The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

Started by muppet, September 28, 2008, 11:36:36 PM

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muppet

It is strange times when the extreme right wing government, in the home of the free market, are proposing to effectively nationalise a huge part of the financial industry.

This proposal will attempt to fix the problem from the top down (save the wealthy bankers) rather than from the bottom up (buy out those who have lost their homes) , but that would be asking too much from the Republicans.

If this plan doesn't go through there are experts who think the dollar will go like some Latin American currencies have done. That would mean hyper inflation and rocketing interest rates. This could be only a matter of weeks away.

The danger of Iran or some one else (Putin will feel like slapping Bush after Georgia) trading their oil in Euros is not being mentioned much as the consequences for the US economy (and our own) are to disastrous to even think about.

What no one is contemplating is what happens if the Big Bailout doesn't work? 
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Bogball XV

Quote from: muppet on September 28, 2008, 11:36:36 PM
If this plan doesn't go through there are experts who think the dollar will go like some Latin American currencies have done. That wouldl mean hyper inflation and rocketing interest rates. This could be only a matter of weeks away.
I thought that was pretty much a given if the deal goes through anyway, surely with all this money being printed the dollar can only go one way?

That aside, you're right that a bottom up fix would be a little more equitable, but...

J70

The Democrats are heavily involved in this too, and it seems to be them and the Bush administration that are driving it. The congressional Republicans are being dragged along kicking and screaming. It will be interesting to see how the votes go with an election in less than two months. Apparently Dennis Kucinich, congressman from Cleveland and perennial Democratic presidential candidate, has vowed not to vote for it, so the opposition is coming from both sides.

muppet

Quote from: J70 on September 28, 2008, 11:40:31 PM
The Democrats are heavily involved in this too, and it seems to be them and the Bush administration that are driving it. The congressional Republicans are being dragged along kicking and screaming. It will be interesting to see how the votes go with an election in less than two months. Apparently Dennis Kucinich, congressman from Cleveland and perennial Democratic presidential candidate, has vowed not to vote for it, so the opposition is coming from both sides.

It mightn't be the best plan but it is the only plan. Anyone voting against it is insane.
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Bogball XV

Quote from: muppet on September 28, 2008, 11:46:40 PM
Quote from: J70 on September 28, 2008, 11:40:31 PM
The Democrats are heavily involved in this too, and it seems to be them and the Bush administration that are driving it. The congressional Republicans are being dragged along kicking and screaming. It will be interesting to see how the votes go with an election in less than two months. Apparently Dennis Kucinich, congressman from Cleveland and perennial Democratic presidential candidate, has vowed not to vote for it, so the opposition is coming from both sides.

It mightn't be the best plan but it is the only plan. Anyone voting against it is insane.
it might be the only plan, but it doesn't have to be the only plan - from my limited understanding it seems like a terrible deal for americans at the very least.  Imo there is no reason why we can't continue as we presently are, if a bank goes under as a result of bad decisions, so be it, there'll be plenty of vultures in to pick up the pieces, this needs to work itself out imo.

Would the dems be in favour because they see this as no lose for Obama?  In that if it works, great, he'll be able to get on with the job of being president, if it doesn't he can blame the last administration, and he can also blame this financial strait jacket for not being able to realise his campaign goals whatever happens.

J70

There is politics involved here too. The Democrats probably could get enough to pass this on their own, but they are afraid that it will then become an election issue and something for the Republicans to beat them with. Bush is irrelevant at this stage, which is why they have been insisting on the Republicans getting on board.

Personally, I would have a lot more trust in someone like Paulson than in politicians, of either stripe, who have one eye on the election in November.




Bogball XV

Quote from: J70 on September 29, 2008, 12:25:57 AM
There is politics involved here too. The Democrats probably could get enough to pass this on their own, but they are afraid that it will then become an election issue and something for the Republicans to beat them with. Bush is irrelevant at this stage, which is why they have been insisting on the Republicans getting on board.

Personally, I would have a lot more trust in someone like Paulson than in politicians, of either stripe, who have one eye on the election in November.




Paulson the former chairman of Goldman Sachs behind plan which will rescue Goldman Sachs? 

Donagh

There's a certain irony to the biggest powerhouse in world capitalism bankrupting itself to save the bankers while thousands of others lose their homes and are thrown out onto the streets with without jobs or healthcare. You reap what you sow as some might say.

Minder

As Jay Leno said "When you screw up, you pay. When the banks screw up, you pay".
"When it's too tough for them, it's just right for us"

mannix

Is it the end of the "hyper power" ?

orangeman

New mortgage lending collapsed in August, according to the latest figures from the Bank of England.

Banks and building societies lent a net £143m in home loans last month, just 5% of July's lending figure and only 2% of the lending in August 2007.

August is traditionally the quietest month for house sales.

But the Bank's figures also show that 32,000 new mortgages were approved in August, a new record low and 70% fewer than a year ago.

This suggests that the fall in sales and prices will continue into next year.




£143m for the whole of the UK is unbelievably low !

Declan

Interesting article in the Guardian: Don't agree with all of his assertions but food for thought.

A Shattering Moment in America's Fall From Power
The global financial crisis will see the US falter in the same way the Soviet Union did when the Berlin Wall came down. The era of American dominance is over

by John Gray

Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over.

You can see it in the way America's dominion has slipped away in its own backyard, with Venezuelan President Hugo Chávez taunting and ridiculing the superpower with impunity. Yet the setback of America's standing at the global level is even more striking. With the nationalisation of crucial parts of the financial system, the American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated. In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed.

Ever since the end of the Cold War, successive American administrations have lectured other countries on the necessity of sound finance. Indonesia, Thailand, Argentina and several African states endured severe cuts in spending and deep recessions as the price of aid from the International Monetary Fund, which enforced the American orthodoxy. China in particular was hectored relentlessly on the weakness of its banking system. But China's success has been based on its consistent contempt for Western advice and it is not Chinese banks that are currently going bust. How symbolic yesterday that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.

Despite incessantly urging other countries to adopt its way of doing business, America has always had one economic policy for itself and another for the rest of the world. Throughout the years in which the US was punishing countries that departed from fiscal prudence, it was borrowing on a colossal scale to finance tax cuts and fund its over-stretched military commitments. Now, with federal finances critically dependent on continuing large inflows of foreign capital, it will be the countries that spurned the American model of capitalism that will shape America's economic future.

Which version of the bail out of American financial institutions cobbled up by Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke is finally adopted is less important than what the bail out means for America's position in the world. The populist rant about greedy banks that is being loudly ventilated in Congress is a distraction from the true causes of the crisis. The dire condition of America's financial markets is the result of American banks operating in a free-for-all environment that these same American legislators created. It is America's political class that, by embracing the dangerously simplistic ideology of deregulation, has responsibility for the present mess.

In present circumstances, an unprecedented expansion of government is the only means of averting a market catastrophe. The consequence, however, will be that America will be even more starkly dependent on the world's new rising powers. The federal government is racking up even larger borrowings, which its creditors may rightly fear will never be repaid. It may well be tempted to inflate these debts away in a surge of inflation that would leave foreign investors with hefty losses. In these circumstances, will the governments of countries that buy large quantities of American bonds, China, the Gulf States and Russia, for example, be ready to continue supporting the dollar's role as the world's reserve currency? Or will these countries see this as an opportunity to tilt the balance of economic power further in their favour? Either way, the control of events is no longer in American hands.

The fate of empires is very often sealed by the interaction of war and debt. That was true of the British Empire, whose finances deteriorated from the First World War onwards, and of the Soviet Union. Defeat in Afghanistan and the economic burden of trying to respond to Reagan's technically flawed but politically extremely effective Star Wars programme were vital factors in triggering the Soviet collapse. Despite its insistent exceptionalism, America is no different. The Iraq War and the credit bubble have fatally undermined America's economic primacy. The US will continue to be the world's largest economy for a while longer, but it will be the new rising powers that, once the crisis is over, buy up what remains intact in the wreckage of America's financial system.

There has been a good deal of talk in recent weeks about imminent economic armageddon. In fact, this is far from being the end of capitalism. The frantic scrambling that is going on in Washington marks the passing of only one type of capitalism - the peculiar and highly unstable variety that has existed in America over the last 20 years. This experiment in financial laissez-faire has imploded.While the impact of the collapse will be felt everywhere, the market economies that resisted American-style deregulation will best weather the storm. Britain, which has turned itself into a gigantic hedge fund, but of a kind that lacks the ability to profit from a downturn, is likely to be especially badly hit.

The irony of the post-Cold War period is that the fall of communism was followed by the rise of another utopian ideology. In American and Britain, and to a lesser extent other Western countries, a type of market fundamentalism became the guiding philosophy. The collapse of American power that is underway is the predictable upshot. Like the Soviet collapse, it will have large geopolitical repercussions. An enfeebled economy cannot support America's over-extended military commitments for much longer. Retrenchment is inevitable and it is unlikely to be gradual or well planned.

Meltdowns on the scale we are seeing are not slow-motion events. They are swift and chaotic, with rapidly spreading side-effects. Consider Iraq. The success of the surge, which has been achieved by bribing the Sunnis, while acquiescing in ongoing ethnic cleansing, has produced a condition of relative peace in parts of the country. How long will this last, given that America's current level of expenditure on the war can no longer be sustained?

An American retreat from Iraq will leave Iran the regional victor. How will Saudi Arabia respond? Will military action to forestall Iran acquiring nuclear weapons be less or more likely? China's rulers have so far been silent during the unfolding crisis. Will America's weakness embolden them to assert China's power or will China continue its cautious policy of 'peaceful rise'? At present, none of these questions can be answered with any confidence. What is evident is that power is leaking from the US at an accelerating rate. Georgia showed Russia redrawing the geopolitical map, with America an impotent spectator.

Outside the US, most people have long accepted that the development of new economies that goes with globalisation will undermine America's central position in the world. They imagined that this would be a change in America's comparative standing, taking place incrementally over several decades or generations. Today, that looks an increasingly unrealistic assumption.

Having created the conditions that produced history's biggest bubble, America's political leaders appear unable to grasp the magnitude of the dangers the country now faces. Mired in their rancorous culture wars and squabbling among themselves, they seem oblivious to the fact that American global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where America is only one of several great powers, facing an uncertain future it can no longer shape.


© 2008 The Guardian

Zapatista

Nationalisation :o those Communist loonies!! Funny how there aren't to many on saying 'I told ye so'.

muppet

Quote from: Zapatista on September 29, 2008, 01:01:17 PM
Nationalisation :o those Communist loonies!! Funny how there aren't to many on saying 'I told ye so'.

The disaster is still current. During a tsunami/volcano etc while you are fighting for your life you dont see too many 'told you so' types and the blame game hasn't started in earnest yet for the same reason.  

When the crisis is finally over that will all start.

For the record I'd say history (with the predictable exception of parts of the American media and GOP) will blame the Dubya administration (Paulson excepted). He inherited a healthy economy with balanced books. He went to pay for an unwise war by printing dollars and when the credit crunch hit the US economy (and the dollar) couldn't cope. 10% of their banks have failed so far this year. The markets dont seem to be too impressed today either so the worst may be yet to come.

Any Irish sneering at their misfortune should look at the ISEQ. Early last year it hit 10,000, today it is 3,320 (at the time of posting). We are being being massacred today alone. We are probably the worst performing SE on earth. We could be looking at very high interest rates in the States in the near future. If that happens the Euro, God help Ireland.
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muppet

#14
The House of Representatives votes NO!!  :o

If the markets were rough today wait till tomorrow.  ???

DOW Jones down 6% or 690 points. Unbelievable.

Markets may not open tomorrow. Time for a pint.
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