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Huge Bailout Proposal--$700 billion--Suck the bad debt out of the financial system

Discussion in 'Politics & Religion' started by earlpearl, Sep 20, 2008.

  1. earlpearl

    earlpearl Well-Known Member

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    #221
    Hm; Bogart, I haven't seen anything about this aspect. If it has a kernal of truth I'd like to hear about it by the Congress in the new upcoming vote. If they don't address it verbally I got the feeling it is political hogwash.

    IMHO, Rush is a simple political blowhard. I thought that recent comments from Newt about this issue were overly political, and not at all focused on the problems and issues. He is a guy who can vaccillate between pure politics and being a thoughtful guy depending on the circumstances. Its easy today for him to be critical. He isn't up for office and is simply selling books.

    Some analysis of the breakdown on votes on the bailout pinpointed many who voted against it. Many members of Congress up for tough votes or who are running for Senate voted against it, including dems and repubs. Many conservative repubs voted against it. The entire Black Coalition in Congress voted against it. There were breakdowns by state. In some states there was overwhelming opposition, such as Arizona.

    Meanwhile, its not the market that is the critical problem. Its the stats from the Yahoo article printed by Bogart that focus on the issues that are problematic:

    To me this is the big one. The libor rate is double what it was from just a couple of days ago. This is what it costs banks to borrow from one another to smooth out their capital needs. Uber expensive. This is the oil that generates the ability of banks to make or extend loans. This is where a crisis in failing businesses will occur. IMHO, this is exactly why some kind of bailout is critical.

    I'm not familiar w/ the schiller index. I guess it measures prices. I suspect if there is no bailout prices will continue to tumble and some markets less impacted will begin to suffer. I thought the NY metro region hadn't suffered relatively speaking compared to markets such as California and Florida. If there is no stabilization, then relatively unhit markets will take hits as businesses fail and unemployment goes up.
    SEMrush
    Well......ugly....and uglier. Everything is teetering down. more reasons for a bailout IMHO.

    and btw....putting Buffett and Bloomberg together to reign in the problems. Pretty funny. Bloomberg was fired from a Wall Street position before starting the business that carries his name. Now he wants to run for a 3rd term as NYC mayor. He was considering an independant run for the Pres. Hmmmm.......each of the vice chairs of this idea.....Buffett and Bloomberg....would prolly be more powerful and believable than either of the candidates running for office right now. :D
     
    earlpearl, Oct 1, 2008 IP
    SEMrush
  2. korr

    korr Peon

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    #222
    Dude, they've been inflating the money supply for a year, that money just isn't going to go back into houses. If it was going to, it would have by now.

    When they inflate, money goes to commodities. End of story.

    The bailout = higher prices on food and energy, a smaller effect at slowing down the fall of housing.

    The simplest way of saying it, your house is going to be worth fewer barrels of oil next year than it is right now. Period. Bailout or not, doesn't matter. Government isn't magic, money obeys the laws of its nature first - the laws of man second.
     
    korr, Oct 1, 2008 IP
  3. pizzaman

    pizzaman Active Member

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    #223
    pizzaman, Oct 1, 2008 IP
  4. debunked

    debunked Prominent Member

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    #224
    debunked, Oct 1, 2008 IP
  5. Firegirl

    Firegirl Peon

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    #225
    Thanks for the link. Good article. Really makes you realize that there are way better solutions out there than this bailout...

    But, at the time of this post I am listening to the Senate, and it really sounds like we are pretty much screwed as they will probably pass this bailout plan. So much for listening to the American people!
     
    Firegirl, Oct 1, 2008 IP
  6. korr

    korr Peon

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    #226
    Yeah, they don't want to listen to the people they want to tell us what to think.

    When the rank and file members of Congress stood up for their constituents against the leaders and the powerful money, the media and the press has tried to show it as an immediate crisis and a few foolish Republicans upset about petty things.

    The thing is, the Republican party doesn't help local candidates anymore and only the party's leaders can collect any kind of kickback money from the corporations. We're going to see a lot of independent Republicans elected in the future...
     
    korr, Oct 1, 2008 IP
  7. pizzaman

    pizzaman Active Member

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    #227
    far far far way way way in the future i hope
     
    pizzaman, Oct 1, 2008 IP
  8. korr

    korr Peon

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    #228
    I don't mean Republicans are going to take any majority any time soon, I mean the ones who do manage to get elected will be more independent of the party leadership.
     
    korr, Oct 1, 2008 IP
  9. earlpearl

    earlpearl Well-Known Member

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    #229
    Korr: The problem with these statements is that they are made without any connection to what is going on in a connected way. Can you show that since late 2006 thru 2007 and this year there was a significant explosion of increases in M's (1, 2, and 3) so that there is a correlation with the mortgage problem. Show it. If not, where is the proof to what you are saying.

    Money supply has been increasing for decades. Where does it correlate to the ups and downs in the economy. Do increases in money supply correlate to the explosion of sub prime mortgages? If so, show it.

    Does it tie into an overall huge expansion in mortgage debt....and what appears to be a movement out of more standard mortgages to sub primes, variable rate mortgages, etc. If so, show it.

    If you can't show it then all you and Guerilla do is blow smoke in the wind. Where are the correlations. You show no hard evidence but a lot of mixed political/economic homilies that don't seem to reflect what is really going on...and not currently attached to the crisis du jour.

    Secondly, why do you think money is going to commodities. That is a very broad statement. With a recession occurring in the States and Worldwide commodity prices in many many many areas are taking and going to continue to take a tumble. Who needs commodities when production across the board dips. That is patently untrue. But watch it to check.

    Commodities on the grand scale (all types of commodities) are tied to demand and supply for production. Less production = less demand for commodities.

    How do you explain a bailout = higher prices on food and energy. Please explain. That statement seems to come out of nowhere.

    If production and travel drop as they are doing in the US and world, there will be less demand on oil. Oil prices have been dropping. I don't see any sense to your comments.

    I see a wild crazy increase in housing prices that relate to a wild crazy increase in mortgage production that also reflected writing mortgages on 90, 95, 100% or more of value rather than more traditional 80% values. If you can relate it to money supply growth. Was money supply growth dramatically higher in the US during the 2002/2003 period to 2006 when the subprime mortgage explosion occurred. If so, show it.

    Otherwise I think you are quoting old homilies that don't reflect what is going on now.
     
    earlpearl, Oct 1, 2008 IP
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  10. pizzaman

    pizzaman Active Member

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    #230
    pizzaman, Oct 1, 2008 IP
  11. korr

    korr Peon

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    #231
    Listen, I agree with a lot of what you are saying but maybe I didn't explain myself well enough.

    First of all, you can't get m3 anymore. We could use M1 & M2 but they don't include all the currently illiquid assets triggering the mess. I like MZM as much as it is disparaged...

    [​IMG]

    Here's what is happened/ what is happening: The money supply has doubled in 8 years. Remember, gas was $1.50 - $1.80 a gallon.

    As long as these mortgage debts were treated like real money, the system could take on more debt and expand. Commodities rise with the tide, eventually commodity prices start to force people into defaulting on their mortgages. The Money Supply Bubble simply can't go on forever - we get into the inevitable demand destruction you're talking about. Suddenly, mortgage debt isn't as good as money, its realized to just be debt. The system of leverage needs to contract to meet that reality, but the government wants to use more debt to reflate the value of the existing debt.

    Here we are in the "credit crunch" because the MZM stopped growing regardless of the first $500-600B in Congressionally sponsored bailouts AND the $630B in new liquidity the Fed is offering since the beginning of the year.

    The inflation bubble got so big that it is nearly impossible for them to re-flate it because the reflation triggers commodity price surges that create deflationary demand destruction... This is why the last six month's worth of inflationary attempts have failed or even backfired!
     
    korr, Oct 1, 2008 IP
  12. pizzaman

    pizzaman Active Member

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  13. Bernard

    Bernard Well-Known Member

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    #233
    Now that the Senate passed their version of the bailout, it's back on the House to kill it (again). If you have a strong feeling about this bill (especially if it's negative), please contact your congressman and let your voice be heard.

    You can find contact info fr your congressman (or woman) and how they voted on the first bailout bill here (select your state):

    http://70.32.73.101/kb.php
     
    Bernard, Oct 2, 2008 IP
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  14. homebizseo

    homebizseo Peon

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    #234
    Let's hope they kill it again.
     
    homebizseo, Oct 2, 2008 IP
  15. pizzaman

    pizzaman Active Member

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    #235
    http://rawstory.com/news/2008/Kucinich_tells_Maddow_Bailout_plan_immoral_1001.html
    Democratic House leaders were rightfully rebuked in their attempt to pass an "immoral" bailout plan that would have put Wall Street's interests above those of average Americans, said Rep. Dennis Kucinich, who commended Republicans for helping torpedo the $700 billion package earlier this week.
    Maddow suggested a non partisan coalition of the no voters to come up with their own plan.
    Kucinich agreed. It seems that he can back some of the repub ideas. It is a very intresting idea.
     
    pizzaman, Oct 2, 2008 IP
  16. bogart

    bogart Notable Member

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    #236
    The Standard&Poors Shiller index is a good guide to home prices. The home price history of New York metro is as follows 1987:74, 2006:214 and July 2008:192. The New York metro prices have declined to 2005 levels. California and Florida prices are at 2004 levels.

    The housing bubble started in 1997. Prices are still at 2x or more what they were in 2001.

    I expect that prices in the New York metro will decline around 20% of the next year and go back to 2004 levels.

    Prices as still way too high and price/rent ratio are still running at 18 when the historical average is 10.

    For more investors there is little or no return on renting a house purchased at the current price levels.

    The current bill has a lot more pork attacted to it. I beleive that an additional $200 billion in pork will be required for the bill to pass.

    The Senate sells out cheap.
     
    bogart, Oct 2, 2008 IP
  17. debunked

    debunked Prominent Member

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    #237
    Thanks for the link.

    I was somewhat surprised with our Reps vote, but then there is some local pork that has a been added that replaces the funds the ran out about a year ago. It is money replacing the timber industry lost by because we can no longer cut trees down.

    I wrote to him and gave him my plan. I just don't expect his email reader to get it.
     
    debunked, Oct 2, 2008 IP
  18. earlpearl

    earlpearl Well-Known Member

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    #238

    Tx, Bogart. I wasn't familiar with those indices. I bought a couple of rental houses in the past and have bought commercial property. Never invested in the NY market region. (I did grow up there) But it is so vast and diverse. It has tons of micro markets that would show dramatically different characteristics.

    Never used it, but the price to rent ratio is exactly the kind of equation I would look at for real estate investments.

    As to some kind of bailout, I'm all for it. IMHO, not injecting mony/help into the system will just lead to faster, greater catastrophe's, with the biggest fallout being loss of business, loss of businesses, loss of jobs, and a crescending fast collapse of many parts of the economy. We have seen rapid increases in unemployment and business failures. People are losing their ability to earn a living.

    How it is structured is certainly open to debate. There is no one guaranteed way of doing this, nor one way that will be painless. As with lots of businesses you take shots at things and see if they work. At times like this to hell w/ political slogans. Action is more important than words.

    Currently it looks ugly for auto dealers. They are a signficant part of the economy, certainly with regard to employment. Full scale dealers include a lot of employees dealing with car sales, finance, and repair. Close down a lot of dealers and you have a lot of car repair folks out of work. On the other hand that is good for the independant repair shops. Auto dealers also occupy a lot of valuable commercial land. I'm sure a lot of that is mortgaged. Close the dealerships, or more drastically see them go into bankruptcy and you have a lot of valuable commercial mortgages going down the drain for the time being.

    I don't think there is anything moral or immoral about congressional action in a bailout. Its an effort to support a collapsing economy..
     
    earlpearl, Oct 2, 2008 IP
  19. bogart

    bogart Notable Member

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    #239
    The DOW is -265. Doesn't seem that the market has a lot of faith that the bailout will pass.
     
    bogart, Oct 2, 2008 IP
  20. Bernard

    Bernard Well-Known Member

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    #240
    You were almost right. The bailout gives Pauson and Bernanke unlimited authority to spend money on the ~$200-600 trillion derivatives market. It will destroy the dollar and the resulting catastrophe is going to make the pain of a ~year long recession/depression while the market corrects itself pale in comparison.
     
    Bernard, Oct 2, 2008 IP