Saturday, September 27, 2008

What Next?

I must admit that I secretly hoped that John McCain would oppose the bailout, with the Republican Congressional Insurgency giving him the opportunity to be a “Maverick’. I thought he would then call this rubbish the Bush-Obama Wall Street bailout, thus covering his greatest weakness. But alas, it’s obvious after last night’s debates that it was just wishful thinking. In fact, it was like watching American Idol with two contestants singing the same song. So this is where we are. The Congress is receiving phone calls of up to 100 to 1 against the bailout, yet they are about to sign into law perhaps the most unpopular piece of legislation in the history of our Republic. So one has to ask. What will happen after $700 Billion is engulfed by the Disappearing Deep Hole of Derivative Destruction? What will happen after the MOAB (Mother of All Bailouts)?
One has to believe that there will be a temporary increase in liquidity, which will be quickly sucked up by the system. But it has been obvious that every Fed and Treasury intervention has had more ephemeral staying power. So this intervention will help for maybe 3-6 months. Maybe. But what will happen when the sequel comes out? MOAB II, or perhaps the Son of MOAB? Don’t you think Americans will be even more pissed off? They will say, and justifiably so, you told us that this will save the system and now we’re right back to where we were a few months ago, and you are asking for another massive bailout! I am afraid that we are going down the slippery slope of ill-guided intervention. Didn’t Paulson and Bernanke say that there is no housing bubble, then they said that Subprime is contained, then they said that by nationalizing Fannie and Freddie that it puts a floor under the mess? WHAT WILL THEY SAY? There will probably be new actors, buy they will still have to read the same poorly scripted lines.
We are going down the path of self-destruction. Lenin said that there is no surer way to destroy a nation than to debase its currency. There is no surer way to debase the dollar than to continue down this misguided path. We have become so caught up in stock market and real estate losses, that we have taken our eyes of the real prize! Our greatest asset as a nation is our currency. Today, the US Dollar reigns supreme. But one has to ask how much longer will our creditors keep the credit flows open while we debase and inflate our way out of this self-inflicted greed wound. There are already grumblings of a Sino-Russian alliance, one that could put significant pressure on other nations to abolish the dollar standard. Once the dollar standard is usurped, we are TOAST!!!!!!! Expect massive tax increases, spending cuts and a drastic decrease in our standard of living. Yet, the guys on the yachts are smart. They will have diversified into other currencies, homes in other nations, and accounts in safety deposit boxes around the world. Much like the Nazi’s who bought their freedom after WWII, these criminals will save their hides. Caviar for them and feudalism for us. You’ve been warned.


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