41 replies to this topic

[forever freedom]

Wow, bailout plan rejected, stocks plummeting all around the world, IBOVESPA (Brazil's equivalent of the US' Nasdaq or Dow Jones indexes) fell 12% today. HA!!


I wish i was sitting in a lot of cash, i would get rich in the next years as the markets recover.

I'm taking a good portion of my money and buying gold coins right away. This is insane; I feel sick...

It's the best thing to do for now. Sit on gold, wait until world (or your country's) economy starts showing signs of recovery, then go shop for company stocks! There will be LOTS of opportunities in the near future. There's nothing like surviving such an economic crisis with a lot of cash in hand to invest.

Edited by sam988, 29 September 2008 - 09:03 PM.

[Iam Empathy]

Here are the votes on the bailout plans grouped by party:

DEMS: Yea(141) Nay(94)

REPS: Yea(66) Nay(132)

TOTAL: Yea(207) Nay(226)

Edited by Iam Empathy, 29 September 2008 - 09:55 PM.

[forever freedom]

Here are the votes on the bailout plans grouped by party:

DEMS: Yea(141) Nay(94)

REPS: Yea(66) Nay(132)

TOTAL: Yea(207) Nay(226)

I don't understand why so few republicans voted in favor of it.

[biknut]

DEMS: Yea(141) Nay(94)

REPS: Yea(66) Nay(132)

TOTAL: Yea(207) Nay(226)



I don't understand why so few republicans voted in favor of it.

The most common reason I've heard is the Republicans objected on ideological grounds. They favor free market, but this plan gave the government to much control. In other words it was too much like socializing the system. On the other hand some of the Democrats wouldn't vote for the plan, stating that it didn't give the government enough control.

The Republicans attitude is if you want to socialize the banking system go ahead and do it without us. You can have all the credit. Some of the Democrats took the same position.

[RighteousReason]

I don't understand why so few republicans voted in favor of it.

1. This is the largest expansion of government in the history of the world.

2. When the surgeon screws up a procedure and you sue for malpractice, who do you hire for the next surgery to repair the damage? The "oversight board" that the bill purported to create consisted of the exact same people who let this happen in the first place.

3. We are willing to take a short term hit in order to prevent the next trillion dollar bail out, and the next, and so on, because we don't believe either Wall Street or the government should be allowed to use our tax dollars to bail them out.

We disapprove of the mindset: "We don't want to suffer the negative consequences of our actions, so we are going to use the police power of the government to shield us."

4. While the Democratic chairman of the senate banking committee Chris Dodd and Democratic senator Barack Obama were recieving huge payouts from Fannie Mae and Freddie Mac, Republicans had been warning about this crisis and predicting that this would happen for years. Republican senator John McCain tried to create regulatory legislation in 2005 for Fannie Mae and Freddie Mac in order to help prevent this very crisis. His legislation was defeated along a party-line vote by the Democrats.

5. We are not convinced this is necessary:

Don't you think that there's an imminent crisis here, that if they were to wait, there could be really drastic results?

Newt Gingrich:
"To be honest, I don't know. Secretary Paulson has been consistently wrong for a year-and-a-half. He told us for a year-and-a-half this wasn't a dire crisis; this wasn't going to happen. So the very people who told us for a long time not to worry about it are [panicked]."

"I think it is going to be a nightmare to implement," he said. "I think it is going to be filled with corruption, inefficiencies and bureaucracy. And I think two years from now it's going to be seen as a major impediment to the economy recovering."

"In a strange way, this reminds me of the Iraq debate in reverse: We’re faced with what may or may not be a looming threat of mass destruction, except this time conservatives are willing to chance it rather than take costly, aggressive preemptive action. Maybe they’re right; as I say, my ignorance on this leaves me unable to judge." (Hot Air Blog)

A very tight credit market will certainly not 'crash' our economy. People will get by without getting loans quite as easily as today. So, maybe it wouldn't be bad to take a hit in the head with a two-by-four, because it really isn't right to be relying so heavily on debt in the first place, and perhaps this is an opportunity for the market to correct that behavior.

6. We have alternatives:
"We couldn't find a single banker in support of this bill. The bankers we talked to said if we marked assets to par (like we have for the last 200+ years) instead of 'mark to market' (introduced in the last 10 years) none of this mess would exist." - John Linder (who I am happy to say is the House representative from my district).

While coming out against the bailout plan, Newt Gingrich forcefully rejected the contention that he favors doing nothing and laid out a conservative alternative:

Gingrich's four-point plan includes: (1) suspending immediately mark to market provisions (the accounting practice of valuing a financial position in an investment at its current market price) in the hopes of stopping the downward spiral in asset values and eventually replacing it with a three year rolling average; (2) repealing immediately Sarbanes-Oxley, the 2002 accounting law Gingrich described as "an enormous drag on small business"; (3) setting the capital gains tax rate at zero "matching the Chinese and Singapore" (to encourage private capital to flood into the market picking up properties without the taxpayers being at risk); and (4) passing an "extraordinarily powerful" energy bill ("to return $500 billion a year to the American economy that are currently going overseas").

7. We are led to believe that buying these bad mortgages could actually pay off for the tax payers. If that is a legitimate case, why aren't they being purchased by any private institution?

"I never believed we would recover any of the money used to buy these bad mortgages" - Rep. John Linder

8. The decline in the market yesterday did not even rank in the top 10 worst days by percentage, and recovered neary half of its losses by one-thirty this afternoon. The free market allows failure to fail. To disrupt that process is not correcting the market, but damaging it.

9. George Bush has a long history as a proven fiscal socialist. We really, really don't care what he thinks.

10. The representatives were simply responding to their constituents. The majority of the people in this country do not want the government to bail these institutions out. (I personally called both my senators and my house representative and told them all that I would not vote for them if they voted for a bail out. I encourage everybody else to do the same!)

Edited by Savage, 30 September 2008 - 05:56 PM.

[luv2increase]

Well, the market rose sharply this morning thus far so let's hope it keeps rising.


If you notice, governments throughout Europe flooding their failing banks and institutions with billions of dollars right now. This isn't a US crisis; it is a World Crisis


Does anyone feel that the One World Government is on its way for all inhabitants, willing and unwilling, on this planet???

[biknut]

This is why most Republicans voted against the bailout plan.

Bailout marks Karl Marx's comeback

Posted: September 29, 2008, 8:03 PM by Jeff White
Martin Masse, mortgage crisis
Marx’s Proposal Number Five seems to be the leading motivation for those backing the Wall Street bailout

By Martin Masse

In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

Indeed, analysts at the Heritage and Cato Institute, and commentators in The Wall Street Journal and on this very page, have made declarations in favour of the massive “injection of liquidities” engineered by central banks in recent months, the government takeover of giant financial institutions, as well as the still stalled US$700-billion bailout package. Some of the same voices were calling for similar interventions following the burst of the dot-com bubble in 2001.
“Whatever happened to the modern followers of my free-market opponents?” Marx would likely wonder.

At first glance, anyone who understands economics can see that there is something wrong with this picture. The taxes that will need to be levied to finance this package may keep some firms alive, but they will siphon off capital, kill jobs and make businesses less productive elsewhere. Increasing the money supply is no different. It is an invisible tax that redistributes resources to debtors and those who made unwise investments.

So why throw this sound free-market analysis overboard as soon as there is some downturn in the markets?

The rationale for intervening always seems to centre on the fear of reliving the Great Depression. If we let too many institutions fail because of insolvency, we are being told, there is a risk of a general collapse of financial markets, with the subsequent drying up of credit and the catastrophic effects this would have on all sectors of production. This opinion, shared by Ben Bernanke, Henry Paulson and most of the right-wing political and financial establishments, is based on Milton Friedman’s thesis that the Fed aggravated the Depression by not pumping enough money into the financial system following the market crash of 1929.

It's seems funny that it's the Democrats and Bush that are supporting this bailout plan and the Republicans that are against it, but this guy is saying it's the right wingers supporting it. Doesn't seem to be the case this time.

It sounds libertarian enough. The misguided policies of the Fed, a government creature, and bad government regulation are held responsible for the crisis. The need to respond to this emergency and keep markets running overrides concerns about taxing and inflating the money supply. This is supposed to contrast with the left-wing Keynesian approach, whose solutions are strangely very similar despite a different view of the causes.

But there is another approach that doesn’t compromise with free-market principles and coherently explains why we constantly get into these bubble situations followed by a crash. It is centered on Marx’s Proposal Number Five: government control of capital.

For decades, Austrian School economists have warned against the dire consequences of having a central banking system based on fiat money, money that is not grounded on any commodity like gold and can easily be manipulated. In addition to its obvious disadvantages (price inflation, debasement of the currency, etc.), easy credit and artificially low interest rates send wrong signals to investors and exacerbate business cycles.

Not only is the central bank constantly creating money out of thin air, but the fractional reserve system allows financial institutions to increase credit many times over. When money creation is sustained, a financial bubble begins to feed on itself, higher prices allowing the owners of inflated titles to spend and borrow more, leading to more credit creation and to even higher prices.

As prices get distorted, malinvestments, or investments that should not have been made under normal market conditions, accumulate. Despite this, financial institutions have an incentive to join this frenzy of irresponsible lending, or else they will lose market shares to competitors. With “liquidities” in overabundance, more and more risky decisions are made to increase yields and leveraging reaches dangerous levels.

During that manic phase, everybody seems to believe that the boom will go on. Only the Austrians warn that it cannot last forever, as Friedrich Hayek and Ludwig von Mises did before the 1929 crash, and as their followers have done for the past several years.

Now, what should be done when that pyramidal scheme starts crashing to the floor, because of a series of cascading failures or concern from the central bank that inflation is getting out of control? It’s obvious that credit will shrink, because everyone will want to get out of risky businesses, to call back loans and to put their money in safe places. Malinvestments have to be liquidated; prices have to come down to realistic levels; and resources stuck in unproductive uses have to be freed and moved to sectors that have real demand. Only then will capital again become available for productive investments.
Friedmanites, who have no conception of malinvestments and never raise any issue with the boom, also cannot understand why it inevitably leads to a crash.
They only see the drying up of credit and blame the Fed for not injecting massive enough amounts of liquidities to prevent it.

But central banks and governments cannot transform unprofitable investments into profitable ones. They cannot force institutions to increase lending when they are so exposed. This is why calls for throwing more money at the problem are so totally misguided. Injections of liquidities started more than a year ago and have had no effect in preventing the situation from getting worse. Such measures can only delay the market correction and turn what should be a quick recession into a prolonged one.

Friedman — who, contrary to popular perception, was not a foe of monetary inflation, but simply wanted to keep it under better control in normal circumstances — was wrong about the Fed not intervening during the Depression. It tried repeatedly to inflate but credit still went down for various reasons. This is a key difference in interpretation between the Austrian and Chicago schools.

As Friedrich Hayek wrote in 1932, “Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about ...”

The confusion of Chicago school economics on monetary issues is so profound as to lead its adherents today to support the largest government grab of private capital in world history. By adding their voices to those on the left, these confused free-marketeers are not helping to “save capitalism”, but contributing to its destruction.

Financial Post

Martin Masse is publisher of the libertarian webzine Le Québécois Libre and a former advisor to Industry minister Maxime Bernier.

http://network.natio...s-comeback.aspx

[PWAIN]

If you write an intricate enough article and include some truth and facts, you can convince people of just about anything.

For decades, Austrian School economists have warned against the dire consequences of having a central banking system based on fiat money, money that is not grounded on any commodity like gold and can easily be manipulated. In addition to its obvious disadvantages (price inflation, debasement of the currency, etc.), easy credit and artificially low interest rates send wrong signals to investors and exacerbate business cycles.

Exacerbate - as in increase wealth generation....More credit = more investment = bigger returns!!!If you don't believe in investing in growth, then why bother with shares at all?

Not only is the central bank constantly creating money out of thin air, but the fractional reserve system allows financial institutions to increase credit many times over. When money creation is sustained, a financial bubble begins to feed on itself, higher prices allowing the owners of inflated titles to spend and borrow more, leading to more credit creation and to even higher prices.

This wasn't happening in any significant way (in the general economy - not obviously property) before this crisis.

But central banks and governments cannot transform unprofitable investments into profitable ones.

Many of these unprofitable investments are likely to turn profitable in the future. They simply do not carry value at this time. Negative sentiment has more impact on their value than anything else. A positive sentiment at a later date would give them value. Eg. a house may not be worth as much as paid now but when things improve, the value can rise and significantly exceed the original purchase price. Everything is only worth what people are prepared to pay for it and this varies over time according to sentiment.

They cannot force institutions to increase lending when they are so exposed.

But they are exposed because they have a risk of bad debt. Take away that risk by buying up all the bad debt and they are no longer exposed - now they can lend again and the money flows again making even more money and changing sentiment and thereby fixing a significant portion of the bad debt.

This is why calls for throwing more money at the problem are so totally misguided. Injections of liquidities started more than a year ago and have had no effect in preventing the situation from getting worse. Such measures can only delay the market correction and turn what should be a quick recession into a prolonged one.

True, this is what has been happening up until now, inject more money into the market but this has failed to be anything more than a temporary bandaid. The Bailout package is different, it doesn't seen to grow the money supply by adding more, it seeks to do it by making institutions less exposed giving them confidence to lend and that is the KEY difference. Fix the cause, not try to circumvent it.

Friedman — who, contrary to popular perception, was not a foe of monetary inflation, but simply wanted to keep it under better control in normal circumstances — was wrong about the Fed not intervening during the Depression. It tried repeatedly to inflate but credit still went down for various reasons. This is a key difference in interpretation between the Austrian and Chicago schools.

It did not do anything near as extreem as we have seen and as early. It also didn't go with a bailout package fixing the exposure issue.

As Friedrich Hayek wrote in 1932, “Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about ...”

Once again, this only goes to show the need for a bailout rather than simply trying credit expansion by printing ever more cash.

Edited by resvhead, 01 October 2008 - 03:51 AM.

[niner]

3. We are willing to take a short term hit in order to prevent the next trillion dollar bail out, and the next, and so on, because we don't believe either Wall Street or the government should be allowed to use our tax dollars to bail them out.

What makes you think it will be a "short term" hit? How many years of deep recession qualifies as "short"?

4. While the Democratic chairman of the senate banking committee Chris Dodd and Democratic senator Barack Obama were recieving huge payouts from Fannie Mae and Freddie Mac, Republicans had been warning about this crisis and predicting that this would happen for years. Republican senator John McCain tried to create regulatory legislation in 2005 for Fannie Mae and Freddie Mac in order to help prevent this very crisis. His legislation was defeated along a party-line vote by the Democrats.

Fannie and Freddie were not the cause of the problem; excessive deregulation, particularly of Credit Default Swaps was. John McCain did not become a cosponsor of that bill until a year after it died. That was just a political stunt.

6. We have alternatives:
"We couldn't find a single banker in support of this bill. The bankers we talked to said if we marked assets to par (like we have for the last 200+ years) instead of 'mark to market' (introduced in the last 10 years) none of this mess would exist." - John Linder (who I am happy to say is the House representative from my district).

Suspending mark to market sounds like a good idea. Fundamentally, mark to market improves transparency and is a good thing, but in this case there is no market. In the event of a market failure such as this, MTM just exacerbates the problem.

[niner]

I hate the idea of bailing out the very institutions that made the mistakes as much as anyone here, but it looks like something needs to be done

George, what should really scare you is that so much of the economy is run "check-to-check" and thus is susceptible to a credit freeze. It is not EVERY business though, it is mostly the big banks and large companies that live "at the margin". My TV station did a story on local banks and businesses here and they all had plenty of cash and could operate without credit for weeks if not months. The local banks had no trouble loaning money to people with collateral and/or good credit. The problem is that a significant portion of the economy is running "check-to check", just like the irresponsible people who bought houses that were too big, new cars, and big screen TVs. They are living/operating beyond their means assisted by inflation. In my view, Elrond is spot on here. The bailout plan just postpones the heartache, at which time it will be worse.

Credit is the mothers milk of business. Without credit, much of our economy grinds to a halt. That's what the Great Depression was all about. Even those local banks and business only have enough cash on hand for a few weeks or months; a credit freeze could last for years, perpetuated by spiraling business failures, job losses, and bank failures.

The American economy is overvalued. A lot of the prior assets were "inflated paper". This infected other parts of the world as well. It needs to be re-valued upon real labor, IP, and raw material. We might be getting close to that point, but I don't think we are there yet. Passing the bailout only keeps things artificially inflated - and at a HUGE cost as well. Not only is the FED printing and loaning more money than ever before (breaking all kinds of historic records) and now the bailout proposes that they should buy bad bad loans and worthless financial instruments created during the housing bubble. Sometimes you just have to "take your medicine" before you can start healing.

I agree that the Greenspan Fed was totally irresponsible and shares a large degree of blame for the current trouble. Bernanke inherited a mess and can't raise rates without doing damage. He can't lower them to help the present situation, because they're already as low as they can go. We've had a real estate bubble, no question about it. This bailout could be structured as a form of "medicine taking" that wouldn't be pleasant for the banks that need it, but if we do nothing, we'll all be taking that medicine, including the majority of us that had nothing to do with the creation of the mess. If we do nothing, it's going to cost us a hell of a lot more than the ultimate cost of this bailout, which will be substantially less than the $700B nominal amount. If we let things fully implode, it will cost us trillions. Multiple trillions. There will be plenty of time quite soon to fix the causes for this by re-regulating. For starters, "too big to fail" == "too big for 35X leverage".

[biknut]

Here's Bill Clinton trying to explain how we got this problem.

Bill Clinton in McCain ad leading role

By JIM KUHNHENN, Associated Press Writer
Tue Sep 30, 6:10 PM ET

WASHINGTON - Bill Clinton is playing a starring role in a John McCain commercial. And here's the ad's kicker: "You're right Mr. President."

Fancy that. The Republican presidential nominee with a tip of the hat to the last Democratic president.

A new minute-long McCain commercial features the former president asserting that congressional Democrats could have done more to regulate the nation's major mortgage financiers.

In a clip taken from a Sept. 25 interview on ABC's "Good Morning America," Clinton says: "I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress, or by me when I was president, to put some standards and tighten up a little on Fannie Mae and Freddie Mac."

The ad is one of a flurry of commercials with economic themes that emerged Tuesday as Congress continued to struggle with a rescue plan for tanking financial markets. Obama released a new two-minute commercial denouncing the tax policies of the past eight years, and the Republican National Committee went on the air with $5 million worth of air time in Indiana, Michigan, Ohio, Pennsylvania, Virginia and Wisconsin.

The McCain ad casts the Arizona senator as an advocate of tighter regulation on Fannie Mae and Freddie Mac. That assertion is true. McCain was a co-sponsor of legislation in 2006 that would have placed more restrictions on the mortgage finance companies.

Though not shown in the ad, Clinton goes on in the interview to blame a decision by the Securities and Exchange Commission to do away with a rule that restricted short selling.

"The biggest mistake, by the way, that contributed to the current circumstance that almost nobody talks about is the repeal, after decades, of something called the uptick rule, which allows the hedge funds, heavily leveraged and others, to just drive down the market without any kind of automatic stoppers," Clinton said.

While too complicated to pitch in an ad, that view also seems to support McCain. The Republican candidate has called on SEC chairman Christopher Cox to resign.

Indeed, the Clinton interview holds several nuggets that McCain can savor.

Commenting on McCain's suggestion last week that the first presidential debate be delayed until the rescue package was negotiated, Clinton said: "I presume he did that in good faith since I know he wanted — I remember he asked for more debates to go all around the country and so I don't think we ought to overly parse that."

The McCain ad and its finger-pointing at Democrats came out on the same day McCain was in Des Moines, Iowa, issuing a call for bipartisanship on the financial crisis. "I will continue to do whatever I can to aid in a constructive answer to the challenge before us," he said.

The campaign announced the ad about the same time.

The Republican National Committee's ad takes an even tougher line, taking a critical tone on the bailout even as McCain says he is working on a deal.

"Wall Street squanders our money and Washington is forced to bail them out with, you guessed it, our money," an announcer says.

The ad states Obama plans to increase spending, beyond the bailout, by about a trillion dollars.

"New taxes, new spending, new debt," the ad states. "Barack Obama's plan. It'll make the problem worse."

One of the most detailed analysis of candidates spending is by the National Taxpayers' Union Foundation, a group that is generally opposed to higher spending. Under its analysis, Obama's various government proposals would increase yearly spending by $293 billion.

The trillion dollar figure is reached by expanding that spending over a four-year presidential term.

Obama spokesman Bill Burton accused the RNC of seeking to "demagogue a rescue plan that he supports in order to score cheap political points." Brad Todd, the Republican strategist in charge of the RNC's independent expenditure arm, shot back: "In last Friday's debate Sen. Obama struggled to name even one spending proposal he'd rescind in light of our current financial problem."

http://news.yahoo.co...NX0QAVhvqZh24cA

[Mixter]

*bump*

http://www.latimes.c...,1410923.column

Now, you can still write your representatives:

https://forms.house....r/welcome.shtml

After entering your zip, this form gives you phone# and email of the representative to contact.

Edited by mixter, 03 October 2008 - 11:36 AM.