Claim #10: “Central banks and government policies control the markets.” An exogenous-cause believer would do far better to explain this result by claiming that authorities’ actions of this type must be bearish, because every time they acted, the market fell; and when they finally stopped, it rose. Economists do not advance this argument, because they can’t make sense of it. Instead, they cling to their traditional cause-and-effect logic, while the markets just do what they want. Elliott Wave Theorist March 2010
Charlie Gasparino: Another Crash ‘Has to Happen Again’ “Goldman has been declared a bank, not much different than the old Bailey Building and Loan, and yet they don’t take deposits or offer checking accounts. So what do they do? They trade, and they are trading as a federally protected bank, meaning they get to borrow at cheaper rates and they are Too Big To Fail. How anyone considering themselves to be a capitalist can support this arrangement is beyond me.” — Charlie Gasparino CNBC; The Sellout — Seeking Aplha 11/05/2009
The Five Worst Bailouts “Has anything good come from $3 trillion worth of bailouts over the last 18 months? To be fair, probably. After Lehman Brothers failed in September 2008 and other Wall Street firms began to founder, urgent government intervention forestalled a deeper financial panic and perhaps even a depression. Instead of talking about a recovery today, we could be facing steep double-digit unemployment and many more months of misery. But the Year of the Bailout also entailed some disturbing moments, and there may still be unhappy consequences. Here’s my list of the worst bailouts:” Seeking Alpha 09/07/09
How Much Does the Bailout Really Cost? “Most people would agree that it is difficult to put the cost of
Click to enlarge chart
bailing out our financial system into real terms. Including the recent Citi (C) rescue, some estimates are as high as $4.6 trillion dollars in total costs. So, we would be remiss in not sharing this shocking visual representation of the government bailout as it currently stands. The chart needs little explanation to get its point across. Jim Bianco of Bianco Research has crunched the numbers, compounding each of these historic government expenditures by the rate of inflation (using CPI) so we can compare apples to apples.” Ockham Research 11/30/08
Bailing Away “Moves to stabilize the system this year have put Americans in harm’s way from possible losses on nearly $8 trillion pledged in loans, guarantees and investments to financial firms. And the crisis is far from over. NY Times 11/29/08
Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor? “Should U.S. taxpayers really be providing billions of dollars to bailout companies (GM (GM), Ford (F) and Chrysler) that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?” Seeking Alpha 11/15/08
China’s $586 Billion Spending Plan Boosts Stocks, Metals, Oil “Chinese manufacturing contracted by the most since at least 2004 in October and export orders dropped to their lowest, according to CLSA Asia Pacific Markets. Home sales have plunged in major cities including Beijing and the stockpile of unsold new vehicles was at a four-year high in September. ‘The golden years have shuddered to a dramatic halt,’ said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai.” Bloomberg 11/10/08
FHA/HUD: Fee Stooges “This piece, in fact, is one of my most serious, since it focuses on the character of the bailout effort, and picks out one (of the many) ways that the government continues to distort and confuse the market even as it insists that it is providing solutions.” Seeking Alpha 11/2/08
A Billion Here, A Trillion There: Calculating the Cost of Wall Street’s Rescue “According to Smetters, interest rates should not be seen as the canary in the coal mine, an infallible early warning system. “The common belief that capital markets cannot fail is precisely the reason why they can,” Smetters wrote in a 2007 article in Financial Analysts Journal, “Do the Markets Care about the $2.4 Trillion U.S. Deficit?” Smetters and his co-author, Jagadeesh Gokhale, a Cato Institute fellow, wrote that “the United States has never faced anything close to the unbalanced balance sheet it now confronts — not even during World War II.” They conclude that fixed-income investors “reveal enormous myopia about the implications of the financial problems facing the federal government.” Knowledge @ Wharton 10/28/08
Henry Halitt on the Bailout “The argument that the government is somehow pumping new capital into the market is absurd. Government is actually borrowing the money from the capital markets that it is in turn injecting into the capital markets. There is no additional source of funding; there is only a diversion of funds from more-productive outlets to less-productive outlets, with government acting as the middleman.” Ludvig von Mises Institute 10/15/08
Fed to Provide Up to $540 Billion to Aid Money Funds “Short-term debt markets have been under considerable strain in recent weeks” as it got tougher for funds to meet withdrawal requests, the Fed said today in a statement in Washington. A Fed official said that about $500 billion has flowed since August out of prime money-market funds, which with other money-market mutual funds control $3.45 trillion….’The problem was much worse than we thought,’ Jim Bianco, president of Chicago-based Bianco Research LLC, said in a Bloomberg Television interview. Policy makers are trying to prevent ‘Depression II’ by stemming the financial industry’s contraction, he said. ‘” Bloomberg 10/21/08
The U.S. Economy Is Still on Life Support “The $3.5 trillion thus far committed to lubricate the credit markets have yet to produce any meaningful result. Even that vast total is unlikely to be sufficient to meet the tidal wave of bad loans yet to hit the banking system. As the massive Bush-Greenspan credit orgy deleverages, corporate profitability is likely to fall dramatically, driving stock prices still lower, further eroding personal retirement accounts. Once confronted with unemployment and bleak prospects, even those who have been model financial citizens will be forced to default on credit card debts, auto and personal loans and, of course, home mortgages. The tsunami of defaults crashing into our banking sector will ultimately overwhelm all government attempts to contain the damage.
Dow Takes Giant Leap as Bailouts Snap Gloom “History tells a mixed story of rallies like Monday’s. Of the five past one-day gains of 10% or more, two marked the end of bear markets, in 1987 and 1933. But three — in 1929, 1931 and 1932 — proved short-lived, and were followed by further declines. Because of that, market historians were reluctant to make definitive judgments about the one-day event. Wall Street Journal 10/14/08
Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks “Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented – many on the RGE Monitor Finance blog forum – alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.” Nouriel Roubini’s Global EconoMonitor 9/28/08
The Paulson-Bernanke Bailout: Will the Cure Be Worse Than The Disease? “Saturday’s $700 billion junk mortgage bailout is the largest and worst giveaway since a corrupt Congress gave land grants to the railroad barons a century and a half ago. If it goes through, it will shape the coming century by giving finance unprecedented power over debtors – homebuyers, industry, state and local government, and the federal government as well.” – Global Research 9/22/08
The federal bailout, brought to you by the “new communists” – “It is a bit like the privatization of the old Soviet Bloc. Faced with crisis, the old communists became the new capitalists; they made the most of changed conditions by buying up old state businesses and running them as capitalist oligarchs. In America we see the same logic in reverse: Faced with a crisis of their own making, the old capitalists become the new communists.” Newsday.com: Viewsday 9/23/08
Original Treasuries Bailout Proposal – Text of the legislative proposal sent by the White House overnight to lawmakers.
Excerpt: (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….. (9/20/08)
The U.S. Economy Is Still on Life Support “The $3.5 trillion thus far committed to lubricate the credit markets have yet to produce any meaningful result. Even that vast total is unlikely to be sufficient to meet the tidal wave of bad loans yet to hit the banking system. As the massive Bush-Greenspan credit orgy deleverages, corporate profitability is likely to fall dramatically, driving stock prices still lower, further eroding personal retirement accounts. Once confronted with unemployment and bleak prospects, even those who have been model financial citizens will be forced to default on credit card debts, auto and personal loans and, of course, home mortgages. The tsunami of defaults crashing into our banking sector will ultimately overwhelm all government attempts to contain the damage.
FinancialEndTimes.com 