BACKFIRES

 

The Fed’s Lat Hurrah   ” Now that the real estate bubble has burst, the Fed is inflating the biggest bubble of them all – a bubble in government. While the earlier booms at least provided the illusion of prosperity and some fun while they lasted, the government bubble will cripple the economy and deliver widespread misery to the vast majority of Americans.”  EuroPacific Capital  4/01/2010

Sandy Weill, Former Citi CEO, Has Trophy That Reads ‘Glass-Steagall Shatterer’  “Don’t confuse Sandy Weill for those Wall Street execs who fret over “optics.”  In a melancholy NYT profile of Sandy Weill over the weekend, the former CEO and chair of Citigroup admitted to some errors of management during his tenure at the mega-bank, but spurned claims that the repeal of the Glass-Steagall Act — which erased key banking regulations after heavy lobbying by Weill — was to blame for Citi’s woes.”  Huffington Post  1/04/10

The Velocity of Money Comes to a Stanstill  “In order to compensate, the government has stepped in with massive spending of $2.2 trillion or almost 20% of GDP. Where they get the “money” for this I’ve discussed many times. Our public debt could one day soon surpass those kings of inflation — the Japanese. In addition to stimulus, the government has also “borrowed” to bailout directly or indirectly the financial system. This adds nothing to GDP but probably saves it from nose-diving via consumption and investment. Not many people know that if you add up all the bailouts, direct and indirect, it comes to $30 trillion. Truly mind-boggling numbers.”  Minyanville  06/15/09

Bankruptcy “Reform” Fails to Deliver – Tough new laws don’t prevent rich or poor from filing  “When Congress passed bankruptcy law reform in 2005, it was supposed to provide greater protection for the poor, while forcing the more well-off to pay their debts. It’s done neither…The researchers also discovered that families filing for bankruptcy were more deeply in debt than their counterparts who filed before the laws changed. In 1981, the typical household in bankruptcy owed debts that equaled about 17 months of their income. By 2001, that figure had risen to more than 30 months of income.  Consumer Affairs  11/20/08

Hedge Fund Managers say U.S. Bank Bailout a ‘Sweet Deal’  “Hedge fund managers, who rank among some of the world’s shrewdest dealmakers, told lawmakers on Thursday [Nov. 13] the U.S. government’s bank capital injection program did not have enough strings attached.  The current terms are overly generous to recipients,” said John Paulson, president of hedge fund Paulson & Co.  Hedge World  11/13/08 

Study of Great Depression  Shows Intervention Postpones Foreclosures, But Causes Mortgage Rates to Spike  “Indeed, the study shows that future borrowers had to face a marketplace where loan capital was in short supply and interest rates were sky high. Lenders made loans tough to get – and then charged a lot for them via high interest rates – because they needed to compensate for the very real possibility that these new laws would restrict their ability to foreclose on delinquent loans.  Fast-forward 74 years, to 2008. Nearly 1% of U.S. home mortgages entered foreclosure during the first quarter; by the time that three-month stretch came to an end, nearly 2.5% of all U.S. mortgages were in foreclosure.”  Money Morning/The Money Map Report  11/06/08

Unintended Consequences  “I use this example to show the world the nature of government intervention: That it does much more harm than good, because it operates from imperfect information and non-economic motivation. They try to “fix” one thing, and another breaks. The government has ruined a very important asset class by trying to fix completely broken ones that use much more leverage.  Eventually the government by nationalizing/socializing markets will plug all the leaks by throwing enough “money” at things. But logic tells us this has major consequences: It will significantly lower productivity and profits. People say stocks are cheap, but they’re wrong: When you pay even 10 times earnings for a stock, it must be because it has growth. If there is no growth, the right P/E for a stock might be as low as 5.”  Minyanville  11/05/08

Don’t get slammed by the rising dollar: Currency headwinds are about to hit U.S. multinationals – here’s how to avoid being blown over.  “‘Most companies don’t even know the impact of what’s to come,’ said Wolfgang Koester, the CEO of FIREApps, a Scottsdale business that helps businesses control their currency risks. ‘The ones that have seen gains are going to start seeing losses – it’s going to be a bloodbath’.”  Fortune  10/31/08

Where it all unwittingly began? 

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” -Woodrow Wilson, after signing the Federal Reserve into existence

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