Wall Street Loots the US

[bitterwind]

OK, let me get this straight ... total disaster is about to descend upon the US unless Wall Steet gets a trillion dollars. But Warren Buffet spends 5 billion on one of the companies because it's a good investment

Comments

[whatawookie]

I am completely baffled by the whole thing. There doesn't seem to be any accountability at all, or plans for accountability, or tracking of how the money is going to be doled out. And now it's a national emergency, that they want to stop campaigning and cancel the debates?

Then again, I never took micro or macro economics. It's entirely possible, probable even that I haven't the foggiest clue what the ramifications are, what the traditional methods are for keeping an economy working well.

[bitterwind]

Well, if one wants to take the sympathetic route, it's a chain reaction of defaults that harkens back to 1929.

But I don't buy it. Yes, it would be disruption and a disaster to see the current banking system implode (and it would spill over borders). But that doesn't mean it's the worst-case scenario.

The bailout doesn't solve the problem: the US consumes more than it produces and sustains its standard of living by selling its ever-more inflated assets. If people lose confidence in the US dollar for fear the government can't pay off the debt they're taking on, it will dwarf even the current crisis.

[themage]

Not everything is toxic, but the lack of credibility is killing the perceived values. And there are gems amid the poop for the keen investor to make off with. I think that is the 'good investment' part.

Any money paid by investors like Buffet will pay back the US Treasury dept as this is a loan with a not-so-appealling interest rate. Of course, it is that way since a good chuck of it is expected to default.

Interestingly, Canadian insurer Manulife is one of the few companies that could 'safely' purchase AIG lock, stock, and barrel and not jeopardize their capital base in doing so. So there will be other winners.

But yeah, there's lots of people that should pay for this. But they won't because the American Dream is about a few people getting rich from the labours of others.

[bitterwind]

I understand the lack of confidence part (the amount of complex debt out there is making everyone nervous, because the default risk is very opaque; buying the bad mortgages at the core will give some breathing room to allow everyone to trust that a chain reaction won't occur and get out of that mess)

And you are right, that in anything less than a total nuclear winter of defaults, there will be companies that emerge from this in a very strong position.

I want to see is the people who successfully formed networks of trust and maintained liquidity rewarded. What I fear that the bailout will do is distort the risks and rewards and punish the people who were prudent.

I'd like to say that I don't actually want to watch the world burn ... but I have to admit that there's a ruthless side of me coming out in this whole debate that I rarely see.