$7.76 Trillion?

[HerefordSire]

Notice the lack of transparency implied is the second to the last paragraph in bold print. There is a huge reason why they are not disclosing this information.


"The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department's $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

"Whether it's lending or spending, it's tax dollars that are going out the window and we end up holding collateral we don't know anything about," said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. "The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones."

http://www.bloomberg.com/apps/news?pid= ... nCCWp3ViSU

 

[Jogeephus]

HS, pardon my being ignorant when it comes to stuff like this but in your opinion what does this mean. I mean, I know how to work and I know how to save but it seems to me that it doesn't matter how hard I save in a traditional manner someone is either robbing my assets through depreciation of currency and investments. If they toss all this money out to the wolves, will this not make the little bit of money I have not worth a hill of beans? Just curious before the lockdown.

 

[HerefordSire]

HS, pardon my being ignorant when it comes to stuff like this but in your opinion what does this mean. I mean, I know how to work and I know how to save but it seems to me that it doesn't matter how hard I save in a traditional manner someone is either robbing my assets through depreciation of currency and investments. If they toss all this money out to the wolves, will this not make the little bit of money I have not worth a hill of beans? Just curious before the lockdown.

When the Treasury doesn't disclose the exact type of collateral they are taking in return for $7.76 trillion dollars of financial guarantees, this makes me automatically believe the (worst) collateral is tied in some way to derivatives which are usually highly leveraged to some underlying asset (maybe 30-1). If this is true, and a large company fails, and the Treasury either decides not to commit additional resources or cannot commit because of capability, related to other exchange or confidence issues, then a global dependent domino system can fall down one after another.

There are, and will, be many things in your control if the worst happens. The cash you have now, will likely not be worth the exact same cash in one year.

 

[HerefordSire]

Also, when the Treaury does not disclose loan recipients (see bold print in first post), this makes be believe they are guaranteeing financial resources with taxpayer money to foreign entities, such as Italy (as an example) since they may have the largest derivative exposure.

 

[Jogeephus]

Also, when the Treaury does not disclose loan recipients (see bold print in first post), this makes be believe they are guaranteeing financial resources with taxpayer money to foreign entities, such as Italy (as an example) since they may have the largest derivative exposure.

Why would we be loaning money to Italy? (I don't think I really want to know the answer to this but .. wth)

 

[HerefordSire]

Also, when the Treaury does not disclose loan recipients (see bold print in first post), this makes be believe they are guaranteeing financial resources with taxpayer money to foreign entities, such as Italy (as an example) since they may have the largest derivative exposure.

Why would we be loaning money to Italy? (I don't think I really want to know the answer to this but .. wth)

Last I checked (less than a month ago), Italy has the most exposure of financial derivatives than any other single entity in the world. If they are allowed to default, similar to Iceland, they could collapse all country's credit and economic systems like a ripping string of dominoes because of economic system connectivity. If I remember correctly, Spain is right behind them. Remember, I am expecting about 1,000 US banks to fail in a short time period in the next year. Where will all the funds come from to support the most important entities?

 

[Jogeephus]

But is creating paper money to bail something out not similar to trying to put a fire out with gasoline?

 

[HerefordSire]

But is creating paper money to bail something out not similar to trying to put a fire out with gasoline?

Excellent analogy!

Yes. It is pay me now or pay me later (of course with interest compounded annually but maybe compounded daily depending on what we agree to). If you recall, our government obligations are backed by the full faith and credit of the United States of America. They are not backed by gold (see Bretton Woods). Therefore, we have a fiat currency. So, if I borrow money from you for an interest rate return, you don't have to buy gold in the same amount the loan is for. You must trust I will pay you back. You do not get gold from me as collateral.

This is where it is possible I can come out ahead barring any defaults.......if I keep borrowing money from someone like you...say from Peter to pay Paul...and the interest and currency rates are identically the same (through averaging trillions of transactions) as when I borrowed money from you, I will be paying you back with diluted currency, such that your buying power is highly likely to become eroded or buy less than when you made the loan to me.

 

[Jogeephus]

This is what I'm afraid of. If we continue to dilute our money supply to bail out this house of cards before long our money will be worth nothing. When its worth nothing, I guess that's the opportune time for them to pay off the debt. But where will I be? Trading sea shells for a loaf of bread?

 

[grannysoo]

@Jo....

This one is simple!

Bend over and grab your ankles. Help is on the way.

 

[Jogeephus]

@Jo....

This one is simple!

Bend over and grab your ankles. Help is on the way.

But I thought Dun and Reagan said they are only here to help - or did I misunderstand him. I do after all have ADD, ADM and a host of other PC problems which I'm hoping will qualify me for some extra hep. :lol2:

 

[HerefordSire]

This is what I'm afraid of. If we continue to dilute our money supply to bail out this house of cards before long our money will be worth nothing. When its worth nothing, I guess that's the opportune time for them to pay off the debt. But where will I be? Trading sea shells for a loaf of bread?

Where you will be may depend upon how well you adapt and direct your family related to the depth of your understanding of the world in which we live. Historically speaking, whenever fiat currency cirulation is increased, there are more dollars chasing all commodities and services, thereby causing price increases. Therefore, the liklihood that fertilizer and land values and attorney fees are going to increase radiply though increased demand is highly likely. If you own land and your neighbor doesn't own land and the value of our currency is diluted, generally speaking, who do you think will fare better? The land is unique. It cannot be shopped around (theoretically speaking) because there are no other pieces of land just like your piece of land. It can provide food and a place to build shelter. It can provide raw materials which are expected to increase drastically. It is a tangible asset in a growing worldwide population. To make a long strong short, to get ahead, we must place our assets in appreciating assets that increase in value enough to compensate for not only inflation but also currency debasement.

 

[Jogeephus]

This makes me feel better about things as it confirms my beliefs in certain investments I've made. I was once ridiculed by someone because of my belief in buying tangible assets. To them, this was a waste of capital that would have been better spent investing in some of these dot com computer companies that were out there. To me, many seemed no more than a computer in someone's closet. How could this be worth $2/share. As I see things, and I'm probably wrong, this would be a wonderful time for middle-class america to take back america. I would love to see the small grocer come back on the scene. The corner butcher shop and all the other little enterprises that made our communities unique and our local economies more resilient to global problems. This would, in my opinion, create more skilled jobs for everyone. Of course, the biggest problem I see with this happening is the regulations which make it extremely discouraging for someone to start a new venture. These are real and need to be addressed otherwise the government will suffocate the one thing that can truly turn this problem around. Oh, and to clarify something posted earlier, I do not have a problem paying someone for their intellect - if it is worth it. I recognize that there are people much smarter than me in a number of areas and I pay them to do certain jobs. Thus far, these people have shown me they are well worth the money I have paid them as they make their fees up and then some. As long as they truly pay their way, I don't have a problem with them its only the leaches I dislike - if you know what I mean.

 

[HerefordSire]

This makes me feel better about things as it confirms my beliefs in certain investments I've made. I was once ridiculed by someone because of my belief in buying tangible assets. To them, this was a waste of capital that would have been better spent investing in some of these dot com computer companies that were out there. To me, many seemed no more than a computer in someone's closet. How could this be worth $2/share. As I see things, and I'm probably wrong, this would be a wonderful time for middle-class america to take back america. I would love to see the small grocer come back on the scene. The corner butcher shop and all the other little enterprises that made our communities unique and our local economies more resilient to global problems. This would, in my opinion, create more skilled jobs for everyone. Of course, the biggest problem I see with this happening is the regulations which make it extremely discouraging for someone to start a new venture. These are real and need to be addressed otherwise the government will suffocate the one thing that can truly turn this problem around. Oh, and to clarify something posted earlier, I do not have a problem paying someone for their intellect - if it is worth it. I recognize that there are people much smarter than me in a number of areas and I pay them to do certain jobs. Thus far, these people have shown me they are well worth the money I have paid them as they make their fees up and then some. As long as they truly pay their way, I don't have a problem with them its only the leaches I dislike - if you know what I mean.

Times are changing very fast.

In my experience, tangible investments are usually time consuming to buy and sell. This takes away the attractiveness for me. I prefer investments where I can get my money within a day. These types of usually liquid investments are usually intangible. While I enjoy owning my land and I expect to make a bundle on the land, I don't really care for my money being tied up as it restricts me when I find very undervalued intangible investments. When I enter an intangible investment, I don't trust the behavior, like a tangible investment. I treat it like a hot potatoe. I am in and out. While I am out, I have theoretically no risk. When I am at risk, my eyes and ears are peeled. I would rather risk $50K in Potach Corp.'s or Apple Computer's stock for one day or one month than have 150 acres of corn growing with hybrid seed, fertilizer, lime, machine expenses, fuel, etc. for 4 months hoping like heck it will rain in an Arkansas July. The balance of both tangible and intangible investments is nice for me as it keeps me from being a fat office slob. :mrgreen: