[Sixstrings]

Fed Pledges Exceed $7.4 Trillion to Ease Frozen Company Credit

Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.

The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world’s companies and brought down three of the biggest Wall Street firms.

http://www.bloomberg.com/apps/news?pid= ... qw8_eMzrhU

[mefistofeles]

Still want those Treasury Notes?

[ReverseEngineer]

Don't you just LOVE the way Bloomberg reports this? Like its just another day doing business?

$30B wasn't enough to rescue Bear Stearns, then we need a few $100B to rescue Fannie and Freddie, THIS week we will rescue the ENTIRE banking industry to the tune of $7.4T!!!!!

Hello. There are no Taxpayers left here to pay off this money. Hello, the GDP of the US is sinking like a stone, $7.4T might have been half the GDP in 2006, in 2009 its MORE than the GDP will be.

I am appalled by the reporting on this stuff. Its criminal negligence. We are standing at the edge of the Abyss, and NOBODY will cop to it! Its beyond belief.

Reverse Engineer

[Sixstrings]

Hey Reverse,

I've been reading that supposedly this won't cause hyperinflation, as the money is just sloshing around in the banks and not hitting the real economy.

Ugh, it's all so over my head

As for Bloomberg, give them some credit. They are at least connecting all the dots and pointing out that this constitutes HALF of every morsel of labor produced in this nation for an entire year.

And they're also pointing out how it "dwarfs" the only portion of all this approved by our elected reps in Congress -- the $700 billion TARP.

But yeah, I get your general point. It is truly unreal how casually all this is being reported.

[ReverseEngineer]

Hey Reverse,

I've been reading that supposedly this won't cause hyperinflation, as the money is just sloshing around in the banks and not hitting the real economy.

Ugh, it's all so over my head

As for Bloomberg, give them some credit. They are at least connecting all the dots and pointing out that this constitutes HALF of every morsel of labor produced in this nation for an entire year.

And they're also pointing out how it "dwarfs" the only portion of all this approved by our elected reps in Congress -- the $700 billion TARP.

I'm still of the opinion it won't cause hyper-inflation, because the money is basically going to resolve out debt on the books, its being burned up as fast as it is printed. NO matter how much money is printed here, its not going to reinflate the economy, because you did not just deflate here, you POPPED the balloon.

Put it this way. There is no place to inject money into the economy where it won't get immediately sucked up into the black hole of debt. If you hand out money to individual taxpayers, all they do with it is pay off debt on credit cards and mortgages to get current, they don't buy anything new. They are STILL in the hole after this.

The currency is already Toast, you can see this in the lack of reality in the equities market and commodities market. You can't value properly any of these things because the actual value of the currency is unclear. Well, its not unclear to me, its worthless, but the folks involved in trading don't accept this yet, they still are looking for a way OUT of the dilemma. Other countries at this point would of course love to decouple from the dollar, but it really wouldn't help because then THOSE fiat currencies also really have no underpinning.

I still do not see runaway inflation occuring here before the monetary system collapses. There just is no time left for that to happen, the deflation in industry, the rapid rise in unemployment and the disappearance of tax revenue are all happening cocurrently and too fast to inflate out of this mess. Its not like 1979. Its not like 1929 either, because you really cannot base a currency on Gold anymore, there isn't enough of the stuff around to do that with.

Anyhow, I can't say I know exactly what game will be played here to keep some form of economic system running, I'm sure something will be substituted, but this system is just TOAST. You can't fix it.

Reverse Engineer

[kokoda]

Put it this way. There is no place to inject money into the economy where it won't get immediately sucked up into the black hole of debt. If you hand out money to individual taxpayers, all they do with it is pay off debt on credit cards and mortgages to get current, they don't buy anything new. They are STILL in the hole after this.

This how we got into the problem in the first place.

All the responsible borrowers realized that they were carrying unacceptable levels of debt and stopped borrowing. The only people left to lend money to were the irresponsible borrowers ... so the banks lent money to them instead.

We are now under a mountain of debt.

You can't have economic growth without making that debt situation even worse.

The best thing is to do is let the market sort out its own problems. Eventually after enough businesses and people go bankrupt the debt problem will sort itself out.

Simply stoking the fire with more cash won't help.

[galacticsurfer]

How many angels on the head of a pin?

This is getting irrelevant. Trillions upon trillions in a fantasia world. Dancing pumpkins and elves twirling in the treetops. Santa comes to spread good cheer from Rudolph and his friends.

At times like these new times are needed. Start the clock at Day One in the year of our lord Obama with no money and a new ideology (pick your own). Dirt and manure and earthworms will officially be declared money. Nobody can fake that or put it in a computer to make a fractional reserve.

[deMolay]

If this doesn't clue people in that we are in Depression, I'm not sure what will. http://www.bloomberg.com/apps/news?pid= ... refer=home

{threads merged by Bas}

[Sixstrings]

I see Drudge has added this, in big red letters:

PANIC OF '08:
FED PLEDGES TOP $7.4 TRILLION

He links to the same story I did. I'm impressed for once I beat Drudge, lol.

So anyway the magnitude of these debt guarantees will get some notice in the MSM now.

[Munqi]

Could someone give a link to a post either on this forum or elsewhere that gives a clear picture of what exactly happens if the dollar crashes?


Would like to know exactly where this is heading.

[Eli]

Just look up stories about Iceland and then every time it says Iceland just insert the United States.

[centralstump]

Hey Reverse,

I've been reading that supposedly this won't cause hyperinflation, as the money is just sloshing around in the banks and not hitting the real economy.

Ugh, it's all so over my head

As for Bloomberg, give them some credit. They are at least connecting all the dots and pointing out that this constitutes HALF of every morsel of labor produced in this nation for an entire year.

And they're also pointing out how it "dwarfs" the only portion of all this approved by our elected reps in Congress -- the $700 billion TARP.

I'm still of the opinion it won't cause hyper-inflation, because the money is basically going to resolve out debt on the books, its being burned up as fast as it is printed. NO matter how much money is printed here, its not going to reinflate the economy, because you did not just deflate here, you POPPED the balloon.

Put it this way. There is no place to inject money into the economy where it won't get immediately sucked up into the black hole of debt. If you hand out money to individual taxpayers, all they do with it is pay off debt on credit cards and mortgages to get current, they don't buy anything new. They are STILL in the hole after this.

The currency is already Toast, you can see this in the lack of reality in the equities market and commodities market. You can't value properly any of these things because the actual value of the currency is unclear. Well, its not unclear to me, its worthless, but the folks involved in trading don't accept this yet, they still are looking for a way OUT of the dilemma. Other countries at this point would of course love to decouple from the dollar, but it really wouldn't help because then THOSE fiat currencies also really have no underpinning.

I still do not see runaway inflation occuring here before the monetary system collapses. There just is no time left for that to happen, the deflation in industry, the rapid rise in unemployment and the disappearance of tax revenue are all happening cocurrently and too fast to inflate out of this mess. Its not like 1979. Its not like 1929 either, because you really cannot base a currency on Gold anymore, there isn't enough of the stuff around to do that with.

Anyhow, I can't say I know exactly what game will be played here to keep some form of economic system running, I'm sure something will be substituted, but this system is just TOAST. You can't fix it.

Reverse Engineer

I've been noticing this parting of ways by a bunch of smart people. There are those that say this is going to result in Inflation long-term and there are those that say it is only countering deflation and there will only be less deflation.

At first glance the deflationists seem to be the ones making the most sense. However, I think they are forgetting one important fact.

It seems to me that two thing happen when debt and equity disappear.

1) One thing that happens is that money goes away.
2) but the other thing is that a "good/service" disappears. While economists want to call those things capital, we have been treating financial instruments as "goods/services" for a long time now.

If the money disappears in lock step with some sort of good or service, it seems in the future, the money created to replace the money lost is going to contribute to higher prices on all the good and services that remain.

I actually don't know where to go to find numbers to support this argument. I was just throwing it out there to see what other people thought.

[Duende]

centralstump wrote:

If the money disappears in lock step with some sort of good or service, it seems in the future, the money created to replace the money lost is going to contribute to higher prices on all the good and services that remain.

Yes, but I think the hope is that the money that is infused will not only protect existing goods and services, but promote the creation of additional ones, i.e., economic growth. It's crazy enough that it might just work.

[mattduke]

The constitution defines the dollar as 1/20 ounce of gold. So 7.4 teradollars works out to 12.6 megatons of gold.

[mattduke]

Please merge.

[Byron100]

Whoa nellie!! Reading that report is just insane - how can such a thing be possible - to devote 50% of our GDP without a vote?!?!? This is surreal beyond belief.

The ONLY way this will be resolved is full-scale revolution. Toss the money-grubbers out of the country, cancel the US dollar and all associated debt, public and private, and start over from scratch.

Until this happens, I'm just going to sit back and munch my popcorn - no sense in even trying to lift a finger - and neither should anyone else. Why work, pay bills, etc when Doomsday is almost at hand?

[drgoodword]

Whoa nellie!! Reading that report is just insane - how can such a thing be possible - to devote 50% of our GDP without a vote?!?!? This is surreal beyond belief.

Agreed. This is a new level of crazy. Talk about putting out a fire with gasoline.

[Sixstrings]

I read somewhere that 7.4 trillion is enough to pay off in full half of the nation's mortgages -- that's all the people behind and even more who are not behind all.

But they won't do that. No, they'll give the money to the banks, and the bank will still take your house.

[eastbay]

Whoa nellie!! Reading that report is just insane - how can such a thing be possible - to devote 50% of our GDP without a vote?!?!? This is surreal beyond belief.

The ONLY way this will be resolved is full-scale revolution. Toss the money-grubbers out of the country, cancel the US dollar and all associated debt, public and private, and start over from scratch.

Until this happens, I'm just going to sit back and munch my popcorn - no sense in even trying to lift a finger - and neither should anyone else. Why work, pay bills, etc when Doomsday is almost at hand?

It's called Democratic Centralism. We elect a Congress and a President. Get it? The Treasury Department and FED whose top officials and operating guidelines were authorized by Congress and the president, do whatever they want and it's justifiable as 'democracy because their actions were authorized through 'democratic processes'. The revolution is well underway.

Expect the exact same thing for the next four or eight years.

[Byron100]

It's called Democratic Centralism. We elect a Congress and a President. Get it? The Treasury Department and FED whose top officials and operating guidelines were authorized by Congress and the president, do whatever they want and it's justifiable as 'democracy because their actions were authorized through 'democratic processes'. The revolution is well underway.

Expect the exact same thing for the next four or eight years.

No, I don't think this charade can go on for 4 or 8 more years. Make that 4-8 months, at best. When half the country is jobless, homeless and hungry, there won't be this so-called "Democratic Centralism" that we have today. The coming riots / people's uprising will be sure to take care of that problem, and in a real hurry, too.