Category — Currency

Prayer won’t work

Fed takes boldest action since the Depression to rescue US mortgage industry

All “real” Americans living within ones means, who save money and have little or no debt, the Fed has drawn a huge target on your back. The ammo used is freshly printed cash, replacing the principal lost in the housing bust. Doesn’t work for the capital lost in the bubble burst is gone. It does not exist for the lenders or the government.
What the bankers and lenders want now is the Government to print more money to replace the loss. Nice of them, isn’t it?
What is backing that extra money? Nothing! This money is courtesy of Gutenberg’s invention; it has the same value as if you printed it, except they won’t go to jail for the act.
So, what’s with the target on your back?
Think of this occurrence as one losing their monthly paycheck on the way home from work. When someone else finds it, that one is enriched by that amount. Creating money from air to give to you is progressive economics.
Increasing the amount of money to compensate you with no commensurate increase in value of the coinage will diminish the value of the total capital. Call it what is, debasing the currency. Your savings, house, IRA, 401(k) and piggy bank are worth what the adjusted currency is worth.

The Fed’s in a desperate race with spectre of collapse
The latest news and analysis of the UK and world economy
Read more by Ambrose Evans Pritchard

The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.

“The agency crisis was a Tsunami event,” said Tim Bond, global strategist at Barclays Capital.

“The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody’s attention in Washington,” he said.

The Fed action set off a powerful relief rally, lifting the Dow Jones index over 340 points in early trading. Both US and European equities have been hovering on key support lines in recent days, threatening to break down through 18-month lows in a second, brutal leg to the bear market.
[snip]
Stress indicators across almost all parts of the global credit system fell from extreme levels on the Fed news. The CDX and iTraxx Europe indexes that serve as a default barometer for corporate bonds retreated from record highs, although it is too early to judge whether the latest action will start to thaw the credit freeze. The stock market rally after the last central bank intervention in December fizzled out after just one day.
[snip]
“This is not going to be enough,” said Hans Redeker, currency chief at BNP Paribas.

The travails at Fannie Mae and Freddie Mac — once rock-solid institutions — had combined in a deadly cocktail with a fresh wave of panic over the solvency of the investment banks with heavy exposure to sub-prime debt.

Bear Stearns was forced to deny reports that it was running out of capital and may seek Chapter 11 bankruptcy protection. The spreads measuring default risk on its debt rocketed from 246 to 792 on Monday.

Mr. Bond said the mortgage agencies may ultimately need to be nationalized. Fannie Mae has already seen its stock price drop 70pc since October at a cost of $50bn in market value, even though it has an implicit federal guarantee. “There is going to have to be a very big bail-out,” he said.

So I ask you, just what do you think is going to happen?

As the politicians are so happy to tell you, ”You are the Government” translates into you are going to pay for our screwup. Starting with Carter, going through Clinton and the current Congress, all of the insane economic policies now fall on the taxpayer.