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alstry (35.19)

The Bailout is NONSENSE!!!!!

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September 28, 2008 – Comments (7)

The issue is that revenues are evaporating.  I have been warning you about this for months.  Our politicans have the problem bass ackwards.  Banks are not making loans not because they don't have liquidity.....it is because they are few qualified or wanting to borrow money.

In the past few years...the vast majority of bank loans came from writing toxic mortgages, HELOCs, agressive commercial RE loans, and highly leveraged private equity deals.  "Legitimate and sound"  lending  was a relatively small portion of bank business.  This toxic business is now dead and the banks want of to take the dead weight off their books after booking huge profits and taking home enormous bonuses.

Some how our politicans are trying to make us believe that if the bad loans are removed from the books of banks....that banks will be ready to make more bad loans???  Is that like trying to cure a hangover with liquor????  How stupid does Paulson think CAPS players are????

Further, by borrowing more money the FED will cause interest rates to rise by weakening the dollar.  When people become worried about a borrowers ability to repay....the rates they demand skyrocket....just take a look at this from the WSJ:

Debt investors are nervous lately. Borrowing is expensive and hard for cities, states, hospitals and turnpikes nationwide. Such extra costs will likely be met by raising taxes in coming months.

Get ready...because cities and states borrowed so much money in recent years.....with the current sharp decline in revenues it is getting much harder and more expensive to raise cash......so they are coming after you and I to make up the difference.

The same will happen to the Federal Government after borrowing an additional $700 Billion and taking on the liabilities of Fannie and Freddie.  As foreigners shift to currencies of countries with more fiscally conservative policies...the borrowing costs to America will rise as dollars are dumped.  Since few banks are paying taxes any more....that's right.....you and I will be making up the difference.

Here is the rub...as we are forced to pay more taxes...that will be less money to spend and further contraction for an economy already breaking to a halt.  In essense...the banking bailout is an economic and a personal tax sucking machine.

What few want to admit right now is that all of the growth America experienced since 9-11...was simply gained as a result of creating credit and accumulating debt.  As long as the banks lent.....things went along just fine.  When the banks ran out of money......just like a plane running out of gas......the economy started heading for the ground.

Right now there is simply too much debt in every crevice our our economy.....borrowing more money will not solve the problem and actually make things worse.  If this bill passes...get ready for huge tax hikes and a slowing economy.

We just loaned the auto companies $25 Billion....if they can't pay the current debt load...how can adding additional burdens in a slowing sales environment help????  It can't!!!!!

Our leaders are committing economic treason against ourselves and children....it is time for the citizens to stand up and kick the foxes out of the hen house.  It is time to restructure....NOW!!!!

 

7 Comments – Post Your Own

#1) On September 28, 2008 at 1:43 AM, StatsGeek (29.53) wrote:

I'm with you, Alstry.  Congress is approving this plan despite massive public opposition because they think we're too dumb to see the problem.  They've got it backwards.

I want to do a Ron Paul write-in vote.  The only elected official with a brain.

 

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#2) On September 28, 2008 at 2:07 AM, Donnernv (< 20) wrote:

For Lord's sake, get some kind of education before blathering.  Read the latest newsletter and learn SOMETHING.

wave@frontlinethoughts.com

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#3) On September 28, 2008 at 8:50 AM, outoffocus (23.62) wrote:

"What few want to admit right now is that all of the growth America experienced since 9-11...was simply gained as a result of creating credit and accumulating debt."

I want to make a few points:

1. That recession in 2001 was supposed to be the real correction.  By lowering interest rates to negative nothing, the Fed interfered with the business cycle and just delayed the inevitable.  Now the Fed wants to do the same thing in hopes of "saving" the economy.  Once again delaying the inevitable. Each time they delay the inevitable they make the inevitable worse. By the time the inevitable finally gets here shes gonna be pissed. 

2. What really infuriates me are the people who blindly accept this and other bailout plans as if there are no consequences.  There will be consequences in the form of 70s style inflation. The government is broke and they plan on shouldering this entire mess back on the people. And guess what, the people are broke too!! For every person that supports this bill, I suggest you go to www.gao.gov and look at the government's financial statements and READ David Walker's letters (former Comptroller General and the ONLY government official I respect and agree with.)  You will find out that the US government should not have a AAA rating in its current financial state. Look for that to be the next major shoe to drop...

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#4) On September 28, 2008 at 9:54 AM, russiangambit (29.53) wrote:

Donnerv, I went and read the link you posted. There is nothing there about the consumer being over-leveraged. The author only talks about subprime. He is so 6 months behind the ball. 

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#5) On September 28, 2008 at 9:59 AM, alstry (35.19) wrote:

We are in a much worse position than the seventies.  In the seventies we had relatively little debt compared to now and productivity was increasing.  As a result wages increased with rising prices...this time wages are going down....especially if you factor healthcare costs.

The plan does nothing to drive more revenues to consumers, businesses or municipalities.  Expect bankruptcies to skyrocket in upcoming weeks and months.

Ask yourself this simple question...how many businesses over the past five years was directly or indirectly dependent on aggressive lending practices?  Here are a few hints...housing, healthcare, autos, retail, finance, government taxes, commercial RE development....and many more.

Then ask yourself how does the current bill help inject growth into any of the above?  If the customer can't afford a loan..do you think banks are suddenly going to start lending.

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#6) On September 28, 2008 at 11:17 AM, btown819 (96.34) wrote:

While some good points are made, a lot of this post is nonsense.  The proposed $700B bailout isn't intended to prevent an economic recession.  It is intended to expedite the repairs to the financial system.  A broken system coupled with an economic slowdown would significantly compound the effects of an economic slowdown.  The free markets would fix the system on their own, but it would take a heck of a long time to do it on their own... time that would bear an incredibly high cost.  This $700B proposal is a pre-emptive strike by the U.S. taxpayers.  I've cringed at George Bush's idea and use of "pre-emptive strike" in the past, but this is one of the few times where I am on board with him.

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#7) On September 28, 2008 at 11:30 AM, alstry (35.19) wrote:

Take a look at my next blog.

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