Other Important Issues and News

Ok here we go…

The $200 Billion (and counting) bail out of the Wall Street Bankers and Financial snake oil
salesmen basically comes down to this. The Fed is simply pulling more money out of thin air to keep these companies from having to actually write down their bad investments to
something close to reality.

We are basically just printing money to cover the fact that these companies have little or no cash flow on the bad paper which is worth considerably less than they all said and thought it was.

The supply of money (cash) in this country is at a 30 year high, and the dollar is at historic lows against darn near every other currency in the world.

The Fed is trying to keep reality from setting in, or at least setting in fast which would cause a very huge downturn in the US financial system.

The problem with the Fed’s position and actions are this;

1. They can’t keep bailing out these companies forever, eventually reality has to come into
play and the losses they are hiding have to be written down to real numbers.

2. They all have no idea where the housing market will end up, and in many cities there
are so many people with houses worth less than the mortgage, (in some cases even those with
fixed decent rates are upside down and owe more than the house can be sold for) that
housing may not turn around or even stabilize for a year or two.

3. Companies that provide Mortgage insuerance are actually blacklisting some area’s that they will not provide coverage for, these area’s are too dicey right now for anyone to
even guess where things are headed, like Las Vegas, and parts of Florida and Ohio and
most of Michigan.

4. The cost of a greatly increased money supply is a falling dollar, and as it falls it puts a lot of pressure on imported goods, including oil which in turn hurts consumers
and pushes the economy closer to, or deeper into a down turn.

5. The Fed’s actions are at best temporary, they cannot keep shoving money at this problem
hoping it will go away, like Wiley Coyote they have run off the Cliff and are hanging in mid air waiting for gravity to take over and they finally fall to take their lumps.

All of which is not helping the basic problem of paper CDO’s which never were worth what
the financial companies valued them at, and are now worth even much less because the
housing market is melting down in 30 percent of the country, and the other area’s are
feeling downward pressure on prices as well.

Stabilizing the housing market and keeping people in their houses should be the primary
concern of the goverment right now, but little is being done to help with that issue.
The banks and loans servicers are dragging their feet hoping to squeeze the last thin dime
out people before they take their houses in foreclosure, or the people walk away.
You can bet GW Bush won’t do a damn thing to help with this either.

Eventually someone is going to take lumps for this house of cards as it comes crashing down
either in landslide or in a trickle. But eventually it will happen.

Right now the crisis the financials face is not one of liquidity, it is one of trust, they all know they are stuck with bad paper and are simply hiding the losses hoping to ride out
the downturn slowly over time, and they all do not trust each other.

The Fed is runing out of options, and their temporary floor under the bubble of debt the
big companies on wall street and elsewhere are holding will eventually fall away,
making reality once again take over.

Which bodes badly for the average american family and worker.