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Originally Posted by Ustwo
And I thank my own personal Jebus daily for that.
Controlled economy is to prosperity as Godzilla is to Tokyo.
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Pssst...Ustwo, the Fed's "actions"...accepting near worthless MBS at "face" value as collateral to distressed "primary dealers" who short sell the treasury bills that they borrow from the Fed, back into the market ....their aggregate T-bills short position yesterday was $800 billion, BEFORE the Fed agreed to accept another $160 billion of near worthless MBS, is the epitome of an indicator of a "controlled economy".
What else do you call an economy that is stoked with easy lending for unlimited upside, but is not "permitted" to go DOWN, not without this ridiculous "fight" to stop it from doing so?
Here is the next "logical" progression after what the Fed has been doing:
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http://jessescrossroadscafe.blogspot...ly-modest.html
"Don't Limit the Bailouts to Banks."
Think about this for a minute. An act of God, "an unexpected earthquake of risk, a financial disaster on the scale of a natural disaster like Katrina" has assaulted our nation. Are we going to sit around and let people suffer thirst and heat prostration, and being shot at while seeking shelter, as we did in New Orleans that last time God tried to take away our good times?
Rather than risk a flood of jingle mail, let's allow the Fed to cut a check to EVERY homeowner in the full amount of the house in which they are the full time occupant (no need to encourage speculators). This way, they can be compensated for this act of God that threatens to reduce the value of their net worth. We can use the current assessed value for property taxes as our benchmarks.
But let's not stop there.
What about all the large ticket consumer products that people purchased with their hard earned credit that have simply not met expectations, through absolutely no fault of their own?? That big screen TV that is now outdated because it doesn't support 1080p? (how were WE supposed to know about THAT!). What about those crappy refrigerators, washers and dryers that no long function and are OUT OF WARRANTY? We bought two Maytag appliances (just before they were acquired by Whirlpool) that had major failures within 16 months, and required substantial labor costs to fix them even though they were obviously mis-designed and of poor quailty.
What about people who have suffered the earthquake of bad investing, and can show losses on their brokerage accounts, and carryovers on their income tax forms? Not to mention those whose cars are just not up to snuff, or have been damaged in accidents and are insufficiently insured? Should they be made to suffer? Are we that cruel? Costco will take almost anything back if you have a receipt. Is the United States government less sophisticated than a discount store (with great quality products AND plenty of free samples for the afternoon nosh).
Working with local municipalities we can set up 'economic relief centers' where we can:
TAKE IT ALL BACK! LET'S EXTEND THE BAILOUT TO EVERYONE! THE U.S. (that's US) DESERVES A 'FRESH START.'
And let's not limit it to houses and consumer durables, which are only a percentage of our GDP. What about the service sector? We're a service economy now. What about the man who spends a CONSIDERABLE amount of time and expense and personal energy trying to score with some likely hottie, only to STRIKE OUT! Should he be punished for falling victim to the earthquake of reality? And what about a woman who marries a prince charming, but who turns out to be a shiftless dud? You still have the original marriage certificate? He may have to take a 'haircut' which he probably needs anyway, but why should you have to live with your clouded judgement? Ever gotten stuck with some sour milk, bad dope, a lousy movie that had a good rating? Oh, you didn't realize that the upright conservative you voted for was going to squander your Social Security on crony capitalism? And dare we mention the faux pas of the century...... the Iraq War?
But the banks are too big to fail! And we're not! Oh yeah, before they had the laws changed there were lots of small banks, but they got organized into a few powerful behemoths!
SAVE THOSE RECEIPTS PEOPLE!
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,,,and yeah, I think the idea of the US, an importer of 14 million bbl per day of petroleum and petroleum equivalents, setting up some sort regulatory body that expects it could "control" petroleum prices without effecting massive reduction in domestic petroleum consumption, is as absurd as the Fed accepting MBS worth 55 cents, when marked to market per dollar of face value....AT FACE VALUE, and then sitting idly by while the "primary dealers" borrow from the Fed and then short sell T-Bills, and putting themselves in the crisis position that they found themselves in yesterday...
Others stuck with MBS were selling them at any price, after Fannie Mae stock dropped 19 percent in price in one day, on monday, and buying T-bills with the sale proceeds....driving the value of the MBS that the primary dealers are STUCK WITH, down, and driving the prices of T-Bills, the very thing the primary dealers have huge short positions in, UP.
The Fed's "solution" was to accept near worthless collateral, in exchange for the lending to the primary dealers of even more T-Bills....so as this cycle continues to repeat itself, the primary dealers increase their T-Bill short positions and wait to see if the Fed ignores the fact that the collateral, the MBS that the Fed has accepted in exchange for the T-Bills is, in the real world, worth less and less.
The primary dealers will resist buying back the T-Bills that they owe the Fed at higher prices than they sold them for....and where would they obtain the money to buy them back out of the market?