Bye bye, Miss American Pie
Well, as usual, the powers that be got exactly what they wanted with this bailout plan. Most people are saying that the version that passed is more dangerous than the initial one that failed. What Mr. Stricker was talking about in his post (hyperinflation) is what you’re going to watch for.
The rest of this is literally a chain reaction. It’s how economies work…it’s NOT a random opinion.There’s no doubt that this is a very, very complicated situation that’s very hard to understand on every level. But it’s time to look into it and see what’ll be coming in the next few months and year.
There’s one guy who has accurately called much of what’s happened over the past year. He’s Peter Schiff…he was Ron Paul’s economic advisor. And these could be the most important videos you’ll ever watch on the internet. This guy KNOWS what he’s talking about. He has swatted away some of the world’s most respected economists and proved them wrong time and time again.
More importantly, POLITICIANS aren’t ECONOMISTS.
Why are these people laying down laws for a complicated system they don’t even understand?This isn’t a ghost story, folks. This is some really scary shit. It’s worth every minute of researching how the American economy was founded, based and the subsequent switch to the Federal Reserve and the ensuing devaluation of the dollar. You CANNOT simply continue to print money that isn’t based in any real value. You can’t keep dropping interest rates to encouraging buying when our credit is stretched and we’re NOT EVEN PAYING FOR WHAT WE ALREADY HAVE.
There’s no legitimate way out of this at the current point after this bill passed. If anyone can suggest a happy ending from this, I’ll all ears. But what goes up, will come down when there is nothing there to keep you afloat.
The bottom line is that inflation will rise, the value of your dollar will drop. That’s a fact and that’s what you need to realize over the coming months.WALL STREET hasn’t even benefitted from the passing of this inane Paulson bill. So what’s the point?
Pay off billions of bad foreign debt so we can keep piling it on.We’ve crossed the Rubicon in many ways. And this is another HISTORIC mistake that Americans will look back on and rue the day it squirmed it’s way through congress. No scaremongering, this is fact.CHECK THESE SCHIFF videos….get a glimpse into what you’ll be dealing with as an American.
http://csinvestor.com/peter-schiff-videos-the-economy-gold-and-the-coming-collapse-of-the-dollar/
And yes, this is one person’s viewpoint. But this person has been right time and time again. He understands the economy, the history of the dollar and the history of the Federal Reserve. They don’t teach all of that shit in grad school.
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4. October 2008 - 01:30 Uhr
For people that haven’t seen the Schiff videos, go and do it right now. This guy is seriously smart and has a strong argument. I am by no mean a econo expert and probably know .01% of what Schiff knows (an another expert on econo)but from what I do know, I believe that Schiff’s position does leave unsatisfying answer and unanswered questions.
I would like to point out that the functioning of the economy is mainly based on theory - no one (not even the so called experts) knows exactly how the market functions so, while Schiff’s point of view has coincided with what has happened to the current economic condition, it doesn’t mean that he knows exactly how the market works nor is it proof that his approach is correct.
I’m a firm believer that the bailout will help the country - it won’t take us out of the coming financial hardship but, it will soften the blow and keep us out of a depression.
Yes, the greenback will lose it’s value - but it doesn’t mean that the dollar will be worthless. I think the situation of needing a wheelbarrow of cash to buy bread is not going to happen, could it happen? yes, if we don’t change our ways but, it I just don’t see it happening in this situation.
Schiff’s answer to the economic problem is to let the market collapse but, he doesn’t offer a suggestion to what he would do with all the families that would lose their home and jobs. He doesn’t offer a solution on how to cope with a collapsed market. Real fallout. Ya, Schiff has an answer but, in the current state will his solution really work?
And for the people that are willing to just burn the system in the name of the free market (don’t be confused with democracy) are you willing to live through a depression, are you willing to put your friends and families on the street? Are you so dead set on letting the market collapse even if there’s an alternative? Have you guys heard the stories of what happens in a depression?
And for those that believe that by not bailing out wall street, we’ll teach the rich - Think again, they’re going to be the ones that have investments gold, and other foreign currencies. Ya, not bailing them out may take a 100 million out of their pockets, but is that really that much when they started with 500 million? I’m willing to bet that if a depression hit, you’re not going to see any of the rich in the the food lines with you and me.
And for those people arguing that this bailout isn’t democratic, I’d argue the exact opposite. Let’s not forget we voted for this government and all the governments before it. The majority of the people in the US put its faith in this government to deal with national problems, just like this. Oh you didn’t vote? that’s your fault, don’t you wish you were paying more attention to what was happening at the white house and not at paris hiltons place? You didn’t vote for the republicans? tough that’s democracy, party with the most votes wins. You voted for the republicans but don’t agree with how this is being handled? tough, voting for a government mean you are putting your faith in that government to solve all problems they see fit.
For the people arguing that this bailout is turning the US into a social state - ie. communism. Slow your horses down. There’s nothing wrong with a bit of socialism, many capitalist country inject some social aspects into their systems. If letting the government provide free health care or subsides schooling makes you believe that I’m a communist then so be it. If letting the government step in to prevent a depression, so that my friends and family aren’t out of house and home, so be it. If having the government regulate corporations makes me a communist, then so be it. If caring for the well being of others makes me a communist, so be it. If being an American and everything it stands for, means screwing the millions of people caught in this mess - than screw being an American and screw what America stands for. But I believe America is more than a free market, more than a simple ideology. America is a country that never leaves their own behind, so why now?
Don you wrote about a universal responsibility - where does schiff’s plan fit in?
Ok, we consumed too much, we all (greedy banks and the greedy public) made mistakes. Now the shit has hit the fan, where do we go from here - you want to collapse the markets? sure - but I’ll ask this again, what do you do with the all the people (rich, middle class, and the poor) that will fall from this?
Sorry for the long post!
4. October 2008 - 05:15 Uhr
SC,
Thanks for the response and the consideration. I disagree, but I do so respectfully.
I’ll address the last direct question you asked first in terms of universal responsibility. From my point of view, responsibility played a huge part in the coming collapse. From government on down. We created a culture that allowed, nay ENCOURAGED, people to live well beyond their means. It was this untouchable attitude of American dominance maybe stoked by the past class restraints that made the lure of easy money almost undeniable for most. The banks were practically GIVING AWAY money. And they assumed that risk when they passed money onto high risk debtors. THEY assumed that risk despite facts, figures, asset value and the lack of wealth to justify it. The government most definitely encouraged it by lowering interest rates, which made the allure that much stronger for Americans.
Now we get down to personal responsibility…most people I know live within or under their means. If they don’t have the money for it, they don’t buy it. I’m being general of course, but that’s how it’s supposed to be. That’s not my opinion of how things SHOULD be, it’s how the economic system works: If you can’t afford something, you don’t buy it. If you want it, you go out, work for the money, save up and then indulge when you have the means. Anything less is becomes a liability. And that goes for every item to be purchased: TVs, Cars, Homes, etc.
Yet we bred this culture where it’s completely acceptable to be hundreds and hundreds of thousands of dollars in debt. It’s almost WEIRDER to NOT be in debt in America.
And logically, that’s fucked up. But we look up at the government and they’re doing the exact same thing: Waging wars they can’t afford, giving away money they don’t have…paying overinflated rates to no-bid contractors 100 times the amount they should be paid. So yes, a culture of debt and credit was created and encouraged.
In terms of being responsible in helping people, well, isn’t that the American way? It damn well used to be. If someone was hurting, you tried to help. If someone needed something and you could afford to help, you did so gladly. You helped pick people up when you could, you took care of your neighbors, you gave to charity when monthly savings allowed and THAT’S why our country became the best enviable in the world. THAT’S what we were known for back in the good days.
What did we create?
A culture of ‘I’M GONNA GET MINE!’ “Sorry about your luck.” People bragging about their jewelry, their homes, their cars, ‘flossing,’ as it was known in the 90s. We created a culture of haves vs. have-nots….a culture that placed WAY more emphasis on wealth and money than on consideration and generosity.
Now here comes the curveball: NO amount of wealth was ever enough. Billionaires who owned 7 homes and 13 cars stepped over homeless people on their way into congress. Or to their job on Wall Street. The Old Boy’s club was created for the uber rich and they used this stonewall to protect their assets, gain MORE assets and help their rich friends get wealthier.
In a word, it was absolute madness. They system was gamed…the tax codes were written and enforced. What’s the ultimate power grab? Absolute power. The only way to have that is to be able to control large amounts of the population.
How was that done? Loan them money and keep them in debt. If someone is indebted to you for large amounts, you LITERALLY own them. Offer easy money with high interest that may not be paid back and watch the masses dive in head first.
Now that bad part: What goes up, must come down.
The best analogy I can make is this: If you’re being hoisted into the air, higher and higher, there comes at some point a time where you think, ‘If I jump off now, I’m going to break my legs.” So you hang on. As you go higher and higher, you then think, at this point, I may die if I jump off.”
So do you hang on to go higher or jump while you can to risk broken legs in an attempt to save your life?
At this point, there’s no way to completely avoid a downside. But we’re hanging on, going higher and higher and higher and it’s threatening our very existence economically. You can play Monopoly all you like with paper money…print as much as you like, distribute it however you want but the value WILL collapse.
You’re wrong on one main account: There IS an established economic system. We no longer follow it but it’s given us every single thing the U.S. lays claims to in terms of success and power. Other countries invested in the United States because it was a sure thing. We owned gold…LOTS of it and gold was wealth. We PRODUCED things that were sold to other countries. Producing those goods encouraged job growth and stabilized the value of the dollar and kept inflation down.
While it’s true that there’s no easy solution, there IS a solution: A return to a value-based currency. In the meantime, yes, there would be a recession but it would be a cake walk compared to what we’ll eventually face according to the people that I look up to.
Keep in mind that the plan they approved today was drawn up by George Bush and his administration. The same people who helped bring you this meltdown. The same people who spied on you without a warrant. The same people who lied about evidence to support an invasion into Iraq…the posse who swore they had the smoking gun to justify the slaughter. A guy who, in my opinion, is barely qualified to run a McDonalds.
His ‘team,’ you say? Paulson? He worked for Goldman Sachs before it went belly up. He understands the crisis but only in so much that he helped create it. And Bernanke?
You’re talking about the fox watching the hen house in a major way. These people are bailing out their friends, their ex-coworkers… a group whose contributions to congress and lawmakers goes way into the millions from lobbying and contributions.
Everyone is free to prepare (or not prepare) however they seem fit. I no longer suggest the sky is falling, I just try to send people in the direction of other people who can explain it better.
I invite everyone to watch a film by Aaron Russo called ‘Freedom to Fasicm.’ There’s a great discussion in there about the formation of the Federal Reserve and the devaluation of the currency. You can watch it for free HERE. It will answer MANY questions about our current situation:
http://video.google.com/videoplay?docid=-1656880303867390173&ei=6tzmSIiqHYHCjgL1kJCcBg&hl=en
This is nothing new. Many, many people have been warning of what’s happening right now. And they all agree on one thing: Until the market sorts itself out and until such time that we return to a currency BACKED by real value, this bubble will burst and it will burst hard.
And yes, times will be hard but we’ll be working towards rebuilding a stable economy so there would be reason to move forward. Right now, we’re on a slippery slope that has potential to completely collapse. When you inflate an economy by pumping in more worthless dollars, the dollar weakens and loses value, interest rates go up and inflation creeps in. THAT is the economic system we’re propped up on right now.
I don’t see a single positive aspect of this bill that was passed today. I really don’t. It’s the American way…why deal with something today when we can put it off until tomorrow.
Well, tomorrow is here. And it’s bringing a bill to be paid.
The times we once knew are over. It’s time to pay the piper for the party we’ve been having for the past 30 years.
I’m not saying we’re doomed as a country…I’m saying that until we shift back to money that is WORTH something, we’re walking the line of collapse. When the government goes bankrupt (go check out how much we owe globally…esp. to China), we’re most definitely fucked.
4. October 2008 - 18:35 Uhr
Don,
I think you’re absolutely right on your take about universal responsibility. You’re right to point out the WE created this mess and that WE need to get it back under control. Please don’t mistake my agreement with a bailout as a get “out of jail free” card. If WE don’t change our ways we’re definitely in for a huge problem. I love your analogy about hanging onto a bar and falling off. If I’m not mistaken, you see the current problem to be at a point that if we let go now, we’ll only break our legs - I’ll have to respectfully disagree with you. I think we’re pass that point, we’re well pass that point. So, while you and I both agree on the fact that something needs to be done to correct the system, we disagree on the method. I just believe that we need a government intervention to help break the fall - this is very different that stopping us from falling altogether.
While you and your friends live within your means and my friends and I live within our means - that doesn’t mean that we’re the norm. You yourself point out, that America is a country of debt - how else did we get into this mess? So while it’s great people like you draw attention to the issues and encourage people to prepare, the fact is, it’s too late to prepare now. How do people with nothing prepare for this, how do they invest what they don’t have into gold and foreign currency? How do they now start to live within their means? The only way for them to be prepared for harder times is if they get some help. Now if they take this help and continue to piss it away, then let them fall.
Ya I know a bailout will help the rich and the “good ol’boy” but, I think that’s a necessary evil. We can’t cut off the nose to spite the face.
4. October 2008 - 22:04 Uhr
SC,
I want to say thanks for the continued input. I do appreciate it.
Another analogy would be for a heroin addict who needs a constant fix. America is the heroin addict and credit is the fix. There’s no positive way for it to end. You quit cold turkey and you’re facing a very painful time that will last a good while. You keep the addiction and you’re going to need more and more to keep the addiction going. And eventually you’ll face a collapse based simply on the amount that you need to keep your habit. Can you solve a heroin addiction by injecting more junk? Definitely not.
There’s simply no way to solve a problem by making the problem bigger with the same solutions that have already failed. It’s inherently an impossible solution.
Is there a single positive result of this bailout that can be cited other than the fact that it gives us more of what’s killing the economy? Is there a single indication that what we’re facing now as the result of a credit bubble won’t just come back, only bigger this time as a result of much, much more debt? As Americans, we’re supposed to assume that this bailout protects us. We give these huge banks our money and they can continue to give out loans that won’t be backed by anything.
Even the most optimistic economist has said that if the bailout doesn’t solve the mortgage crisis, it’s useless.
There’s no single other advantage to it besides the fact that it allows us to spend more money we don’t have.
That’s it. We inject it, we stabilize momentarily and then eventually, the bill has to be paid. Who’s going to pay it? There’s not enough money in our country to pay off the debt we owe.
One last analogy: You are a working American and have a credit line that extends to a car, a boat a home and other products. Very typical of America right now. But you’ve financed everything and then suddenly you’re making less money or couldn’t even afford it in the first place.
Time comes when you can’t pay your loans. The banks come knocking and you say, ‘I don’t have the money. I simply cannot pay it.”
Would it EVER be a good idea for the bankers to say, ‘Well, hey…go get a loan and you can pay off the money you owe US.’
It perpetuates debt that will, at some point, HAVE to be paid by hard currency.
As a country, we’re borrowing money to pay off loans. It’s the most ludicrous idea in the world and it’ll never work. Especially for a country like us who produce and export so very little and in an economic atmosphere where people are losing their jobs left and right.
Wealth does not start at the top and trickle down. I’ll say that again because it negates the whole theory of this bailout: Wealth does NOT start at the top and trickle down. Wealth stays at the top. Wealth starts in the middle and works its way out. That’s why things were so good in the 50s and 60s because we had a growing middle class. It boosted PRODUCTIVITY and OUTPUT rather than boosting PROFITS, which is what occurs at the top level of wealth.
As far as preparation, this is a historic failure on the part of Government. They’re in no position to help us and there are millions of reasons for that, the most obvious and recent being the war in Iraq that has siphoned over a trillion dollars from the American taxpayer and injected into a foreign country to help rebuild the shit we just destroyed.
Will it get to where there is fighting in the street over a loaf of bread? I certainly hope not. Martial law would be declared before it would get that bad. Whether or not that would work is a matter of more speculation on top of speculation.
So I won’t even get that far into my personal opinions about the aftermath. What I’m 100% sure of is that the value of our dollar will drop dramatically in the coming months. And inflation will go up…it’s a sliding scale. You get one, you get the other…that’s the way our economy is based. The value will go down because of lack of confidence in it globally. No foreign markets will be investing in American dollars. Americans will be spending less and less since there is no consumer confidence in the market.
What happens next is, again, more speculation. Just like it’s the law of nature for something that is in motion to stay in motion, or what goes up will eventually come down…these are laws of nature we’re dealing with and not just laws of economics.
As a country, it’s completely unavoidable that we will have to pay the tab and that will come in the form of a sprawling recession, if not a full fledged depression. People paying off debt rather than incurring more debt. Banks not offering credit to anyone except those who have the assets to secure it, buying food and paying utilities rather than buying any item of luxury or entertainment.
That doesn’t necessarily mean there will be a class war or unrest but it has the very distinct elements that could cause something dramatic.
Again, if anyone can point me to a single evidence backed idea of how this bailout will help, I’m all ears. Any evidence that would suggest that it will HELP Americans at all other than offer them more credit. I’d love to believe that this thing stands a chance. I’m not against it because it puts me in more debt I didn’t create and helps billionaires maintain their lifestyles, I’m against it because I haven’t seen a single shred of evidence that says it will keep us from going bust as a nation. Not ONE piece of evidence. I know what it DOES do…it takes money from the poor and gives it to the very rich. Bankruptcy for the companies involved is the solution for this thing, letting the market working itself out is a solution. Throwing money at a failed system won’t solve it. Do me a favor and check out this link…it’s another angle to consider in terms of the companies that helped create the sub-prime meltdown:
http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html
5. October 2008 - 05:55 Uhr
I understand that this bailout isn’t perfect and believe me, I really would prefer to let the banks burn and not have the government step in. But, we need something to cushion the fall. Here is someone that has a similar opinions and offers a better explanation,as to why the bailout is needed, than I would be able to do.
http://www.frontlinethoughts.com/article.asp?id=mwo100308
Don, if you don’t mind, I’ll post up a few more people that share my views - I’m just a bit pressed for time right now.
Cheers.
5. October 2008 - 08:59 Uhr
DP,
Thanks for the mention, and SC, thanks for actually posting here and starting dialogue.
There are many problems here, the largest being that no one in the US likes to sacrifice, especially those born in the last 20 years and never lived through a time when one would need to curb one’s spending. It’s been a “it’s mine” world ever since about 1995-96 and it’s foul on all fronts.
I’m pretty sure I’ve stated this before, but even when I was ignorant to anything financial/real estate oriented, I knew lots of people who made less money than me buying homes and it immediately sent up a red flag as I grew up with parents who–early on in my life made nice money–but always lived in townhomes and we were never “comfortable.” (and still aren’t).
To me a home was always a MONEY PIT–watch the movie. Just as it was to everyone else pre-whenever that movie was made.
Even if you have a perfectly built and maintained home, a home is a LIABILITY. People have obviously forgotten that.
And not that it totally should be, but when you allow people who make 25K a year to buy a 400K house with no money down as was the case in much of inland LA, you’re begging for problems.
I was ignorant to most all of this and put down 20% on a nice chicago condo 20 months ago. Luckily, it has gone up in price nicely, and I’d probably make money if I sold tomorrow, but if any real rescue happens or if housing prices drastically fall (which they will in 95% of places-DRAMATICALLY), those of us who have suffered and worked to save that 20% down payment are going to be fucked. No one will be bailing my ass out.
We have been taught that renting is “throwing away money,” if even you sign up for an ARM or interest-only loan where you’re now owing more than your house was worth and haven’t paid down a penny in principal in months.
As I was saying, when I was extremely ignorant, I still sniffed out this concept: The median household income in Carlsbad, California (very white, conservative–uncultured and foul IMO) was 63K while the median home price was about 563K. (And these are similar ratios throughout most of So Cal). Anyone who does even the slightest amount of research knows that housing costs should be no more than one third of the monthly family take home pay.
My mother and many other people I know, including my very liberal professor uncle Frank (nothing wrong with being liberal, I just think it’s a false classification created for separating potentially like thought) say we went through this same thing in the 70s and then again in the 80s. The only problem is: “Homeowner debt is at unsustainable levels. “In 1980, Americans carried a little less than a trillion dollars of mortgage debt, which came to about 20K per family of four. Today, we carry nearly 10 trillion, or nearly 135K per family of four. If you add in all the other debt in the system–government, business, credit card–the total comes to around 600K per family of four. Clearly, we’re in no shape to begin a real-estate borrowing binge.” (THE COLLAPSE OF THE DOLLAR AND HOW TO PROFIT FROM IT, by JAMES TURK & JOHN RUBINO). Basically, when all these crises have happened in the past, American have owned 50-90 percent of their homes, not 10-20 percent.
There is much more to say here, and I’m about 99% sure we are going to see some crazy banking collapse this week with the potential of some implementation of martial law to some degree. And please understand that Don and I (we’ve never even met each other) are not doing this for shits and giggles. We make our living off expendable income.
Also, how is the FDIC insuring bank accounts for 250K over 100K supposed to be an assurance? You DO KNOW that they only have about 50 billion in reserves to cover over 9 TRILLION in deposits, RIGHT? So what happens then? Do we vote for ANOTHER bail out?
e
5. October 2008 - 19:55 Uhr
e,dp - you guys both have great points and I’m glad you guys post about important issues - it’s important to keep people aware.
I really feel where both of you are coming from, to be honest I’m a bit worried that the US (government and public) will just continue their troubled ways (reckless spending). If that’s the case, then no bailout/government intervention will help - like you guys point out - but, if people do change there ways than this bailout can/will do exactly what its suppose to. Instead of looking at the bailout as the ultimate solution, it should be looked at as a stopgap - something to prevent a mass panic, like the panic that lead to the great depression. Let’s not forget, committees will be set up to monitor how the money will be spent.
In terms of the public continuing to spend recklessly, I am noticing that more people are starting to use cash, instead of plastic - a sign that people are watching their spending. To confirm that people are using more cash, I was at a popular local sushi place (a more upscale sushi place), a couple days ago, and was talking to the owner. He also raise the point that a lot of people are starting to pay cash - something that he said hardly happened at his place before. So maybe people are taking notice to the harder times and maybe we shouldn’t be worried about the continuing of reckless spending?