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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Sr K who wrote (86445)	9/24/2008 9:38:35 AM
From: Little Joe	2 Recommendations Respond to of 116555

Mish: There certainly is a difference btween decisions and actions. Actions would be broader. The following is from an email I received this morning from Money and Markets: "And then there's the whole question as to whether this mega-bailout is going to work or not. Martin told you his doubts on Monday. I have my doubts, too. After all, here's just a partial laundry list of all the schemes the government has hatched in recent months to "save" the market ... The Bear Stearns takeover by JP Morgan, which was midwifed by the federal government (cost to taxpayers: $29 billion) Special Fed liquidity programs including the Term Lending Facility and Term Auction Facility ($200 billion) The Economic Stimulus package ($168 billion) The Federal Housing Administration's scheme to refinance failing mortgages into new, reduced-principal loans with a federal guarantee ($300 billion) The bailout for Fannie & Freddie (up to $200 billion) The bailout for AIG ($85 billion) Last week's decision to block short-selling of financial stocks The insurance program for money market funds (potentially $50 billion from the Great Depression era Exchange Stabilization Fund) Direct Treasury purchases of mortgage-backed securities ($10 billion) Another $300 billion injected into global credit markets on Friday Add in the $700 billion proposed for the current bank bailout plan, $87 billion in repayments to JP Morgan Chase for providing financing to underpin trades with bankrupt investment bank Lehman Brothers, etc., etc., and I tally up over $1.8 TRILLION ... so far. A flood of dollars into the system lowers the value of dollars. It's simple supply and demand. Since commodities are priced in dollars, as the greenback goes lower, they usually go higher. And gold is an obvious play for a falling dollar. Flooding the financial system with billions of dollars will only deflate the value of the greenback — and boost the price of gold. Some of these programs and ad-hoc spending sprees were more successful than others, but any short-term rallies they caused in the stock market didn't last for long. Oh, and there's more to come. We still haven't gotten to the billions of dollars in special loans proposed for GM and Ford, as well as the next new economic stimulus package which may be tied in with the bank bailout — a second economic stimulus that Treasury Secretary Paulson ruled out as recently as May. If you think I'm being hard on Secretary Paulson, remember that he was in charge at Goldman Sachs when that company (among others) went crazy for bad debt that is now impossible to value properly. He's been in office a year and a half, and now — SUDDENLY! URGENTLY! — he needs us to approve his new bailout plan without time for deep discussion or changes ... to give his friends on Wall Street a check for $700 billion without a second thought." Says it all. Little joe