Have any of you seen this? This actually makes sense to me: http://www1.daveramsey.com/etc/fed_bailout/economic_cleanup_10887.htmlc What are the flaws I'm missing?
Several things are wrong here, in my opinion. His approach is far to simplistic. The single most glaring omission is his failure to address the related and far more serious credit default swap problem. Ramsey's populist, personal finance recommendations for folks with maxed out credit cards may make entertaining fodder on a radio talk show, but solving the current financial situation is obviously way beyond his pay grade.
Looks good to me. Simple is foreign to politicians, but it works. Only thing wrong with his plan is expecting citizen voices to sway political opinions. They're already set for life and they don't give a damn. But the rest of it is good theory.
Piezoe, I thought of the CDSs. Aren't most of the problems with those related to the people who issued them (like AIG)? Of the entities that bought them, weren't the ones that weren't gambling really just looking to make sure the bonds weren't defaulted upon? So, wouldn't the government guaranteeing the loans take care of that issue. I know there were some entities that bought CDSs on bonds they didn't even own, how widespread was that, and were those entities things like hedge funds or big banks?
Why cant they just ban CDS's now? Force the floating rate payers to give back the money collected from fixed rate payer(or part of what they collected), and tell the greedy fixed rate payer investors that were hoping for a big payoff to go f*** themselves cause they aint getting anymore than their payments back and be done with it? Wouldnt that clear alot of crap up?
We're wasting our time, aren't we? They'll do whatever Paulson's asked for with a few things in there that Democrats to use to show that there are punitive measures for those who caused this. I don't think it's because they don't care, it's because they haven't been given much time and don't understand the problem fully. Ah well. Back to trying to position myself for the eventual dollar decline... At least it's a little cathartic. Our country's declining, I guess it was inevitable, most things revert to the mean, huh? We've got to have something to vent about.
Yes indeed, Susannah, we are all dismayed and chagrined at what's been going on. The problem with just having the Government step in as an insurance backer to pick up the bill on any defaults by the original insurers, is that you let the original insurers off the hook, but don't protect them from bankruptcy which sounds great to most people, until they realize that the government won't be able to collect premium because they are insuring something already insured and those with the insurance are not going to pay twice! And the government can't simply seize premium from the original insurers because there isn't enough money, they are insolvent. Then too, a company like AIG is way to big to fail -- it would create total chaos-- they have us over a barrel. The governments solution was the right one here, and will cost the taxpayers the least in the long run. But the tremendous deficits created by a simultaneous war and the 700 bil bailout (which will come out of treasury quite rapidly) is liable to create horrendous inflation as the government attempts to monetize the additional debt without raising taxes. It seems a tax increase or a productivity increase must come, and it is not going to be the latter -- at least not right away. Finally, yes you are correct there is more than one policy insuring the same asset, and you don't even have to own the asset to insure it. And the "policies" , or CDS's, are traded like mad and there are trillions in force, roughly on the magnitude of the entire worlds GDP. It's an absolutley horrendous mess. These things are traded over the counter and the CDS market, so far as i can tell, is completely unregulated and the issuers used far to generous a risk assessment and did not allow for a large number of defaults at the same time, i.e. a real estate crash and a recession. Obviously that's going to change. People on ET that are knocking the governments plan for the bailout don't realize the extent of the problem and don't appreciate that the governments plan will, in the end, cost the taxpayer relatively little. The initial inflation and weaker dollar that results will be mostly paid back latter in terms of a strengthening dollar, and perhaps even lower taxes if the government actually turns a net profit, which they could. What the ET'ers should be knocking instead are the laissez faire policies of the Reagan and latter Bush administrations that together, with the help of that bastard Phil Gramm and that Zionist Greenspan, and many others, fed this chaos. A capitalist free-market system requires, at minimum, two things: an educated population and, ironically, very tight disinterested oversight to preserve competition, and prevent it from deteriorating into cartels, monopolies and most importantly of all to protect the public interest against those who would bend the rules in their favor. We've had plenty of oversight, but it hasn't been disinterested-- in fact it's been the opposite.