It's grossly unfair, but it's got to be done

WTF?_2

formulaonefan wrote: »

But as per your analogy, they won't learn anything. They will gamble it all again! But mine says they won't be able to run straight away as they are hurt. But they will again when they get the energy and strength to run again!

So in your analogy maybe we should say: They were banned to gamble for next two years!

Its friday and I don't have anything better to do! lol

It doesn't really matter whether or not they learn anything in terms of the end-game which will be set in stone should this plan go into operation. In fact, if they behave sensibly then the recession will continue anyway as most of the 'prosperity' that we have enjoyed was based on unsustainable lending anyway.

Over the last decade the banks and financial institutions have created trillions of dollars of 'useless' (I define useless as there not being corresponding product in the economy) money through their reckless lending and new financial instruments (eg. derivatives) which is now in the system as actual credit and will not balanced by a corresponding amount of debt. That is effectively monetizing bad debt.

This will be massively inflationary unless somehow it is all paid back, with interest, by the US taxpayer. Even then, it's still going to be inflationary in the near to mid term.

Either this cripples the US economy for decades as the state is loaded down with absolutely unreal levels of debt which taxpayers have to repay or it leads to hyperinflation as organisations and states lose faith in the ability/will of the US to repay and dump the dollar. Then all those vast amounts of foreign held dollars are used to buy assets, making the dollar all but worthless.

My guess is that the US will eventually default on dollar debt and create a new currency, once it has managed to make itself more or less self-sufficient. It has massive energy resources yet to be exploited, it could easily make itself more energy efficient, it has a well developed modern infrastructure already in place, lots of farmland, lots of natural resources and hands down the biggest military in the world.

WTF?_2

Jonbvn wrote: »

You are of course entitled to your opinion, and I agree my response was a little harsh. However, your post that I responded to hardly presented itself as an opinion (This is going to be the last rescue plan - if it goes through then the next crisis will be the last under our current monetary system)

I would have thought it 'taken as read' that anything anyone says here just represents their opinion.

WTF?_2

Jonbvn wrote: »

But that is essentially what happened in 1989 and we didn't have hyperinflation then?
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

We didn't have trillions of dollars of derivatives and various other 'new financial instuments' then either.

concorde

quick question regarding this US rescue plan...

So say an institution provides a $200,000 mortgage on a property and the borrower defaults and hence the loan becomes a bad debt... Is the intention of the government to buy the debt at the original value of the loan or will they mark down the value based on the amount they expect to obtain from a foreclosure sale? i.e. will the institutions get away with no losses after off-loading the bad debts from their books?!

slipthru

Right thread this time.

Two questions,

Don't the banks have to value their level 3 assets to sell them to the government and admit there worth, thus letting everyone know how much junk they are holding on to?

Who is the governement going to sell these worthless assets on to?