Friday, September 19, 2008

It's Funny Cause It's True

LongOrShortCapital has the answer to my question about how the BankAmerica/Merrill Lynch negotiations went down.
They also had a great question: Why didn't AIG just insure itself?
ScreenJunkies and WallStreetFighter look at 6 stock market movie geniuses.
At least I don't have this job. (via WallStreetFighter)
1-2 Knockout has some more points on why it's silly to blame the "shorts." He also has the best handle around: Anal_yst.
Nouriel Roubini is much smarter than me. I think he's basically saying what I'm saying though: that the Ponzi scheme hasn't been solved:
When a country (say Russia, Ecuador or Argentina) has too much debt and is insolvent it defaults and gets debt reduction and is then able to resume fast growth; when a firm is distressed with excessive debt it goes into bankruptcy court and gets debt relief that allows it to resume investment, production and growth; when a household is financially distressed it also needs debt relief to be able to have more discretionary income to spend. So any unsustainable debt problem requires debt reduction. The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession - with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) and bailouts of distressed financial institutions (Bear Stearns creditors’ bailout, Fannie and Freddie and AIG) do not resolve the fundamental debt problem for two reasons. First, you cannot grow yourself out of a debt problem: when debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt). Second, rescuing distressed institutions without reducing the debt problem of the borrowers does not resolve the fundamental insolvency of the debtor that limits its ability to consume and spend and thus drags the economy into a more severe economic contraction
I read a comment on another blog today where someone basically said "It's crazy for the government to buy only the bad, distressed assets from these banks - if they're going to bail them out, then take over EVERYTHING." I think I pretty much agree with that; we can't take a TRILLION dollars of taxpayer dollars to take the mistakes off the books of the big boys and let them continue to operate afterwards.
I lost so much faith in our government today that I may not vote in the upcoming election. I don't want to have to say I supported these idiots - and I don't think either candidate has any clue what's going on with our financial system.


Skoo Ⅱ said...

When you think things are supposed to be like this, they always upset you by taking on another look. True and Sad.

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