Fundamental Question, What Happens If There Is No Bailout !

[Gone4Good]

Back to the original question "What happens . . . ", we may soon find out. Credit markets are starting to melt again while Congress dithers. Tick-tock, tick-tock.

 

[Helena]

yeah, just when we need these people to show some kaunas and take a stand (or at LEAST understand the problem and vote accordingly) ... they RUN and HIDE.

Now there's talk of canceling the Friday debate.

 

[Gone4Good]

I'm not sure why people keep saying this. An individual can have an unlimited amount of money in FDIC-insured accounts, this limit is 100K per registration-type per bank. So, a couple could have $300K in a single bank (his, hers, theirs) and do the same thing at as many banks as necessary.

Just open accounts in multiple banks, it's as easy as that.

Yes, although doing this takes some work and [-]not everybody[/-] almost no one understands this.

 

[Gone4Good]

Now there's talk of canceling the Friday debate.

Unacceptable! With only ~40 days before the election the American people should get a chance to evaluate the two men who hope to inherit this mess on Jan 20, 2009. If 2, out of 100 US Senators, can't spare 90 minutes to audition for the Presidency in a national forum then we should find a way to select another two candidates . . . pronto.

 

[tmm99]

Quote:
Originally Posted by Helena
Now there's talk of canceling the Friday debate.

Unacceptable! With only ~40 days before the election the American people should get a chance to evaluate the two men who hope to inherit this mess on Jan 20, 2009. If 2, out of 100 US Senators, can't spare 90 minutes to audition for the Presidency in a national forum then we should find a way to select another two candidates . . . pronto.

McCain wants to postone the debate. Omaba wants to do it. I agree with Obama.

 

[Gone4Good]

McCain wants to postone the debate. Omaba wants to do it. I agree with Obama.

Off with his head!

He apparently wants to postpone the Palin-Biden debate scheduled for October 2nd, too. I guess the Governor of Alaska is needed to help negotiate in Washington as well.

 

[HFWR]

This is a perfect time to have a debate. You wanna go to the show? Well, we've just added "the bailout" to your to-do list...

 

[Milton]

Our total debt is not that bad compared to GDP and most other countries in the world.

That's a valid point. However, the problem as I see it is that the debt just constantly grows, with little thought being paid to the unarguable fact that perpetual deficits are unsustainable. Reverse compound interest is a fearful thing.

Eventually the piper must be paid. Since it will almost certainly be too expensive to do so with 'real' money, the only plausible way out will be rampant inflation: which is going to hurt a lot of people.

 

[al_bundy]

if the deficit is the level of gdp growth or less than it's OK

i'll take a national debt over no national debt anyday

 

[audreyh1]

This is a perfect time to have a debate. You wanna go to the show? Well, we've just added "the bailout" to your to-do list...

Terrific point!

Audrey

 

[Art G]

This is a perfect time to have a debate. You wanna go to the show? Well, we've just added "the bailout" to your to-do list...

I look at it as, I'd rather wait until these guys knew what the heck was in the final bill. What good is a debate over what may never happen?
Besides, if they're not back in Congress, won't people be questioning how well they're doing their current job?

 

[Milton]

i'll take a national debt over no national debt anyday

Wow.

Well, enjoy!

 

[FinanceDude]

Off with his head!

He apparently wants to postpone the Palin-Biden debate scheduled for October 2nd, too. I guess the Governor of Alaska is needed to help negotiate in Washington as well.

I guess Joe Biden resigned his Senate seat, I didn't see it in the news, though. Is there any legitimate reason we wouldn't want ALL 100 Senators in Washington DC to work on a bill that might be one of the most important in a half century? Some folks on here sure confuse me........

 

[cute fuzzy bunny]

McCain wants to postone the debate. Omaba wants to do it. I agree with Obama.

Yeah, but Obama thinks January 20th, 2009 is in 40 days...

Maybe we need someone with a better handle on their calendar.

 

[Zoocat]

Our total debt is not that bad compared to GDP and most other countries in the world.

compared to the initial RTC estimates in 1990, $700 billion in 2008 dollars is pocket change. back then the deficit was a lot higher as a percentage of GDP.

RTC wasn't a magical fix either. Back then Citi almost went belly up in 1994 and home prices were flat for most of the decade with a lot of 1987-1990 buyers being upside down until 2000 or so.

the goal is to make any downturn controlled and gradual so that asset prices don't go in crazy directions very fast.

Foreign investors own 25% of our external debt. This is a problem.
From United States public debt - Wikipedia, the free encyclopedia

". . .the U.S. Treasury statistics indicate that, at the end of 2006, foreigners held 44% of federal debt held by the public.[36] About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China. In total, lenders from Japan and China held 47% of the foreign-owned debt.[37] This exposure to potential financial or political risk should foreign banks stop buying Treasury securities or start selling them heavily was addressed in a recent report issued by the Bank of International Settlements which stated, 'Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency. While unlikely, indeed highly improbable for public sector investors, a sudden rush for the exits cannot be ruled out completely.'"

A sudden rush for the exits. There is the doomsday scenario that Paulson, et al., do not dare to mention for fear that it's already happening.

 

[Zoocat]

Yeah, but Obama thinks January 20th, 2009 is in 40 days...

Maybe we need someone with a better handle on their calendar.

He was referring to election day, which is actually quite accurate since GW has become less than a lame duck, more like Mr. Zombie.

 

[utrecht]

McCain wants to postone the debate. Omaba wants to do it. I agree with Obama.

I agree with McCain. Maybe we should have a debate about the debate?

 

[FIREd]

Foreign investors own 25% of our external debt. This is a problem.
From United States public debt - Wikipedia, the free encyclopedia

". . .the U.S. Treasury statistics indicate that, at the end of 2006, foreigners held 44% of federal debt held by the public.[36] About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China. In total, lenders from Japan and China held 47% of the foreign-owned debt.[37] This exposure to potential financial or political risk should foreign banks stop buying Treasury securities or start selling them heavily was addressed in a recent report issued by the Bank of International Settlements which stated, 'Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency. While unlikely, indeed highly improbable for public sector investors, a sudden rush for the exits cannot be ruled out completely.'"

A sudden rush for the exits. There is the doomsday scenario that Paulson, et al., do not dare to mention for fear that it's already happening.

I read on Bloomberg last night that the Chinese are calling for a meeting with other Asian central banks to make sure that none of them dumps their treasuries and damage the other's asset values. They have much to lose in a sudden drop in treasury values (Asian central banks hold several trillion dollars in treasuries, don't they?), and they are pretty nervous... The best is for everyone to keep drinking the kool aid and believe in the resilience of the great US of A! Of course they will probably buy fewer treasuries going forward and spread their money around as to minimize their risk... But I think it will be a gradual process.

 

[al_bundy]

Foreign investors own 25% of our external debt. This is a problem.
From United States public debt - Wikipedia, the free encyclopedia

". . .the U.S. Treasury statistics indicate that, at the end of 2006, foreigners held 44% of federal debt held by the public.[36] About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China. In total, lenders from Japan and China held 47% of the foreign-owned debt.[37] This exposure to potential financial or political risk should foreign banks stop buying Treasury securities or start selling them heavily was addressed in a recent report issued by the Bank of International Settlements which stated, 'Foreign investors in U.S. dollar assets have seen big losses measured in dollars, and still bigger ones measured in their own currency. While unlikely, indeed highly improbable for public sector investors, a sudden rush for the exits cannot be ruled out completely.'"

A sudden rush for the exits. There is the doomsday scenario that Paulson, et al., do not dare to mention for fear that it's already happening.

it's not that easy, reason they hold the debt is for their currencies to be pegged to the dollar. if they let their currencies float than it may cause their products to go up in price and hurt their economies.

 

[al_bundy]

Wow.

Well, enjoy!

a lot of non-profits keep their assets in t bills along with MM's using t bills as short term investments. no national debt means no t bills and a lot of problems for the above

 

[Zoocat]

I agree with both of your replies, FireDreamer and Bundy, but those reasons do not stop the foreign lenders from putting the screws to Paulson, in fact, give them more reason to do so.

 

[Retire Soon]

Fundamental Agreement in Bailout Reached

A fundamental agreement has been reached ahead of High-Level Meeting:



Agreement Reached on Bailout Ahead of High-Level Meeting - WSJ.com

 

[FIREd]

I agree with both of your replies, FireDreamer and Bundy, but those reasons do not stop the foreign lenders from putting the screws to Paulson, in fact, give them more reason to do so.

Oh, I agree with you, the Chinese are probably leaning heavily on Paulson, and I would be too if I had half a trillion dollars in the balance! A chinese official said that they were in contact with the US treasury every couple of days to monitor the situation... I bet you it's a lot more frequent than that! I was just commenting on the "sudden rush for the exit" possibility.

The best scenario would be for Americans to start saving more so that we can finance more of our own debt (It's of course unpopular with people, as we know, but the politicians don't like the idea either because it would dampen GDP growth). America doesn't only need more energy independence, America also needs more financial independence IMO (It doesn't mean we should necessarily strive for no national debt). But I haven't heard a single politician talk about that. Somehow, counting on the Saudis for oil = bad, counting on the Chinese for money = not so bad.

I also think that the latest turn of events has put a massive nail in a few coffins... Lower taxes, national healthcare, 100 years in Iraq, yeah I really don't think so. If foreigners start buying fewer treasuries, I think that it might be the signal that we are getting close to our credit limit.

 

[cute fuzzy bunny]

He was referring to election day, which is actually quite accurate since GW has become less than a lame duck, more like Mr. Zombie.

I was just foolin around, but what he said was "Americans deserve to hear from the man that will be in charge of the mess in approximately 40 days"

The president elect isnt in charge of anything until January 20th.

 

[Zoocat]

Here's an interesting analysis by a contrarian blogger that I read now and then. His whole essay is interesting but I've only included his conclusion below.

charles hugh smith-Weblog and Essays

"...the threat is the Chinese and Japanese central banks will no longer prop up the U.S. bond markets by buying T-bills and other dollar-denominated debt. Well, as the global recession deepens, they won't have as many dollars anyway, so that decline is inevitable.
And if Congress is spineless enough to pass the bailout, then the dollar falling will wipe out hundreds of billions of value from the $1 trillion+ Chinese and Japanese hoards of T-Bills and other debt. "

Also, another excellent analysis of what "might" happen if there was no bailout is here
http://www.doctorhousingbubble.com/

His conclusion:

It is like we are in Wonderland and doing the Red Queen’s Race:
“Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else - if you run very fast for a long time, as we’ve been doing.”
“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”