Response to AmEx/Auto Industry Bailout
I have sat quietly watching things unfold since PM Bush and King Paulson railroaded Congress with that $700 billion bailout bill. At the time, I lost faith in both candidates and all the politicians that voted yes for that travesty of a bill.
I have sat quietly by since, not only because I disagreed with the way that issue turned out, not only because I disagreed that we were in a Financial CRISIS, not only because I disagreed that we needed a $700 billion bailout … I have said nothing because, quite frankly, I did not predict the government’s response in Mid-September.
There was a loud SPLISH sound when George Bush finally signed that bailout bill into law. The whole CRISIS and society had jumped the shark in such a way that I had not anticipated. I anticipated the dominoes falling … I did not anticipate the reaction.
I was wrong about the bankers, who I thought would do the right thing early on. To think that Citibank announced YESTERDAY was FINALLY going to work with homeowners in danger of losing their homes! Citibank – a huge bank that my father had a checking account with when I was a boy … they have near infinite resources and, I had supposed, near infinite financial intelligence and wisdom … they waited until NOW, November of 2008, to start restructuring bad home loans and working with people who are losing their homes.
IT’S A LITTLE TOO LATE FOR THAT. There have been sooooooo many foreclosures over the PAST TWO YEARS!
Insanity. It’s like trying to plug the whole in the Titanic after the boat is sticking up in the air, about to plunge in the water.
So, I have sat quietly by, trying to figure this out. This is just insane, and, quite frankly, I did not want to sim it in my mind.
Well, I saw a post yesterday morning from Damian where he apparently read my thoughts and called me out on it.
So, here goes:
It’s really quite simple. When you’ve got a Fed Reserve bank that is creating money out of thin air, like crazy, out of control … that is going to cause the value of the currency to drop!
There’s no doubt about that. My parents are from Brazil. I remember in the 1980’s, Brazil had a currency called the Cruziero. Their Fed Reserve kept printing money in response to hyper-inflation — which is insanity — and kept moving over the decimal point to keep up. They went from the Cruziero to the Cruzado to the Cruzado Novo … it wasn’t until someone must have gotten their head out of their butts and created the Real that the currency finally stabilized. They stopped printing money and moving the decimal point over to deal with hyper-inflation.
The same thing has happened in Argentina and other countries. And now we’re doing that here.
I never thought we would see the day that the U.S. would repeat the same mistakes as our South American counterparts. Ben Bernanke, a PROFESSOR by trade, should have more sense than this.
Sure, he claims that the treasury bonds we issue balances out the increase of currency.
It’s still a gigantic gamble.
As far as I’m concerned, the only reason we’re not seeing the effects of creating currency is because we’re in a global recession. Economic activity has gone down.
R.A.W., in a comment, asked how is it that I knew gas prices would go down to $2.00 a gallon. Simple: we’re in a recession. Economic activity has gone down due to the price going up to $4.00 a gallon. There would be fewer deliveries by UPS and Fed Ex, fewer delivery trucks sending products to Wal-Mart and Target and all these other places, fewer people driving because they lost their jobs … so, fewer people and companies buying gasoline. That is what has helped cause gas to go down.
In addition, speculators who had gambled on high oil prices saw that the recession was hitting. Once they realized this, I knew they were going to bail out on oil and cash out their gains … just the way investors bailed out of the stock market after the tech bubble burst … just the way people bailed out of housing after the housing bubble burst.
I knew there was an oil bubble. Prices don’t go up 200% over the course of three years in a normal economy. It was a bubble. Pension funds and speculators were looking for high rates of return and they ended up buying oil. The recession hit, people sold, and the bubble burst.
That’s how I knew.
It’s not going to stay at $2.00 forever … I won’t even get into that issue.
The low price of fuel would have helped the economy … but because King Paulson and company have stepped in and declared a FINANCIAL CRISIS and that the end of the world is nigh and that they need $700 billion dollars to save us … they have delayed the recovery.
The currency is weakened by this … and we could see crazy inflation in the near future.
The only other saving grace, other than Bernanke’s faith in treasury bonds, is that this is a worldwide phenomenon and everyone’s currency is getting hit.
However, if you look at history, you know how this is going to play out for our currency. I just hope that this is some new precadent.
Unfortunately, I suspect that gas prices will double … and prices for groceries will go up….
Three years ago, I wrote about how the dominoes were falling. Well, they’ve fallen.
The government is trying to pick the dominoes back up. Instead, they have made the dominoes heavier. They are weighing down the dominoes. It will be harder to pick up those dominoes, thanks to their ineptitude and fear-driven policies.
PM Bush is the most inept economic President since Jimmy Carter, at least. He was led by the nose by this King Paulson, who is a Democrat! It’s just absolutely stunning.
And NOW we have a new President who made it clear that he’s not cutting Federal spending. Hello — there isn’t going to be any money to implement those lovely social programs, the way we’re going.
I suppose, if you’re a fiscal conservative, this is a good thing? Talk about throwing the baby out with the bathwater.
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Thanks for the explanations…the oil bubble makes sense.
Now if Obama will truly put a coalition of the world’s smartest economists, and they still decide to pursue course and create even more spending to create social programs, any chance you can speculate on “Who benefits?” and the motivations behind the disregard for conservatism in Washington?
The oil bubble argument might make sense, but I still think the price of oil was artificially high to begin with.
I mean, it doubled in price in a very short time.
That doesnt seem natural to me.
I think the car manufacturers are getting hit now and predictably theyre asking for a bailout too based on the premise that this thing is going to blow over.
this thing wont blow over until the average employee in america has enough money left over after paying their bills to buy a car.
this recession was not caused by high taxes or government spending.
It was caused mostly by a reduction in wages for most working class people.
They simply have no money to spend, so any sector of a consumer driven economy is going to feel this.
This thing is not going to just blow over by itself, it requires some kind of concerted organised effort by the federal government in order to correct it.
What should be done?
well for one thing gatt and nafta should be modified to make sure that we dont lose our entire manufacturing base, plus the money the employee/consumer is supposed to have in order to support the economy.
we did lose all of this, this has already happened.
I believe eventually whether people like it or not we are going to end up with some kind of government run health care.
Other countries that have a single payer system have a lower manufacturing price and consumer cost for items because the employer is not forced to pay for the cost of employees health care, american companies have been known to move their manufacturing base to Canada and other countries because of this.
We also need a living wage for every american citizen in the country.
This will of course cost money, as all things do.
but I ask anybody, how can this be done without some kind of intervention from the government?
I dont see any way not to increase government spending when something has to be done to deal with this crisis, and nothing that needs to be done is going to be free.
the economic “experts” who say “this thing will blow over”, or “these things go in cycles” or whatever, to them the center of the universe seems to be the stock market, and to me its not about wall street anymore.
When I or people I know lose money and have to go without, its just the free market, but when anybody involved with the stock market loses money and has to go without as the price of the stock they own goes down, its “a crisis!” and they start getting free money via bailouts from the government left and right to make up for the loss while the “regular joe’s” like us are told to “suck it up”.
The “economic experts” have failed, along with the politicians because for years they have concerned themselves with whats good for the market instead of whats good for most people, claiming that the market and the people are one in the same while the situation they created where average people have to go without because its good for “the market” proves that this is not true.
The federal government doing nothing is not an option, and anything the fed wants to do is going to cost money that requires an increase in spending.
simply put, there is no way out of this, its unavoidable.
I just hope something the government does actually works.
furthermore:
these “bailouts” are just free money to a select few that will solve nothing in the long term.
I think everybody already knows this.
Just like bush’s checks solved nothing (although I was happy to get one) predictably these bailouts will also solve nothing.
even though this is true, the government still has to step in and do something to address the issues most people are experiencing because to make a long story short, the market has failed.
Actually, it’s clear Paulson is trying to save his buddies on Wall Street, and duped Bush. Congress benefits via donations for re-elections and other stuff that is probably illegal.
If Obama pushes ahead with Social Programs, it is to benefit those who helped him get elected – ACORN, gay rights groups, MSM, groups that “help” poor people (private and public sector), unions, etc.
I don’t believe he will be able to do much of anything in his first year, due to the bad economy … I’m sure he’ll continue campaigning against Bush and the Republicans, blaming them (rightfully so. They failed fiscal conservatives) while Democrats get off scott-free …
I’m sure he’ll offer Public Works programs, ala FDR, to boost the Economy, while raising taxes to pay down the deficit (supposedly).
I am holding out hope that this all works out somehow, and we don’t all lose our jobs.
Here’s irony: I doubt Paulson and Pelosi believed we were in a Crisis they couldn’t fix with gov’t intervention. Now, they can’t fix it.
I mean, to think this was an emergency, and yet it Dept. of Treasury did not have staff to purchase the bad debt Paulson said they would do. That’s why Treasury is buying equity stakes in banks (stocks). It would take months to hire that many experts!
Paulson’s announcement yesterday was a joke. They were talking about the staffing problem on Fed Talk Radio weeks ago! That’s why Treas is doing what they’re doing.
This was bad as the Iraq war aftermath, in terms of lack of planning.
This was a game, something to laugh about after the bailout bill passed.
This was about helping Obama get elected, and helping Paulson’s buddies.
The hubris of Paulson, Pelosi, and Bankers has made this Crisis worse.
This was the September surprise. Bush fell for it.
I’ll be more than happy to explain further via blog interview.