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| 700 billion and counting bailout |
admin writes, "Dave Goss writes:
Excessive Self-Indulgence
I feel somewhat distressed over the bail-out that we will now be paying for who-knows-how-long. I hope that we, in the “land of the free,” have not become so self-indulgent as to think that the Feds are going to bail us out each and every time we get too greedy. If the majority of us think along those lines- we're doomed. "
We, of the older generations need to get a better perspective on what is happening. It isn't just about us. I'm a baby-boomer. Our age group is probably the richest in history. We all seem to want to live out our lives in comfort. We are the generation that brought us to this point in history. We are so un-involved with other life on this Earth as to the point of thinking that human life is the only life that matters. We have become a country where entitlements are handed out like Halloween candy. Our freedom has taught us that we can have everything we want; even if we don't have the money to purchase what we want; we buy it anyway.
Right here, in this wondrous State of Michigan, during the lumbering era; we clear-cut the entire State of white and yellow pine: leaving nothing for the future. Why are our wants more important than our future?
Come on people. Cut back on your “wants,” we'll have everything we really “need.” Hopefully, there will be life after we have gone. It's up to us to at least help insure that there is a future for our grandchildren. "
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This recent blog post was found on BloggingStocks.com
New bailout price tag: $700 billion
Posted Sep 20th 2008 10:33AM by Peter Cohan
Bloomberg News reports that the price tag for the bailout being discussed this weekend in Washington just went up another $200 billion. That's if you believed the initial $500 billion estimate bandied about yesterday. According to Bloomberg, the plan will be broken into "$50 billion tranches which would last for at least two years" and would "accept mortgage-backed securities [MBS] and collateralized debt obligations [CDOs]." Since there are $13 trillion such securities out there -- I am not sure whether $700 billion will be enough to buy them all up -- unless this agency buys them at a steep discount.
That $700 billion price tag will increase the national debt ceiling to $11.3 trillion, that's more than double where it was in 2000 and it represents 80% of U.S. GDP. Why is that important? Because in international banking circles any country whose debt exceeds 60% of GDP is considered at risk of not being able to pay back its debt. So the U.S. is surely turning itself into one of the riskiest borrowers in the world. Thus it's too bad that the rest of the world seems to be entirely dependent on what happens here for the global economy work.
And it wouldn't shock me to wake up Monday morning that that $700 billion having hit $1 trillion or more. As the saying goes, when you owe a bank $100,000 and can't pay it back, that's your problem. But when you owe that bank $5 billion and can't repay, it's the bank's problem. That's the way the rest of the world must feel as the U.S. goes out to the beg the world to buy another trillion dollars worth of our national debt.
And here's another little problem: If banks are forced to sell their MBS and CDOs to this new agency at huge discounts, won't they need to write-down their capital to reflect the losses? Will they have enough capital after taking those write-downs?
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
WHAT DO YOU THINK? PLEASE RESPOND WITH AN OPINION ON THIS MATTER!
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Posted on Sep 28, 2008 17:43pm.
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