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Subject: Trillion dollar bailout - will it work? rss

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Have faith
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Bailout Could Cost a Trillion Dollars
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=...

The headlines are full of an imminent US govt plan to buy up as much as a trillion US$ of "toxic debt" in the financial markets.

Apparently the details haven't been decided yet - but do you think this basic idea will work?

And what will be the future impact of this bailout?
 
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"that's a smith and wesson, and you've had your six"
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Well I think that the mortgage industry learned some valuable lessons here. These crazy ARM terms bit them hard in the ass, and they should be restructured. It would have been nice if they went down with the ship alone, but not at the cost of the entire economy. So will this bailout "fix" things, probably not. But it may patch things up long enough to bolster confidence, and make lenders aware that their practices should be re-evaluated. Of course that might be a overly hopeful ideal.
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SH W
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It is largely a matter of confidence. It is self-fulfilling prophecy.

If everybody believe it will, the feedback loop ends, and the positive loop begins.

If not, then we let the negative feedback loop go to its logical conclusion-> zero liquidity. All that you possess is what you own physically.
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Eric Knauer
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Can you say "moral hazard"?
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SH W
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eknauer wrote:
Can you say "moral hazard"?


Boo! laugh

Why do you hate America, my dear Austrian?
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Eric Knauer
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Wisdom from the great Austrian, Ludwig Von Mises:


"The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration."

"How pale is the art of sorcerers, witches, and conjurors when compared with that of the government's Treasury Department!"

"The ultimate cause, therefore, of the phenomenon of wave after wave of economic ups and downs is ideological in character. The cycles will not disappear so long as people believe that the rate of interest may be reduced, not through the accumulation of capital, but by banking policy."

"The cyclical fluctuations of business are not an occurrence originating in the sphere of the unhampered market, but a product of government interference with business conditions designed to lower the rate of interest below the height at which the free market would have fixed it."

"Every step which leads from capitalism toward planning is necessarily a step nearer to absolutism and dictatorship."

And finally, Rockwell:

"That's the nature of government, always fixing problems of its own creation that create ever more problems for government to fix. It's like the plumber who breaks more pipes than he repairs – except that you can't fire him."


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Jorge Montero
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A government must do what's best for the country.

The question is, is intervention the best for the country?

Up next: The republicans open the borders to increase the US population and drive the price of houses up!
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Jorge Montero
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I'll take Manhattan in a garbage bag. With Latin written on it that says "It's hard to give a shit these days"
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Quote:
"The cyclical fluctuations of business are not an occurrence originating in the sphere of the unhampered market, but a product of government interference with business conditions designed to lower the rate of interest below the height at which the free market would have fixed it."


And yet, corporate consolidation can end up creating pretty much the same problem, just not in the name of government.

The free market can be distorted in many ways without any government intervention whatsoever. If only a few people are competing, it fails. If most of the people competing aren't really motivated by the long term health of their company, but by their own personal incentives that might go against it, it fails too. Guess what? Both of those are almost guaranteed when dealing with entities as big as modern banks.

Their analysis of what went wrong is pretty good, their solutions are not.
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Eric Knauer
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hibikir wrote:
Quote:
"The cyclical fluctuations of business are not an occurrence originating in the sphere of the unhampered market, but a product of government interference with business conditions designed to lower the rate of interest below the height at which the free market would have fixed it."


And yet, corporate consolidation can end up creating pretty much the same problem, just not in the name of government.

The free market can be distorted in many ways without any government intervention whatsoever. If only a few people are competing, it fails. If most of the people competing aren't really motivated by the long term health of their company, but by their own personal incentives that might go against it, it fails too. Guess what? Both of those are almost guaranteed when dealing with entities as big as modern banks.

Their analysis of what went wrong is pretty good, their solutions are not.



Free-market failure is fine and even desirable (“creative destruction”) since the market rewards (profits) companies who serve the consumers and punishes those who can’t. The beauty of the free-market is that competition allows competitors to overtake corporations that have become too large and inefficient. The problem with government is that when it fails in a particular area, it isn’t allowed to go out of business, and perversely, is often rewarded with a larger budget because of its failures. When government tampers with the money supply and interest rates, the magnitude of the failures are amplified (because of the artificial distortions) and result in what we are seeing now. There are no distortions (in the bad sense) on a free-market because the price system is allowed to function properly without interventions by the government. If the government could effectively set prices and interest rates, then markets wouldn’t be necessary; all that would be needed is a computer to determine the cost and supply of things.
 
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Latria wrote:
It is largely a matter of confidence. It is self-fulfilling prophecy.

If everybody believe it will, the feedback loop ends, and the positive loop begins.

If not, then we let the negative feedback loop go to its logical conclusion-> zero liquidity. All that you possess is what you own physically.


So the people who have the least to lose here are those that have the least right now. If all you have is what you own physically, right now, then you don't have much to worry about. :)

I'm thinking here of my little old lady mama who has a couple of CDs in the bank and owns her house and car. Otherwise, that's it. I'm thinking she's okay.

I own a couple of CDs and my cars, not my house, not yet, so that's a little freaky. I have some retirement plan that I haven't ever really counted on and an IRA that's lost about a quarter of its worth. Whatever. My kids are my retirement plan, I guess. I'll live with each one for like two months a year -- ha ha.

It's a little scary, but I'm really not sweating it. Just a couple generations back have survived worse economic conditions, and honestly, if you have a full belly and a roof over your head, you have more than an assload of people on this planet, so be happy for crying out loud. Why do we lament the loss of so damn much excess?

I'm a little jealous that the government didn't bail out my parents' arts and crafts store in the recession of the seventies. But hey, I guess I should be thankful for the free breakfast and lunches I got at school as a direct result. he he.
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Darren M
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I've heard there is 2 trillion in "overextended debtloads" floating around so the horror story may be worse than it looks even now.
 
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