November 28, 2008

Paulson and Bernanke, with no oversight, have now gambled the United States. They're going "all-in".



The World Series of Poker, starring the United States.

Wow.

Well, look at the bright side. If the bet pays off (it won't), and the value of the crap assets that Bernanke just bought on our behalf soars in value, we could pretty much pay off the public debt.

But...

If it doesn't, we're f*cked.

On a side note, there's one thing about this $800 billion shock-and-awe money-print. Why didn't the US dollar collapse on the news? I mean, we just told the world we're now so desperate that we're going to the printing press, instead of the debt market.

So why didn't the dollar collapse? Yes, it rattled, but it didn't collapse.

Serious question.

27 comments:

Roccman said...

We are past peak oil.

The petro dollar must collapse...it is a mathematical assurity.

Unless...people stop using oil.

Anonymous said...

Quantitative Easing...

I just experienced that on the toilet.

Anonymous said...

The USD is riding high because 1) It offers liquidity, 2) As world reserve currency it offers relative safety, and 3) China, Japan, Germany, etc. need us as a market for exports. I think the recently strong dollar is a transient, temporary phenomenon, a rally in a otherwise downward spiral.

We're a banana republic now, a big one yes, but still in the same category. Eventually the bottom will fall out and all those foreign creditors will be demanding payment.

Conversationist said...

Keith,

OT, but are you going to post a thread to get us S&A'ers to share the content from yesterday's Thanksgiving dinner conversations?

Might be some really good comments...!

yoski said...

A lot of entities around the world will go to great length to prevent the dollar from collapsing. Japan, China & Saudis to name some of the main suckers. They hold trillions of dollars and would hate to see their holding become worthless. I don't think mathematically there's any way we can ever pay back the money we owe (other than printing of course) but as long as foreign suckers keep on throwing good money after bad the dollar will be OK. How long will stupid foreigners keep on buying US treasuries? I have no idea but I suspect even they have limits of what they'll put up with. It appears that Paulson and Bernanke are determined to find out exactly where those limits are.
I hold 6 month worth of cash which is being hedged by my fixed rate home mortgage. I pay down debt, buy some gold and energy stocks. Very uncertain times, very difficult to protect your savings from the thiefs running/looting this country.

vanilla ice said...

Great. Encourage debt and recklessness at the expense of saving and investment. F you Paulson and Bernanke.

vanilla ice said...

Why didn't it collapse? Maybe the inflation by the Fed is equaling the price decreases from commodities. The intrinsic value of the dollar is staying the same while other countries' courencies get worse.

JaneZ said...

Op-Ed Contributor
Dying of Consumption
By STEPHEN S. ROACH
Morgan Stanley Asia
Published: November 28, 2008

IT’S game over for the American consumer. Inflation-adjusted personal consumption expenditures are on track for rare back-to-back quarterly declines in the second half of 2008 at a 3.5 percent average annual rate......

http://tinyurl.com/6xsek3

Anonymous said...

Keith,

Dollar didn't collapse outright because everyone else's printing presses are white hot too (with the exception of China and Japan). Now, if the Asians must divest themselves of treasuries to finance their respective bailout/stimuli packages, then watch out below.

Anonymous said...

the dollar didn't collapse because the economies of other currencies that are contenders to replace the dollar are in just as bad of shape if not worse.

Did you read about the bailout that Europe announced the day after our most recent bailout? how about china's latest bailout which is ~25% of china's GDP?!

Anonymous said...

Schiff has it wrong concerning "decoupling". There hasn't been any significant decoupling of other economies from the US. if he keeps "betting" on decoupling he is going to get his "investment" head handed to him on a platter.

Anonymous said...

The dollar is too big to fail.

Paul E. Math said...

Keith, I second Conversationists idea to have a thread on thanksgiving discussions. I found myself across the table from a baby boomer realtor.

SeattleMoose said...

Smoke and mirrors. The rape of America is at full thrust. Trillions of taxpayer dollars are going.....???

Nobody knows because only Goldman Sachs is privy to that information. No accoutability.

After all the cronies and crony companies are being protected financially with OUR money. Then the inevitable happens.....a GREAT DEPRESSION. But hey, Paulson and the his WS cronies will be set to ride it out and profit from it.

It is all so perfect really for the fat white conservative parasites in DC and NY. Rape the country until it is bleeding from every orifice, have a black man elected president, and then blame everything on Obama, who will have to deal with a mess he had no hand in creating.

If you are part of the Bushco inner circle or the financial elite....you are set. Further, when soup lines and homeless camps are everywhere, all the money hoarded by the criminals will be used to buy up assets and stock on the cheap.

The game is called THEY WIN....and THEY do not include you and I. We lose.

k.w. - Southern Ca. said...

I was speaking with an older German friend last night at ThanksGiving, and he quite simply said that people gambled on housing and lost, and they should have to now bear that burden themselves.

He is corret, but at the same time, we cannot let our entire market collapse.

Unfortunately, our government employees on capital hill are still throwing away our money on a faulty system.

Obama was handed a real sh&t pie from Bush Co., and I'm watching just to see how much of that pie he's going to force down the tax-payer's throats.

Just curious, if the government is going to attempt to print their way out of this mess - which has never worked - why are tax payer's still being held accountable for the additional debt?

k.w. - Southern Ca. said...

That's what we said about GM, FORD and CHRYSTLER.

Nothing is too big to fail.

Anonymous said...
The dollar is too big to fail.

Nick said...

The dollar didn't collapse because the U.S.A. has the rest of the world by it's own balls. The rest of the world was stupid enough to over-invest in dollars and U.S. Treasuries. Thus when we announced that we are going to the printing press, the rest of the world's dollar and U.S. bond holders knew that if they too panic and sell, then most of their holdings will lose their value. So it's in everyone's interests to keep the dollar from collapsing.

Anonymous said...

I think those who paid attention are in utter shock and awe: "we are so dead".
As for others, didn't notice, or thought it was just a small add on to the original 700B.

At this point, does it matter what anyone does, or any market? It's all a machine still running, but the factory is empty, and there is nothing in the chutes, no materials in the assembly line.

Yes, those in charge, the
'elite, best and brightest in the Capital system' have bet on unreality, and lost.

My grandfather could have told anyone it was all bs.
Anybody should have known about the time Enron was peddling " energy futures"..
The sold thin air, imaginary widgits, the emperor's wardrobe...have we all been so stupid, stupid, stupid?

grandma pkk

LibVet said...

After WWII we were, essentially, the last industrial power left standing. We were not prosperous in the post-war world because God loved us SO much or that we had the smartest, bestest workers in the world. Poets, priests and politicians (w/ apologies to Sting)have made a living telling us so. But it ain't so.

What is clearly happening is that we are losing our status as king of the hill. We will not roll all the way to the bottom, but we are sliding down from the top.

There is no reason that this should not happen. Powerhouses have risen on either side of us. The world is no longer our oyster.

Is this the end of the world? Nope. Will the dollar survive? Who knows?

Will we have a mother bear of a recession? My money is on yes.

If the dollar does indeed look so wobbly that it might fail, there will be time to flee, if you're liquid.

Lost Cause said...

That's what ticks me off about the bailouts -- they are a loser's bet. The money is already gone -- totally wasted. How does that make you feel?

keith said...

I bought more gold, silver and yen today

anyone joining me?

I don't see how (long term) printing up trillions of new dollars doesn't water down its value

Short term, I still see liquidations of dollar-denominated debt artificially propping up the greenback. But like the housing bubble or the oil bubble or the rice bubble, it's not fundamentals driving prices.

But of course, eventually they will.

And I've got my eye on commodities again.

The other shoe will soon drop.

But the sheeple may think everything is fine, as the stock market goes up, and home prices stop going down.

Who cares that their currency just lost 50% of its value (again)

And I think the Euro and the Pound may be in for a world of hurt too. Watch their rate cuts next week for clues.

i've had it said...

Here are some of my thoughts on why the dollar has not collapsed yet:

Trillions of dollars in bailouts and support funds have been announced by the govt but this amount of money has not yet been provided to the recipients. And it remains to be seen whether it will be. A major part of the govt's strategy is bring back confidence to the financial system. One way of doing this is for the govt to "say" it will provide "X" numbers of dollars in bailout money to "this" or "that" party everytime a new problem crops up or the Dow starts to test its lows. In order for the money to make it into the system however, and thereby have an actual impact on the economy, it has to be printed (electronic transfers, in this day and age) and given out. That hasn't happened to the full amount of the bailouts...at least not yet.

So, perhaps the foreign exchange market at this point in the process is betting that the Feds are just talking policy here with all these bailout announcements and that the govt won't actually go through with the disbursement of funds. This, along with the tanking of all major industrial economies, could explain why the dollar has not gone down.

Also, I'm sure the Feds have at least five to ten more other bailouts in their plans and they will trot them out whenever a new problem comes up (like the soon-to-be problem in the commercial mortgage market). They will do this to instill CONFIDENCE in the system, since they know if that goes then we are royally screwed. Confidence in the system is the only thing that makes the system work for fiat-based monetary economies.

Now, if it turns out the Feds actually have to print and disburse ALL of the trillions and trillions they have promised, then we will see the dollar tank and inflation roar. It remains to be seen, however, whether the Feds will let this happen. If it comes time to start disbursing these trillions, they may just stop these programs or rescind future ones altogether, and make an excuse for doing so; or tell the truth of the type of damage it would do to the economy.

So, in sum: the Feds are in the process of announcing bailout policies right now (and will continue to do so). They have not disbursed the actual amount of these bailouts and they may never do so. If they do, the dollar may go into a heavy decline or collapse. And because of this potential, the Feds may never follow through on the "announced" bailouts.

Just some thoughts of mine...

On a related note, I got an email today from a mint from which I purchased American Eagle gold coins saying my order shipped on 11/26 and should be arriving soon! Took nine weeks for them to get it to me from the day I placed the order in late September. They are saying any new orders will be shipped in March because of the high demand.

JaneZ said...

...have we all been so stupid, stupid, stupid?

grandma pkk

uh, umm, uh yea.

JaneZ said...

Someone (way smarter than me, you gotta be smart to do comments at GEA) asked Mish the other day about how he sees all of this world debt panning out in the end. Mish said it could be possible that all the countries get together and everyone agrees to forgive each other's debt. Like a complete world start over.

What would that mean I wonder? For us bottom feeders? I have thought about it ever since he said it and I can't even begin to fathom how it might turn out for us. Would the world then return to the gold standard?

Bluman said...

Two words: Neucular Weapons.

Got Gold????

too much turkey said...

Answer:

All the other currencies declined at the same time.

But just give it time. All currencies will degrade against gold.

inflation bomb soon said...

Agree with gold play. But battered stocks are not too bad either. Stocks provide an imperfect hedge against inflation.