On the current crisis the financial market is holding up on to, we sure have to salute the top guns for being able to us their stature and influence to put up with manipulation of funds to shore up investments and the equity market. Treasury yields are still near all time low and getting lower every minute, as i assume there would still be some problems getting people to buy those notes more over hold. If i were treasury holders i would have sold all the bills and shift to anything that is safer or holdings that will protect my assets against depreciation of the dollar.
If one steps back again, and take the birds eye view, Mr. Paulson although adamant but contradictory, has always wanted to back the dollar badly, he acclaims that his motives are to defend the dollar from a further depreciation and 25% was suffice to diminish the value of the US debt they were holding, but from his latest act to propose for the bill to finance 700billion USD in the market would certainly boost the US nation into a 6.6 % increase in national debt. It is suffice to say that the actions to have the" troubled asset relief program " would debase the currency and suppress any yields still exist in them, all from the action of both the feds and the treasury secretary. The view now is certainly paradoxical.
Now we must always access the situation from both sides, yes the debt will be increased to a level where dollar must depreciate another 1 % minimal to justify any increase in debts, but who is going to continue selling the dollar cheaper? To what level are they going to give up the entire dollar as the common denomination used, it is not impossible to have such a scenario since the Euro has a more stable outlook compared to the dollar, at least they are not giving the money out at such a rate us printing press are.
The Euro interest rates are still at least double of those in US, but ... there is always a but Henry Paulson is putting his hopes high on the appreciation in inflation to boost the CPI and the price of real estate which may have a very feeble push in certain parts of America where real estate have already down 30% average speaking, although pricing is very individualistic and objectivity bears on buyers. They are running the funds on a reverse auction for the lowest and most competitive pricing from banks. If anyone is going to take it harsh it is the further write downs after the Troubled Assets Relief Program buys a property or default or security from 60 cents to the dollar , at the price of 20 -30 cents, that halves the value of securities held by banks.
This would be taken badly by banks and in terms of liquidity they are going to be dried up even more, but i view as long as the real estate market does not bottom and rebound we are not going to be able to feel the effects of the TARP yet, they are engineering a bottom, giving hope that they will buy only at the cheapest and receive warrants for the cent they pay in, returning the gains to the US government and from the returns covering back the loans and debt from the US foreign counterparts holding bonds and buying treasuries and the dollars.
But with all the dust and mist surrounding the asset market and the diminishing valuation of dollars from the heavy selling of yields would turn the entire economy into a hyper inflationary recession cycle before going deep into a depression. The only people happy now are Americans spending habits using more credit cards to pay for goods as their repayment would be in cheaper dollars, no wonder they are happy to take up even more loans.
I believe that asset prices will stay afloat for a while since the US government is going to buy them , but afloat at what level and for how long until we need to see the people suffer another round of Bailouts as banks took too much of a writedown, and a rate cut is either imminent or targeted loans by federal reserve parties come to their doorstep.
But, if this bill passed is well accepted and manage to stimulate bankers to lend, for business to be financed and turnovers, for mortgage loans pending for the past 6 months approved, auto sectors will see some light as well, the nation will benefit from our socialist government to help us invest the money we pay in tax, and hopefully it will not go to the top guns and financial institutes who benefit from offloading mortgage holding cheap and gain off disposal. As the trend of paying high rank CEOs with fat luscious bonuses continue , I dont see the need for the Feds to intervene, moreover risk the money of the US nation.
Adam Sharp: Is gold cooked? No way!
7 hours ago
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