The bailout plan

1 October 2008 Sören Zschoche 9 Comments Economy, Politics

I have never seen that the Dow has reacted so strong on a decision of politicians, as it did when when I saw the decision about the 700 billion dollar bailout on CNN on Monday. CNN presented this decision really exciting and I think for many people this 15-minute decision was the most exciting decision of the whole year. Especially it was very funny to see how much the presenters believed in this plan and incredulous they looked when the votes finally were 228 against and 205 for it.

However the only problem is that actually this really was not funny, but I think everybody with a relative sound common sense knew that the house wouldn´t rubber stamp Bush´s funny 700 billion rescue plan so easily, especially in times of election campaign. So Bush has to hurry to find a new ingenious plan, but in my opinion the house of Representatives will be hard to convince because Bush already accumulated debts worth 10,6 trillion dollars. It´s really a bad bad situation but, let´s go back to what will happen to the markets and the economy, while I´m writing this post at Monday the 29th of September the Dow-Jones is 7 % in the red which meas that the wallstreet has lost more than one trillion U.S dollar again while the representatives are still debating if 700 billion could save the economy. So if the representatives don´t agree on something more and more banks will fall under chapter 11 like I discussed in my last post “Facing a world economic crisis” yet. I think after the shock waves are finished in the banking sector they will achieve insurance companies, then hedge fonds and private equity companies and in the end the whole world economy with every participant.

But let´s imagine what happens if the U.S. government would yet again make it the force the bailout through even only in another form?

Of course the wallstreet would leap for the joy and the Dow would probably close with a plus of 5 or 6 %, but does that really solve real problems? In my opinion the the bailout would just distort competition between the banks and in the end bad banks would finally become good ratings again. Also the idea that short sales on banks are forbidden is a very bad one because they short sales are an essential component of the price formation at the wallstreet. In my opinion and remember it´s a crisis of confidence we are facing. So be aware of the rise in the market if the bailout really comes because it won´t be here to stay. In my opinion the best thing the U.S. government could do know is to nationalize or bomb the rating agencies which in my opinion are the main reason for the crisis, because if they hadn´t distributed AAA rankings for incredible bad financial derivatives we probably wouldn´t have these enormous problems now.

So in my opinion we are facing a very very deep recession but despite that I hope that I was wrong with my last post that this crisis would finally end in a world monetary reform, but at the time many things point to that. However as hard as that sounds:

“Sometimes it´s better to burn the sick forest so that new trees can grow on a rebroductive ground.”

The decision Source www.necn.com

9 Comments »

  • Filoi said:

    $700 billion is not enough ! Help your bank.Pledge donations on http://www.bankthon.com/?c=us

  • scott said:

    great blog

  • Sireena said:

    Hi, Salaam, hey, guys i am Sireena…
    and i am from Canada but origianlly from Pakistan….
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  • Forex scalping said:

    Well, I doubt that 700 billion dollar is enough.

  • Metatrader ea said:

    Good article, thank you

  • Forex scalping said:

    700 billion dollar is enough. I am sure.

  • Americans said:

    A FINANCIAL REVOLUTION PART II

    A Modern day “Boston Tea Party”, Americans all over America has gotten wise. Here is the American publics’ response to government, bailouts, stimulus packages and the putting us back to work to spend. The wizards of Government and Wall Street, through their greed and corrupt practices, have given us the people two options: risk destitution, foreclosure and bankruptcy or save. We’ve chosen to save. To save, save, save ourselves.

    1. This isn’t working. The public doesn’t get information on what’s going in and what’s coming out of bills until the information is already out of date. We have no effective means of tracking and influencing the legislative process. Our participation is limited to whether or not we support saving the economy. We don’t have a seat at the table when it comes to the actual nature of making government work.
    2. Whoever is in office be it Democrat or Republican makes no different. American government is about keeping the system going. The system is for the elite; corporate America, our elected officials and keeping capitalism alive. The masses of people are inconsequential and expendable at every level, rich, middle class and poor.
    3. Let’s face Reality; the top 400 people in this country took in 250 million a piece each and every one of them for a year… ONE MILLION DOLLARS A DAY……or 100 billion for the year and paid less than 20% in taxes….and that was adjusted income,,,, What do you imagine their incomes were BEFORE the adjustments….
    4. Wall Street is the CANARY in the COAL MINE… We will never make significant process until these people’s unmitigated GREED is alleviated by 94% tax rate….
    5. The less you know, the less you care. The less you know, the more you believe. The less you know, the cheaper your job. The less you know, the weaker your opinion. The less you know, the easier you’re scared. The less you know the better pawn you are.
    6. This is what the internet is all about! This is what transparency looks like! Put a million pissed off people with computers to work and stand back!
    7. Judging a system only by the magnitude of profits is a fool’s assessment; capitalism as designed by free market fundamentalists, also, falls much harder when it fails, and it ALWAYS fails, as its design flaws make it impossible to sustain.
    8. I am one of many unemployed Americans. I lost my job 10 months ago, and have yet to find employment. The harsh reality today is that I had 2 interviews for a long-term temp assignment, and still haven’t even landed a short-term assignment. I possess a graduate degree and have 9 years of direct work experience. The point of my comment is not to elicit pity; I am simply one of the millions of disillusioned Americans hoping for a better tomorrow.
    9. Government tells us keep hope alive for that bridge building job or to pave roads. Who cares if you paid $100,000 for your education or what degree you hold?
    10. American people, design stuff, manufacture stuff, construct stuff, grow stuff; create your own jobs. Human productivity, not financial manipulation.
    11. I think we have to pull together. People on the lowest rung……they need the most support. If the gas prices go up, they can’t even get to work or feed the kids. They are looking at homelessness. Those who have stretched their resources and bought a house beyond their real capacity to guarantee repayment lured in by greedy bankers? They aren’t the worst who need to be saved. They took a bad risk.
    12. A great way to put billions of dollars back into the economy via this stimulus bill, lobby for every Senator and Representative to take a 35% pay cut, every senator and rep receiving Soc Sec and drawing a congressional salary, give up Soc Sec, because that’s double dipping. Whittle down those aides and staff from 50 each to 5 each so these people can actually do the jobs they’re hired for instead of handing tasks off to a lackey. Also, cut off pensions for these losers. If American people who have lost all their pensions and the autoworkers who are being penalized for drawing pensions can do without, so can these moochers.
    13. Alright everybody time to start calling our congress and senate.
    14. For all of the pandering, the “moderates on both sides” are now getting ready to gut the budget, and prove that the only thing they believe in is a failed ideology of “supply side economics.” Cut taxes, raise defense spending, screw the poor.
    15. This “bipartisanship”, “post-partisanship”, “new politics” is a complete and total failure.
    16. For the Office of the President the people voted for change. But when it came to the Congress people voted for the status quo in both houses. The people in Congress are the same people who voted for the Iraq war, No Child Left Behind, TARP, etc. If you wanted change, you should have voted against your incumbent in the primary and general election. As long as the same people are in Congress we will not have change. 2010 you get another chance to do so.
    17. We are still arguing Evolution and the rest of the developing world is investing in education, infrastructure, engineering and science. What do you expect in a highly competitive globalized business?
    18. We are getting rolled by government. That has no experience in governing and it is showing. The lack of ability of government to pass a bill or negotiate with colleagues on an executive level civilly is showing every time key legislation needs to be passed. They have no idea what they are doing and so our congressional leadership is playing games and playing us like a fiddle…particularly with these catch phrase named bills where they through in the kitchen sink to be funded by us.
    19. Could you explain how enormous government spending and borrowing from the Chinese will create long term private sector jobs?
    20. We wouldn’t be in the position if we hadn’t gone heavily into debt to purchase sophisticated agreements that nobody really understood but seemed like a sure thing right up until they started destroying the economy. In the solution I see ominous reflections of the problem. Do we really know what we’re getting for our debt? Does anybody know if it will work? The answer is no.
    21. It seems that most efforts to help the housing market are aimed at maintaining the artificially high inflated prices that are part of the problem. If you want to see home sales go through the roof, list a $100,000 house for $100,000 instead of $300,000 and watch what happens. Continuing to prop up these unrealistic home “values” only makes current mortgage holders’ ability to make their payments more tenuous (in this job market especially) and continues to price many prospective buyers out of the market entirely.
    22. The real problem can be summed up with two numbers: Average price of houses sold in America in December 2008: $247,900. Average personal income 2007 (most recent data available): $38,611.
    23. Hang onto your wallet…The states are collectively about 100 Billion in the red.
    24. A tax rebate is tempting, but doesn’t change the bottom line, which is we aren’t making enough money to afford the housing bubble. Where I live $15,000 does not offset the fact that mortgages have doubled in a few short years. All this will do is lure people in who can’t afford it, and award those who can game the system. It will keep mortgages artificially high and we’ll need another boost down the road….
    25. Doesn’t it seem that the bailout dollars will keep those sinking from going to the bottom and that then it will take even longer for the fail/rebirth cycle to run its course? Like the Phoenix that rose from the ashes, wouldn’t we need ashes before there could be an arising, and anything else will just prolong the misery.

    American people while the old way of “storming the fort” was applicable in that day and age to signal revolt, this is modern America’s way, by us staging a “financial revolution”. Not buying into the consumerism that keeps the cycle of abuse going.

    We have seen our annuities shrink by tens of thousands of dollars, and likewise, the value of our homes. Of course we are not spending. We may never spend. One reason is that we are so ANGRY at the corporations. We are tired of being subjected to social engineering every time we enter a store, tired of cheap junk merchandise from China, tired of our government being bought instead of representing us, tired of the government being taken over by armband religion, tired of our healthcare, tired of lousy schools that are unaffordable, tired of bailouts which is really nothing but more robbery of the people, specifically, the middle class.

    We have no representation, no free press, and no recourse of any kind, except, not spending. So, by golly, we are not spending. It’s practice for when we won’t be able to spend anyway, because the government will end up with every last cent that we ever earn anyway.

    Congress, American government, consider yourself notified. Americans are no longer “buying” the swampland, of buy, buy, buy, or, consume, consume, consume. It is now save, save, save ourselves. Unless you start mailing out checks directly to the American people to help bail us out, to get us through this depression, expect it to go on for as long as it takes, to bring down the system of the elite. You left us no other recourse. We are no longer going along with the program (stimulus, relief, bailout, TARP or whatever you decide to call the next bone); you heard it, first, from us…

  • Freya Harris said:

    stimulus packages are very helpful for kickstarting the economy`-~

  • free checking banks california said:

    free checking banks california…

    [...]The bailout plan – Economy – World Financial Blog[...]…

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