$700 billion dollars is just the beginning

That's right, Hankey! BUY! BUY! BUY!

Just don't forget - by the end of the week, a "Wall Street million" will be worth maybe, oh, $7.13.

By the way, I noticed today that Wachovia has been gobbled up by one of the big fish after losing 80 percent of its stock value since the first of the year.

I'm having a hard time generating any sympathetic feelings for those ba**ards here. I mean, they're the outfit that keeps charging my son $5 to cash his payroll check - WHICH IS WRITTEN ON A WACHOVIA ACCOUNT - simply because HE doesn't have an account there. And they call it a "service" charge.

Yeah, right. Like a BULL services a COW. Those greedy banks with their hidden fees and charges deserve to go bankrupt if they can't even be HONEST in dealings with customers. Just because they HAVE a license to steal doesn't mean they have to USE it at every opportunity. I don't remember SCN pulling that kind of crap on customers before Wachovia swallowed them up, do you?.

JD, Wachovia had a huge reduction in employees a  month or 2 ago-big clue of trouble.  They are a bank that has become geared to commercial accounts.  That's why they are now taking a big hit. They should have stuck with the little fellow. They should have stayed as SC Nat. instead of consolidating with others.  I think we're seeing that bigger isn't always better.( BTW, see we all use colorful language when it's important to us.)

From about 2001 - current the United States has funded a comprehensive restructuring of domestic government agencies (i.e. Homeland Security) with new and far-reaching "anti-terrorism" programs (e.g. Federal subsidy of enlarged state and local police, USVISIT, etc.), funded an invasion and ongoing active occupation of Iraq (at a cost of about $1 billion per month), while at the same time cutting taxes, and in September 2007 Congress raised the debt ceiling $9.815 trillion.

The U.S. Government went from an ostensibly balanced budget in 1999, to a mind-boggling increase in spending, while at the same time collecting less revenue (i.e. taxes). How do they afford it? They artificially increase the supply of money and credit through the Federal Reserve. This is a stealth tax. By debasing the fiat currency of the dollar, they spend the new dollars which dilutes the value of the dollars we save in our bank accounts (or that we negotiated with our employers to earn in our paychecks), but all of the other goods and services are still just as scarce, so more dollars are needed for the same value to exchange for them, which is inflation.

The "Three Trillion Dollar War" or whatever you want to call it was all paid with inflation, which explains why the price of gold went over $1000/oz, why oil and food prices are up, but people are still generally acting as if dollars are worth what they used to be worth before the new money was created. (Arguably this is also why the Federal Reserve ceased publishing M3 Data in March of 2006, and why the Department of Labor and Statistics has redefined the consumer price index (CPI) to exclude energy (i.e. oil) and agriculture from its "basket of goods" estimation of dollar purchasing power.)

The economic crisis the United States can no longer ignore the unwinding of this inflation. However, economists who speak on television or for politicians will tie themselves in knots and circular logic to avoid ever saying the word "inflation" -- it's like a taboo. So first they pitched this problem as a "sub-prime mortgage crisis", until now the problem is obviously not contained to just that market sector.

There’s plenty of blame to go around, it’s a little late to worry about assigning the blame. There was unbridled greed fueled by free flowing, cheap credit and stoked by the lack of nearly any regulation of the markets. So this bubble didn't even feel like a bubble so much because the "improvement" was marginal over the pre-existing recession from the previous dot-com bubble and the housing "foam" created by Alan Greenspan.

All that inflation is now being defined. If you have faith in a free market economy, one must realize that it is non-linear. Speculation bubbles will always be present which makes the economy fall out of equilibrium. When policy (political or ignorance) supports these speculation bubbles, there comes a point that the economy must return to equilibrium. This equilibrium will have to occur. The decision is whether to spread the return to equilibrium over a long period of time (bailout) or allow the equilibrium to happen quickly (no bailout).

Interesting take today from columnist Thomas Sowell on the bailout:

September 30, 2008
Bailout Politics
By Thomas Sowell

Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis.

Among the Congressional "leaders" invited to the White House to devise a bailout "solution" are the very people who have for years created the risks that have now come home to roost.

Five years ago, Barney Frank vouched for the "soundness" of Fannie Mae and Freddie Mac, and said "I do not see" any "possibility of serious financial losses to the treasury."

Moreover, he said that the federal government has "probably done too little rather than too much to push them to meet the goals of affordable housing."

Earlier this year, Senator Christopher Dodd praised Fannie Mae and Freddie Mac for "riding to the rescue" when other financial institutions were cutting back on mortgage loans. He too said that they "need to do more"
to help subprime borrowers get better loans.

In other words, Congressman Frank and Senator Dodd wanted the government to push financial institutions to lend to people they would not lend to otherwise, because of the risk of default.

The idea that politicians can assess risks better than people who have spent their whole careers assessing risks should have been so obviously absurd that no one would take it seriously.

But the magic words "affordable housing" and the ugly word "redlining" led to politicians directing where loans and investments should go, with such things as the Community Reinvestment Act and various other coercions and threats.

The roots of this problem go back many years, but since the crisis to which all this led happened on George W. Bush's watch, that is enough for those who think in terms of talking points, without wanting to be confused by the facts.

In reality, President Bush tried unsuccessfully, years ago, to get Congress to create some regulatory agency to oversee Fannie Mae and Freddie Mac.

N. Gregory Mankiw, his Chairman of the Council of Economic Advisers, warned in February 2004 that expecting a government bailout if things go wrong "creates an incentive for a company to take on risk and enjoy the associated increase in return."

Since risky investments usually pay more than safer investments, the incentive is for a government-supported enterprise to take bigger risks, since they get more profit if the risks pay off and the taxpayers get stuck with the losses if not.

The government does not guarantee Fannie Mae or Freddie Mac, but the widespread assumption has been that the government would step in with a bailout to prevent chaos in financial markets.

Alan Greenspan, then head of the Federal Reserve System, made the same point in testifying before Congress in February 2004. He said: "The Federal Reserve is concerned" that Fannie Mae and Freddie Mac were using this implicit reliance on a government bailout in a crisis to take more risks, in order to "multiply the profitability of subsidized debt."

Chairman Greenspan added his voice to those urging Congress to create a "regulator with authority on a par with that of banking regulators" to reduce the riskiness of Fannie Mae and Freddie Mac, a riskiness ultimately borne by the taxpayers.

Fannie Mae and Freddie Mac do not deserve to be bailed out, but neither do workers, families and businesses deserve to be put through the economic wringer by a collapse of credit markets, such as occurred during the Great Depression of the 1930s.

Neither do the voters deserve to be deceived on the eve of an election by the notion that this is a failure of free markets that should be replaced by political micro-managing.

If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.

It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts.

Phasing out Fannie Mae and Freddie Mac would make much more sense than letting politicians play politics with them again, with the risk and expense being again loaded onto the taxpayers.

Copyright 2008, Creators Syndicate Inc

Hankey and PJ have alsoforgotten that countries like Dubai, Saudi Arabia, China and others have so many fingers in our American-pie that we don't even own our OWN country any more.

Cant wait till they come a'callin to collect....anyone brushed up on their Mandarin? 

"Here we go again with the rep/dem thing. This is a US problem."

I agree with confused. This isn't something that is the fault of either side. They are all to blame and many of the American people are too, from greedy bankers to free market politicians to people dumb enough to take on ARMs that they couldn't afford. We've latched on to this credit mentality in this country, and it is time that we let it go. Unfortunately, even if we snap out of it, we've already "mortgaged" our children's futures, so we can only do so much.

-ibvirginia