Actually, the bailout of FRE/FNM pretty much guarantees your dollar is going to suck balls well into the future. It is a contest of which country will decimate their currency the fastest. The US continues to lead the way.
Correctamundo! It is only the fact that other central banks have also been inflating and debasing their currencies (right along with the Fed... is there some sort of conspiracy here? I suspect so.), that the $USD has not dropped through the floor. However, some day the world will come to the understanding that ALL inflating, fiat currencies are garbage and reject them en masse.
OP could be right or close to right, but the implications are probably too large to digest at this point -- for me at least. I would consider it an action in response to catastrophe, not a fix of the catastrophe by any stretch, as in the difference between casting off lifeboats due to a shipwreck versus plugging the holes and righting and saving the ship. But market apparently believes otherwise. Reputable press is quoting money managers as saying the action pops some of the inflated risk aversion -- witness yen drop on rekindling of carry trades. I would think that it would accelerate, not slow, the longer term trend of USD's loss of value. Must be my amateurishness showing.
Ultimately, reality/value will win out. Much deception en route... especially when Gummint is involved
I reluctantly agreed that there was a government role in unwinding this mess, if only to prevent the sort of global meltdown you envision. My complaint is that the administration should have used the leverage they had to impose a final solution to the FNM/FRE problem. They hsoul dhave insisted that these companies be wound up and liquidated in an orderly fashion but with a date certain. Let the private sector handle this function in the future. The administration has implied strongly that this will be the ultimate result, but as Sen. Schumer made clear this morning, democrats have not thrown in the towel. And why should they? They get to run FNM/FRE as their own private slush fund for decades, using them for huge lobbying contributions and enormous salaries for favored ex-political hacks. Then the republicans get stuck with bailing it out. How perfect is that? For those around at the time, you will recognize this is exactly what happened during the S&L crisis of 18 years ago. Congressional democrats pushed through a massive increase in the government insurance for S & L's and undermined regulation of them. Result? A similar crisis that required an enormous bailout and tainted the republican administration that was stuck with it. Ironically, that was the administration of Bush 41.
Wrong. FNM/FRE were democrat sandboxes. Everyone knows that. Franklin Raines was Clinton's budget director. The infamous Jamie Gorelick, the real Attorney General under Clinton, was a senior VP. Many other prominent dems drew huge salaries. Democrats on the Hill fought tooth and nail against the administration's efforts to rein in these entities. It has been noted repeatedly that Wall Street supported both Clinton and now Obama with far more money than republicans received. Congress, which authorized this bailout, is controlled in both houses by democrats. But don't let the facts get in the way of your mindless partisanship.
Agreed. The government should have allowed the governments to correct themselves. Bush is doing what Clinton did in the 90s by propping up the economy and not allowing the cycle to complete, resulting in a harder fall during the next cycle.