tag:blogger.com,1999:blog-2182962435875556601.post6164298629614079283..comments2023-09-24T08:04:06.909-04:00Comments on FSK's Guide to Reality: Where Did $700 Billion Go?FSKhttp://www.blogger.com/profile/11903396202330950362noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2182962435875556601.post-81206013725636330772009-08-14T07:06:29.014-04:002009-08-14T07:06:29.014-04:00"Somebody has to pay up, or current home owne..."Somebody has to pay up, or current home owners will lose their houses."<br /><br />Sounds ok to me. I already have my house to pay for, I don't know why I'm expected to pay for yours, too. (I think Rick Santelli already famously covered this.) <br /><br />House prices are too high and need to come down and should come down. Propping them up is just a transfer of wealth. <br /><br />What a strange country we live in when people don't want to let the "free" market work.Wesnoreply@blogger.comtag:blogger.com,1999:blog-2182962435875556601.post-16662803391812010402008-10-03T01:56:00.000-04:002008-10-03T01:56:00.000-04:00ReasonableCitizen,First of all, you're right, the ...ReasonableCitizen,<BR/><BR/>First of all, you're right, the math is all wrong here. The whole 700 bln will make just 3,800.00 per adult citizen (roughly).<BR/><BR/>But, this is not the crux of the issue. Let us imagine that each adult had received 1000000 dollars. Now what you think will happen? The prices will go right up to compensate for this and no one would feel any richer than before (roughly).<BR/><BR/>An even easier way of imagining that is to assume that by a government decree, tomorrow, everyone can exchange their every dollar for a thousand of new ones.<BR/>The prices will immediately adjust up exactly 1000 fold and we will be where we are now.<BR/><BR/>This process is now very much looking like a regular inflation, which it actually is, i.e. the process where a saver (creditor) is made to pay for a spender (debtor). This is because if you'd borrowed 1000 bucks from me yesterday, you'd give me back today 1000 of new notes, but I can only buy what was worth 1 dollar before.<BR/><BR/>This is the reason why we have treasury paper, bank deposits, savings accounts, etc. Through these mechanisms, our government extracts value from gullible people in favor of those who like to spend it. Note that our real inflation rate is higher than the highest interest rate paid, which makes our real interest rates absolutely negative. This means ANYONE who holds his money on interest in treasuries or savings or money market accounts or even stock market, is actually paying for the privilege. His purchasing power continually declines faster than his money can multiply in nominal terms.<BR/><BR/>You didn't actually think otherwise, did you? :)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2182962435875556601.post-47205952371934229882008-10-01T21:52:00.000-04:002008-10-01T21:52:00.000-04:00Never mind. New-fangled calculators just aren't as...Never mind. New-fangled calculators just aren't as good as longhand division and multiplication.<BR/>The curse of electronics...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2182962435875556601.post-376635105376963052008-10-01T21:06:00.000-04:002008-10-01T21:06:00.000-04:00I'm interested in your saying that financial worke...I'm interested in your saying that financial workers perform no real work. You've also said that insiders know it's a scam.<BR/><BR/>I think that mentality would make a very interesting article in it's own right, given your background.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2182962435875556601.post-60496071697336102042008-10-01T19:07:00.000-04:002008-10-01T19:07:00.000-04:00On the internet someone postulates that every adul...On the internet someone postulates that every adult American can be given $425,000 and this will solve the mortgage crisis for $85B rather than $700B. The assumption being that people would pay down their mortgages or pay them off. <BR/>Is this true?<BR/>If true, why would it not be employed?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2182962435875556601.post-787751847994108082008-10-01T16:22:00.000-04:002008-10-01T16:22:00.000-04:00The bailout contained provisions for foreign banks...The bailout contained provisions for foreign banks to transfer their "underwater" assets to their US-based branches, and then for the US Treasury to purchase those assets.<BR/><BR/>This is a way to make good on the promises by us mortgagees. Either they pay as agreed, or they default, in which case the treasury will pay for them.<BR/><BR/>If done, it will pave a way for future interest rates to stay low, so that housing market can be purchased without lowering the prices.<BR/><BR/>If this bailout doesn't happen, then foreign mortgage holders won't be paid as homeowners default. This will prompt higher rates, and thus the decrease in house prices. That, in turn, will prompt yet more defaults, yet higher rates and yet lower prices. Repeat ad nauseum.<BR/><BR/>Thus we can say, that this bailout is about all of us helping current home owners, not foreign bankers.<BR/><BR/>Somebody has to pay up, or current home owners will lose their houses. Future homeowners will not be affected as their purchase prices will trend lower to compensate for the higher cost of financing at a future time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2182962435875556601.post-34173517147188088012008-10-01T12:35:00.000-04:002008-10-01T12:35:00.000-04:00The current problem is much more perverse!!! The g...The current problem is much more perverse!!! The gov of US probably doesn't have these $700bn, so it is going to take them from somewhere at interest rate. It is hard to chase the money flow nowadays if you are not insider. It may happen that the gov will take the money as credit from some Wall Street banks to provide them for free to some other WS banks. It's crazy!!!<BR/><BR/>I believe it is the smaller evil this bailout plan to be executed. Otherwise the crisis will develop more and the impact will be much more severe and the guilty one will be the gov, not the banks. And the banks are much more interested the crisis to get bigger, it is amazing how history repeats, first by inflation and then by deflation and voila the rich are getting richer and the poor are getting poorer!!!Anonymousnoreply@blogger.com