Hi John
Not sure that anyone cares about my ideas to fix the economy ... but, I'll tell you anyway.
Give people something for their $700 Billion - sell them deeply discounted savings bonds ....$1,000 bond for $100, 20 year maturity. Payback becomes part of the budget.
FDIC ups the insurance on savings accounts to $1Million - Treasury subsidizes the interest rate to depositors to 10%. Forces banks to only issue to mortgages with 20% down and proof of income ... who wouldn't put money in a "safe" bank paying 10%?
What do you think?
Michael
Michael,
I think your ideas are at least as good as the best ideas coming out of Washington and New York. (click for more)
Michael,
I think your ideas are at least as good as the best ideas coming out of
Washington and New York. I think the bailout plan will include false promises to benefit USA
citizens.
My objection to the plan is first, why believe there is a crisis for us?
Yes, there is a crisis for some, those who lied, stole, broke the rules, or
foolishly invested in "something-for-nothing plans." Any bailout will save those whose actions
were foolish. What is at risk here is Hamiltonian ascendency, which if allowed to
fail, will yield to jeffersonian sanity. if this goes away, peace and freedom will come back.
They tell you it is a mortgage mess. that is a small part, but by focussing on
mortgages, the average american is drawn in. The damage was done during the boom when
stadiums were built, TSA was set up, countries were invaded. All financed by bonds,
which we cannot pay for, because we do not have the productive base to generate the
income any
longer. The "other stuff" is more than 90% of the ten trillion dollar waste we
are facing. the
mortgage mess is only 10 % of this.
Bankruptcy is the key. if there is a bailout, impressionable newbies in
business will do more of the same. people who are lax and tend to thievery will tend toward
banking business and wall street. if there are bankruptcies, they will not. It is a
matter of cultural capital.
As it stands now, since our masters are selling out to foreignors, the benefits
of our innovation and creativity will go to foreignors who are holding our notes. As
people learn they work and foreigners earn, they will tend to produce less. A downward
spiral sets in. Your kid gets sick, but foreignors get cured. the reason congress is willing to
do this is because no matter what their sensual appetities, to pay off the foreignors and
burn usa citizens, they will remain in office and never lose the access to the limosines,
private jets, caviar and big buttons on their lapels.
By saying "toxic" balance sheets, the banks are victims, not perpetrators. By
saying "mortgage mess" it is your problem not theirs. by paying off the foreignors,
the powers that be keep their hamiltonian positions. If we revert to jeffersonian America,
true america, these clowns will lose their jobs.
Do nothing and the mortgage mess will sort itself out. Here is the reality; the
foreclosure crisis is far larger than is generally known... those loans are so convoluted
they cannot be litigated. Most loans are packaged up and sliced and diced into tranches, and
then sold off... the right to collect the fees on late payments was packaged and sold off
on some tranches... to foreclose on such a property, the person with the "late-fee"
rights is a party to the transaction. A lawsuit nightmare. Plenty of foreclosures are happening,
but there are far more than that practically cannot be foreclosed on. there is simply not
enough capacity in our courts to process all of this mess. Think of the hundreds of
thousands of people involved in writing up all of this paper when all parties were willing,
then think of the court infrastructure to sort out a Foreclosure when all parties are
fighting. It would take million of judges hundreds of years. It will never happen. By allowing the
system to break down, a sane one would emerge. All of the parties would be settling
quickly for pennies oon the dollar than get nothing, ever. We who played right would not be
taxed by those who speculated. Losers would not be rewarded.
"Innocent" homeowners facing foreclosure would have far more leverage if there
is no bailout, than if there is.
Couple of side notes, regarding what foreclosures there will be. Almost nobody
has a mortgage. They have deed of trust. A mortgage has a law behind it where
foreclosure is difficult, a deed of trust can be fast-tracked to throw a person out of his
home. A mortgage carries a homestead payoff which a person gets when he is obliged to
leave, not so a deed of trust. Active duty military cannot be foreclosed on. The new
draft rules are for men and women, up to 29 years old and all people with any medical training.
See a moral hazard here? Attack Iran, start to lose, start a draft, delay the
mortgage reckoning. Doubt Obama would do this? Doubt Mccain would do this? Only war presidents get
to be considered great presidents.
All booms are about malinvestment and misallocation born of central bank
monetary policy failures. Seattle has three 70,000 plus seat stadiums paid for by bonds.
We cannot. Most wars are about destroying excess capacity generated by bad policy and then
starting over.
Michael, the fatal flaw in your plan is it is a government solution. Not
sufficient, not necessary. Your guaranteed 10% is too little when inflation is running 300%.
More policy to abuse will not work. the closer we get to a natural law solution the better.
The cultural capital we would gain from letter the criminals and delusional fail, and let the
sane and competent succeed, the better.
A side note on shorting the market. The government has outlawed you protecting
yourself from their policies by outlawing shorting stocks. this rule is now in place.
Since October 07 I have been double-shorting the dow, nasdaq, russel 1000, and S&P. It has
been a very good move. these are funds so there is never a margin call. I am willing to
risk double the losses for double the earnings. It was a safe bet since the govt solutions
were stupid and guaranteed to fail.
(An early and forgotten bailout was a few months ago when some mere 20 billion
was put up to buy a certain kind of "toxic" paper from banks. Paper with these specific
conditions proved time-consuming for the banks to locate and pull out to offer in exchange
under the plan. While the banks were busy locating this paper in their inventory,
market makers went out and wrote up brand new toxic paper that met the conditions. the brand
new stuff was traded for good money. by the time the banks showed up with the old
bad stuff, the money was already gone).
I thought when they were going to outlaw shorting, they would require I unwind
my present short position, at a considerable loss to me. They did not. i still
hold my short positions. Now, with no short selling allowed, we cannot know the real prices
of stocks. Liquidity will now be truly compromised. There is not net under stocks and
bonds. When it crashes the fall will be spectacular. I will benefit, and you cannot. the
bailout may very well put me into a new category of rich. One I have not seen before, nor sought.
Nonetheless, I do not want a bailout, even though I will clean up personally. A
bailout will do so much harm to so many for so long, money cannot compensate. There will not
be enough money to buy the things that will not come forth because our economy and
our people are so compromised in their ability to innovate and produce. I'd rather
be scrambling to limit my losses scrambling to unwind my short positions than see
what will come when my bets pay off big time, and bigger the more the bailout.
(My other hedge is gold. The strangest thing is happening. the price dips a
bit, stays fairly flat, but there is big shortage of coins Then why is the price not
rising to meet demand? Because if no coins exchange, then there is no price set. no exchange,
no price change. people holding gold right now will not sell at these prices, there fore
no change In price, nor availability. Ominous.
why not call it the price?>)
We are truly on our own. Certainly no viable politician, not business, not
academia, not religion, not medicine or labor is opposing this. We can hope for Deus ex
machina. God help us.
Plans and rules and regulations got us here. Human action can get us out. A
free market will sort itself out. No one in a place of "responsibility" is considering that
option. Plenty are calling for a free market solution, and countless americans sense it and are resisting this
bailout. What will happen, who knows?
John
)
Monday, September 29, 2008
Michael has a Bailout Plan Ready
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