The financial institutions of the world have admitted to about 600 billion in loses so far. Uncle Bernanke coughed up 30 billion for Bear Stearns. If you figure that we are in a dive that will take the normal 6 years to pull out of, then we have a considerable amount of loses to be realized. It looks as if the loses could go hyperbolic. In real estate we are only 8 months into a situation, which normally takes 6 years to stabilize. The trouble is, we have already set records going into this mess that exceed the amounts from the last down turn, numbered in years, in months. It looks like we have 8 to 10 times the velocity of the last real estate slump. We are really moving.
Another thing to look at is the acceleration factor. Is it getting better or getting worse? Our government claims the brakes are on full (getting better). You have to wonder about that. The government is doling out 150 billion dollars to the taxpayers for doing absolutely nothing.
In a card game called Hearts, there is a maneuver called “Shooting the Moon” where one person takes all of the heart tricks. The player doing this has the option of adding 26 points to everyone else’s score or subtracting 26 off of his score (lowering his own score keeps the game going [more $$$] if one of the players is approaching the end of game point score say 500).
This tax stimulus could be called a “Governmental Moon Shot.” The government had the option to tax everyone and pay for the mess or print more money. To realize this effect, imagine that Congress passes a 10% tax on all money saved in banks or retirement funds (there would be riots in the street). But if they print more money, $10,000 in the bank, is still $10,000, but now it will only purchase $9,000 of yesterdays goods.
Giving away money in an election year isn’t a bad idea. You get $1,200 back, and think the government has given you something. You have been fleeced like a lamb. It’s a little like buying invisible goldfish as an investment, they’re not much to look at, but you’ll make money breeding them. Yea, right!
The real irritating thing about this mess is that we can count the 150 billion in the stimulus package and the 30 billion given to Bear Stearns. Whatever else the Fed is buying from the rest of the banks, is being done behind closed doors. It kind of makes you wonder what we’re going to get for Christmas this year. I just hope they're not going to give us our lunch!
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