Thread: Will Government Bailouts Spell End Of The Dollar?

Will government bailouts spell end of dollar?
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Posted: September 12, 2008
8:53 pm Eastern

© 2008 WorldNetDaily

We have seen, in the dead of night, three major government bailouts in the last year, none of which had more than a few days' positive effect on the markets. Each was done by powerful men in powerful places in the wee, small hours. At the end of the next day, a few were made rich while the many were handed the bill.

First there was Bear Stearns. Then IndyMac bank. Fannie and Freddie followed rapidly. All engineered on Sundays while the markets were closed.

How many more bailouts have to occur before someone asks the questions no one wants to ask? Is this a systemic problem and where does it end?

It is no surprise to those of us who warned about the drunken credit binge on Wall Street that the day of reckoning would come. What we never anticipated was the reward in store for the gluttons who caused the damage.



Bear Stearns was sold to JPMorgan on March 17; billions of equity was transferred to the balance sheet of one of the top five banks in America while the liabilities were guaranteed by the government (a.k.a. the taxpayers). Through the use of very complicated devices the government moved to save the system. The executives of Bear walked away with bonuses and severance packages. Disaster temporarily averted.

On July 11, IndyMac was taken over by the government due to a "run on the bank" which depleted deposits literally overnight. With $100 million leaving each day, the feds had no option other than to shut the doors. The $52 billion FDIC rescue fund was tapped for $4 billion-8 billion to pay off depositors and 4,000 employees lost their jobs overnight as IndyMac became runnerup to the largest bank collapse in history (Continental Bank in 1984). The net result: the banking system is saved for the time being.

Fannie and Freddie were seized by regulators Sunday after weeks of speculation that both were suffering losses far beyond their ability to cover. Voices like Bill Gross from PIMCO, with $800 billion in bonds, made clear their intention to stop buying bonds unless the Treasury acted to provide an implicit guarantee for all Fannie and Freddie obligations.

By Monday morning, Gross and his firm are $8 billion richer and the American taxpayers take on potentially $200 billion-$700 billion in losses. I guess the slogan "E pluribus unum" took on a whole new meaning as 300 million of us (the many) united, involuntarily, to give PIMCO (the one) a whole lot of money.

This is not unusual. The market rallied 300 points only to give it back the next day. But Fannie and Freddie did not fail; in the technical sense.

But is the system broken? And if so, who benefits as a result? Did Paulson and Gross identify a weakness and capitalize on it?

If the problems we are now witnessing are systemic and can potentially develop into a far worse crisis than anyone expected, what level of loss should the public be responsible for? Should we the people be on the hook for an unlimited amount of liability while not participating in any of the reward? At its face that seems very unfair but, I was told at an early age, life is not always fair.

There is an even bigger question in all of this. How many commercial banks, investment banks and mortgage guarantors can the government take over before we as a country are forced to create money to meet all the obligations represented by these takeovers? It is not as if the government has surpluses from which to draw all the needed capital to meet these obligations. We will have to borrow or print it.

What if General Motors, Ford and Boeing need to be bailed out? What about airlines, drug companies, insurance companies ... shall I go on? We cannot and should not adopt a bailout mentality without first considering the long-term ramifications for the country as a whole.

Currently we are running about a $500 billion dollar annual budget deficit. This will be added to the national debt which currently stands at $9.6 trillion. Will we just run the national debt to $15 trillion, $20 trillion? And that doesn't even take into account the off-budget debt, reflected in future Medicare and Social Security obligations, which now exceeds $50 trillion. At what point will the U.S. dollar have any value if we can never pay any of it back?

The U.S. dollar has always been the currency the world turns to when there is trouble. The dollar has always represented safety, but can it maintain that trust if we just continue to print, borrow and move dollars around from balance sheet to balance sheet ad infinitum?

I have asked a number of questions so at this point it is appropriate to offer some answers.

We cannot continue employing the broken business model our current financial system represents. It doesn't work. We cannot leverage, inflate and deflate forever. There comes a day of reckoning when people will not tolerate the abuse of a system to enrich a few while decimating many.

I see vulnerability in America that must be addressed and time is of the essence.

For the first time in the post-World War II era, the American dollar is susceptible to competition from a currency based in an identifiable and universally accepted value. A currency that cannot be created out of thin air. Is such a currency available? Not yet. But you know the old saying, "necessity if the mother of invention."

Right now the world has three very strong and prosperous countries competing on the world stage with huge amounts of capital, natural resources and gold that could easily, if they so chose, create a currency much like Europe did in the Euro. But this time it could be backed with oil and gold.

Russia, China and the Arab nations are sitting on an enormous amount of oil, gold and U.S. dollars. What if those nations forged agreements (much like NATO, WTO, etc.) and offered an "ARC" dollar fully backed by gold or oil? (The holder of the currency could actually exchange the currency for a specified amount of gold or oil).

A Note is a promise to pay. For years in America a Federal Reserve Note (currency) was a promise to pay gold and silver at the Treasury. Today it is a note to pay debt. Debt that is exploding and can apparently be wiped away by the Fed overnight or, worse yet, transferred to the backs of American workers in the form of tax on future labor. But what if a group of nations offered a currency that had no recurring liability attached to it but actual "money" in the form of the ultimate currency (gold) or the ultimate natural resource (oil)?

In the past I would have viewed such a prospect as preposterous. Today it may well become a reality. Currently talks are under way with the Gulf Monetary Authority for just such a system.

If we think the government is capable of bailing everything and everyone out of every financial mess that may occur then we are fools. And perhaps we are being viewed as such by very hostile nations that would welcome the deterioration of our position on the world stage and would not flinch at our total demise.

In short, we have fattened our hearts in the day of slaughter and now is the time to acknowledge and accept that each of us is solely responsible for our own future. Not the government. The time of discussing the problems has come and gone. Now is the time to devise a plan and put it into action.

With gold and silver trading at levels 10% below stupid, it is time to put 10-20% of total assets into tangibles. Knowing that the only answer to avoiding a meltdown is either a new currency or runaway inflation. To quote Harry Shultz, "If Bush bails them all out, the die will be cast for inflation unseen in the west since 1923 Germany. If no bail:1929. Gold helps you out either way."

You can either ignore the obvious or act upon it.

Ignorance is produced in ignoring the facts. It makes one ignorant. Acting upon the facts makes one wise, which is wisdom. This will be a time when many will prefer to deny what they see around them and hope against hope that the system will fix itself.

It will not.

The best analogy I can give is a person (the system) having a massive heart attack, a heart attack resulting from years of abuse of the victim's own body. He is rushed to the hospital where the doctors (the Fed) work feverishly to save his life. They are successful and the patient lives. The doctors then sit the patient down and explain that while they saved his life, without major lifestyle changes, the patient will have another heart attack and die. He must immediately stop smoking, eliminate fatty foods and exercise daily. The patient refuses.

And thus is our system. This is not the first crisis. It will not be the last. The system is not willing to do what is necessary to get better.




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Craig R. Smith is an author, commentator and popular media guest because he instantly engages audiences with his common-sense analyses of local, national and global trends. Serving as CEO of Swiss America for over 25 years, Craig understands that Americans want solid answers to the tough questions and that real leadership begins with servanthood. Craig's most recent book is "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil," which he co-authored with WND columnist Jerome R. Corsi. For media interviews please call Holly at 800-950-2428.









http://www.wnd.com/index.php?fa=PAGE.view&pageId=75119

you are witnessing the Largest Theft in American History ... the MOB doesn't have ANYTHING on the Federal Government. They give a new meaning to Gangsters and Crooks

I am more concerned about this being the end of capitalism in this country than the dollar. Without the checks and balances of failure, capitalism can not properly work. If allowed to continue, the government will soon own most of the major financial institutions in the US. This is not the way our country was set up. Ultimately, these bailouts could be the end of our freedom. IMHO it is better for the economy to completely fall in the toilet like during the Great depression for 5 to 10 years than to permanently end as we know it. I have no connector, but my gut tells me this is somehow connected to NAU.

Well, I don't know, the dollar just hit a one year high against the euro and gold has dropped to a one year low. The FMs bailout actually gave a boost to the dollar. The economy grew 3.3% last quarter. Gas prices are reaching below 100$ a barrel, so all is not doom and gloom, in spite of what the libs and the media keep saying.

Originally Posted by AirborneSapper7

you are witnessing the Largest Theft in American History ... the MOB doesn't have ANYTHING on the Federal Government. They give a new meaning to Gangsters and Crooks

It's just like Mexico. The well connected few get all the money.

China has to keep creating millions of jobs each year in order to keep order. THey don't want the people flooding into the cities and civil unrest. What would happen to China if they lost the American markets. Entire towns are working doing nothing but making cell phone cases. It's in China's best interest for the U.S. to be in good financial shape in order to continue keeping it's people busy. China needs U.S. technology in order to maintain its growth. I don't think they are eager to see us collapse and lose their biggest market.

From a 2003 NYTimes article:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac....

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

http://www.alipac.us/ftopict-131246.html

I think it may be the end of the dollar. And Cayla, I think you may be right that this is all part of the NAU plan. Fail the US economy, then bring in the Amero

Well, since everything is based on capitolism and consumerism then you better have a population that is growing, not deminishing like the American People. We need more Americans to have babies or else everyone will need to completly rebuy everything every few years to keep the consumerism cycle going.

Everything going on is based on consumerism around the world, and our little 330 million people market compared to the other 6.3 billion people market is looking insegnificant to the international corporations. Bring our standards of living down, move the other 4 Billion low income peoples income up a bit and market to them, the corporations make 10 times more money, America will not be missed in the food chain by the big global corporations.

This is why governments overlook illegal immigration, the killing of our people, the rampet lawlessness going on, all to make a buck.
This is why britian and now the US is going to let the radical muslims move in and build up shop and not say a word about it, because they want to make the money off of them and if they say anything or put their foot down that means a potential dollar has been lost, so we'll just let them move around the world wherever they want and we'll sell them the banking, the loans, the cell phones, the internet, the cars, the insurance and everything else, screw the countries that are getting ruined.

Its not about diversity, or helping people or any of that, its about making a dollar, the caring part is a coverup so they don't have to admitt its about making money at any cost. Just like the global warming is about making money, making everyone have to re-tool and buy new cars and buy new solar crap and all that, its about buying more crap, and the globalist corporations and your local municipalities will charge you into oblivion to get you to move toward those new products. And of course then the banking industry gets their greedy little hands on all of it by refinancing the home upgrades, the new solar crap, the new electric car, the hybrid van and on and on. They electric company jacks up the price for electric so the other new cars look good and if we buy them we'll save money but we'll only save money because the electric went up so much. Then we'll pay more because interest rates are higher. In the mean time the cars take less materials to build, less parts and less of everything yet the cars cost 30% more, and the power company isn't working any harder to produce electricity but they are charging 50% more for it. It seems like all the corporations are doing less work and charging more for it.

Right now in countries where the income is far lower than ours is you can buy the same products way cheaper than you can here, because they know the people there can't afford to pay more and at the same time they know we can pay more, so they price them accordingly. So, they make a huge profit on us, and obviously its worth it to them to make a smaller profit selling in lower income countries. So, to hear how these giant corporations barely make a profit here is just a big lie.

Its like being a contractor and you have 10 steady customers, 9 that pay decent and 1 that pays really well, after a while the 1 really good paying customer keeps getting his price jacked up because the contractor knows you'll pay it, while he knows the other 9 won't pay if the price goes up, thats how the American people are treated by the global corporations, like a gullible unwitting consumer. Just look at the cable and internet access in other countries, they get blazing high speed internet for $9 a month while we pay $40 to $50 for a sub par speed, yet the companies there make a good profit, we are getting soaked at every angle.

This is not an ownership society anymore, you just rent things and then make payments to the government every year so you can keep it or use it. Then when you sell it you pay them again.

What a waste of a perfectly good constitution.

YEP, its definitely the NW Order, sucking the very life out of us.

LETS GET CHUCK BALDWIN IN THE WHITE HOUSE!! HE SAID HE"D GET RID OF THE NW Order.