Denver Direct: House Passes Bogus Bailout Bill

Friday, October 3, 2008

House Passes Bogus Bailout Bill

Congress Pats Itself on the Back – Dow, Not So Much

Let’s see of I’ve got this right. The credit market is freezing up, after 12 years of gorging, de-regulation, naked shorting, and the creation of fantasy “derivative” instruments, because bankers won’t lend to each other because they don’t trust each other, and have raised their own interest rates considerably. The “spread”, as they call it, is speading. No one knows which bank is going to be the next to go down, because banks are, apparently, not very transparent.

Now, in order to protect the bankers from the higher intra-bank interest rates that they themselves ginned up, we, the US taxpayers are agreeing to buy up their bad, nearly worthless shit, to provide the “liquidity” they need to continue making money. If we can sell it later, we might recoup some of the money. Or maybe not.

Here is the former CEO of Goldman Sachs, one Henry Paulson, himself the beneficiary of the gorging to the tune of his $700,000,000 net worth, now Secretary of the Treasury in the lying Bush administration, telling us if we don’t do what he says we are going to suffer a catastrophe of unknown proportions.

It doesn’t really matter that this “rescue” bill has now passed, as the correction coming upon us now is like a force of nature – it cannot be stopped. You can run from it, you can seek higher ground, you can try to batten down your hatches, but like a hurricane, it will come.

This $700 billion is (plus $600 billion already doled out) amazingly, a drop in the bucket compared to the unknown size of the derivatives market which must now be unwound. I’ve seen estimates between $300 trillion and as high as $600 trillion. Did you notice the 2-hour (and then extended) opening of the derivatives market on Sunday, Sept 14th? This before Lehman went under, presumably to allow the players some time to scurry out of the way of the hurricane.

Yesterday I got word of two local Denver businesses closing their doors and a third, usually bustling with business, with very few customers. The tide has turned. Americans are battening down, spending less, saving more. Although perhaps “painful” to those used to living high on the hog from “financial services”, this is a good thing. You cannot correct a prolonged period of loose credit, low interest, and insane buying of Chinese gee-gaws with an increase in credit.

You may prolong the collapse, but more credit cannot correct the problem created by too much credit.

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