certain payout, and if they go belly-up, you get first dibs at their stuff to get paid.

And when you buy these instruments, you take on the risk that they might not work out. When a company starts to fail, the burden should lie squarely on the shoulders of the shareholders and bondholders, NOT the taxpayers.

It's bullshit - Bernanke, Paulson, Bush, and everyone else who speaks keeps blabbering about how these plans must "consider the taxpayers". Yah, the consideration goes like this - "Will this fuck the taxpayers? Yup."

So you stayed away from these companies. You don't have any interest in them, and now you're on the hook as a taxpayer. This should be a big deal for people.

As for the line of "taxpayers are better off with this than the alternate" is bullshit. "Taxpayers" wouldn't be affected at all by the alternate. The economy would be in trouble, companies would fail, and investors would get torched, but it wouldn't cost a dime in taxes. Yes, "Americans" MIGHT be better off with this than the alternative, but not from a taxpayer standpoint.


This government intervention is pure, undiluted crap. They own your house now... you realize this right? They own your insurance. They will slowly own you bank. One of the CNBC commentators today was talking about how they know people who are literally taking their money from the bank and storing it in a strongbox. You know who else did this? Russians during communism. They hoarded their rubles in mattresses, under floorboards, etc.. They couldn't trust the banks or the government with it because it would just disappear. Then, when the curtain fell, the government came out with "the old rubles are worthless, here are new ones" and set a limit to what people could exchange. Millions of personal savings were lost in one swoop.

No, I'm not actually saying the States is turning into communist Russia, but this is an insane power grab that is going unchecked and it scares the shit out of me... and I don't even live there!

Plus, it does nothing to help the economy or the markets in the long-term. Even today, the DOW is back down, the dollar is down, and it's only been a weekend. It's the goverment fumbling around trying to staunch the bleeding without dealing with the all the shrapnel inside. It's a short-term stabalization that will backfire HUGE not that far down the road, and take even more good people with it.


And of course, our news starts putting up headlines like "Harper says Canadian banks won't receive US-like bailouts." Well NO FUCKING SHIT! We're not bloody insolvent up here! Our banks aren't in imminent danger of collapse! We don't NEED a bailout, but that headline sounds like we're doomed and nobody will throw us a line.

Okay, I'm done for now. How was your weekend? Mine was actually great.


VinNay said...

I am fucking scared. I want to take out all my $$$ and put it in a strongbox, but I fear the devaluation of the dollar or Allah forbid, the replacement of currency as you suggest. So, its time to buy lots of shit.

Is it legal to own/purchase gold in Canada? Like large amounts of it? I'm not talking about futures, I mean like bards of actual gold. It's not legal here in the states.

I think I should move to Australia.

Astin said...

Yah, there are a few services that sell bullion up here. They'll hold it for you, but you own it.

Or you could by a lot of gold coins, something I think would be cooler than bars :)

There's the GLD ETF in the states too, which is kind of like buying into a group gold-buying plan.

This somehow seems more appropriate for Talk Like a Pirate Day suddenly... ARRR!

Riggstad said...

I'm coming to canada.. Bash has been relocated to Toronto.

Fuel55 said...

A little canadian communism goes a long way sometimes.

Lots of product here:

Astin said...

Heh, I've got a BetaPro Rubik's Cube on my desk here...

Hammer Player a.k.a Hoyazo said...

Well said, Astin, all of it.

Truth be told, as an investor I think not bailing out these banks last week would have been calamitous to the major averages. But personally I would be willing to take on that risk, rather than spend another trillion of my hard earned dollars to bail out the rich bastards who got themselves into this mess in the first place by lending money to any anus with an identity and a couple of fingers to sign with.

Where were these fat-cats sharing their millions (billions) with me on the way up when they all got rich hand over fist from issuing all these irresponsible debt obligations? But now I have to pay to buy it back from them at hugely depressed values?

What am I missing here?