The Bailout - fanocks2003's solution to the mess

[fanocks2003]

Here's my constructive idea of how the US (and almost every other country for that matter) could solve the Bailout mess.

Right now, correct me if I am wrong (I have not followed every piece of the story to be honest), the US is to pay several hundred Billions of dollars to bailout sloppy, big banks. Where do all of these money come from? Am I wrong to assume: printed money? Which means higher inflated currency?

My solution for the current mess: Yes, bailout the banks, but let it be the absolute last time for bailouts. The goverment needs to say no. The US is treating its big banks like it was their evil children. Children that lives on their parents money and who never learns anything from their mistakes. For christ sakes, let the big banks grow up, will ya. If they mess up, let them fall and let smaller banks take over the reign. I think they will do a better job. So long the US is not helping the small banks as they helped the big banks today. New reign, new rules.

Why do goverments print money? Am I wrong to assume it is due to lack of exporting income? I am no US economy expert by any means (far from it), but RK said something about the US importing more than they exported. If that is so, then there has to be a deficit somewhere in the financial equation. So raise the exporting efforts for crying out loud.

This means, every industry should be encouraged in any way possible to do exporting deals. Make it child like easy for the business community.

All of us on this forum, with our financials straight, knows that in order to have a sound private economy you need higher incomes than expenses. You need less import than export. More export than import. The equation is based on simple mathematics. No need for any kind of genius at all.

Raise exports, minimize imports. I am really sad that a capitalistic country like the US, fails at this simple task. I mean, it is basic business stuff. You have gone from being the smartest capitalists in the world to having amnesia of some kind (sorry to be so harsh. But come on, what would you call this? I call it "financial amnesia". It's like the smart capitalist fathers built it up, and now the capitalists "Trust Fund children" spend it).

I am in no way pointing finger to any one american individual. Rather I am pointing finger to the leaders of the US.

Printing money is a stupid thing to do. It does no one any good. Printing money is the same as, quoting RK freely, private individuals writing bad checks. It solves the problem in the very, very short term, but it busts you in the end.

A simple idea for the US goverment and for every other country as well:

- Use some of all that tax money you recieve and support exporting companies. You will see a good return on tax money. Believe me. And when exports exceeds imports there will be more tax money paying down the inflated dollar of yours (or swedish crona or whatever might be the case). Because that high inflation of yours will only be solved with higher income. Only exports will solve the inflation, together with a rule for how much a country may or may not print in a certain time frame. Also, do the printing of currency a matter for every citizen in the US to decide upon. That is to big a thing to let a few representatives decide upon. They clearly can't control it. Current situation proves it many times over.

In Sweden we have a 4.3% inflation at the moment of writing this. In the US I would believe it is above 10%? Am I assuming wrong? In Kenya the inflation is so high that the swedish crona is something like 10 times stronger. All countries with super high inflations clearly has no exports. And clearly they have done little to imporve upon that particular area. You can only come so far with what you have right now.

If I have $1 in my bank account and I have $10 in expenses, then clearly I can't pay more than $1 in expenses. You have two choices: invest the $1 and make more money with it so you can pay more than $1 in expenses (exports) or you can take out your checkbook and write a faulty check and hope for the best (printing money to pay for stuff that you can't afford and that you can't back-up with real coins).

More constructive ideas is supported, please fill in (only constructive ideas, nothing else. PhxMJ is free to act on non-constructive posts). Good initiative by PhxMJ, by the way.

 

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[Russ H]

Fanocks,

If you have 59 minutes, this will get you up to speed quickly on the details of what's going on:

http://www.thefastlanetomillions.com/64254-post1.html

(Hint: It's not banks that are the problem. It's a declining RE market underwritten by AAA securities based on junk-- and there are multiples of these securities that back each bad mortgage, and they are held by millions of investors worldwide)

-Russ H.

 

[AroundTheWorld]

Fanocks,

I agree wholeheartedly with that you say.

The US has GOT TO STOP printing money! Increasing exports is sure one way to help in that problem.

I also think that the leaders need to tell citizens to step up to the plate and take responsibility. There are times in the United States in which leaders have asked each and every citizen to do their part. This is one such time. Each and every citizen needs to be asked to take responsibility for their own financial house.

 

[fanocks2003]

Fanocks,

I agree wholeheartedly with that you say.

The US has GOT TO STOP printing money! Increasing exports is sure one way to help in that problem.

I also think that the leaders need to tell citizens to step up to the plate and take responsibility. There are times in the United States in which leaders have asked each and every citizen to do their part. This is one such time. Each and every citizen needs to be asked to take responsibility for their own financial house.

The US goverment should do everything in their power to make it idioticly simple to do exporting deals. The reason a country prints money is because they have no money in store. The same as private individuals sometimes writes bad checks just because they have no money on debit.

And the US goverment also need to stop the printing presses and invest the money they do currently have in store, in exporting companies and also encourage more companies to do exporting deals. Give exporting companies financial incentive to do so.

No citizen and/or companies in the right mind would do anything that harms there finances. There needs to be incentives. Just like there always needs to be clear enough incentives for customers to purchase a product/service from a company. Same stuff.

I would say "increasing exports" and "decreasing printing of money" is the two most important steps to solving any countries inflational problems. And stop helping companies that continually and willingly screw up so that the masses has to pay the bill with their tax money when they (the bankers and their CEO's) walk away with the loot. Until you give incentive for companies (especially big banks) that screwing up is no alternative (that no one else but themselfs has to pick up the bill in the end). That screwing up is harmful for themselfs, not others. That day such an action is taken, that day you will see change. That day the Bailout problems will be a lot less common (maybe even eliminated entirely), because then there is no longer any incentive to do any stupid mistakes.

I always find it funny how someone believes things will become better by encouraging the existence of the actual problem. There is no logic in that.

As Einstein said: "You can't solve a problem with the same method as with which it was created". People are trying right now to solve the same problem they had the last time, with the same methods. Wasn't this Bailout number 2 of Bailouts in the US? Isn't it time to try something that works for a change? Something fundamentally smart? Like:

-Making money and then spend money on debit.
-Stop printing money. Or at least leave it up to the people to decide on every printing decision.
-Stop supporting companies that have no brain whatsoever. If they don't want to play the game, then dump their asses and let the small companies take over. I think they are more gratefull. But do not mold them to be just as "nasty" and "needy" as the big ones. Then you only re-create the same problem.

Fundamentals, everyone. Fundamentals. I am not a financial genius, but running a big country is the same as running your own personal finances. The only difference: There are whole lot more money to handle on a country level. But the fundamentals are identicly similar.

 

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[fanocks2003]

Fanocks,

If you have 59 minutes, this will get you up to speed quickly on the details of what's going on:

http://www.thefastlanetomillions.com/64254-post1.html

(Hint: It's not banks that are the problem. It's a declining RE market underwritten by AAA securities based on junk-- and there are multiples of these securities that back each bad mortgage)

-Russ H.

Yes, but banks are the center of every society/country so of course they are a big part of the problem. The banks exist to avoid such bad financial deals. They just, as I have come to understand it during my own research, accepted bad deals and repackaged them to make a buck (not thinking of the consequences). That doesn't seem to be financially intelligent at all. Maybe for the bank CEO's, they made a lot of dough (I need to applaud them for that. Who wouldn't do that if they had the opportunity? I would have done it any time any day. Yourself first, remember) and when the bad news came out they just resigned and said "sorry", but I am sure they thought internally "Suckers". I am harsh I know, but come on. If they did care, they would take those fat compensations and pay it back even though their employer went belly up. Just to compensate for their screw up.

The banks are a hell of a big problem in this Bailout story. The RE market is probably also bad because wiht bad banks falling (going into bankruptcy), of course they will be called on their loans. Why wouldn't they be called? If the RE loans are called upon, then I guess many people will be bankrupted quickly (because not everyone has a big chunk of change to just throw back at the bank at will). This goes with companies and private individuals alike. You can't escape the fact of that. Ripple effects as they are called. When the banks screw up, everyone screws up.

We have not felt the same crashing ripple effects in Sweden, but some banks has had some trouble because of this mess. Many Swedbank (where I have my banking affairs) savers have moved their saved assets elsewhere. Many big savers I might add. Big blow to the bank even though it is a very big bank.

I have to mention that Sweden has gone through a mess like this 1-2 decades ago (can't remember specific year unfortunately). But I remember Sweden having a financial meltdown not that long ago. Maybe someone on this forum with a good memory remember when this was? The point is, Sweden has learned it's lesson. Maybe that is why we are not that much harmed by this current event.

 

[Kung Fu Steve]

I think the key point that is being brought up over and over again is that the government needs to be run like a business.

The simple idea of making more money than you spend would solve most of the issues. Instead of purchasing $10,000 note pads (or other ridiculous expenses) go over to the Wal-Mart down the street and pick up a low-low priced notebook for $0.69. Spend less than you earn!

I think it's the American mentality that "if I can't afford it I will just put it on my credit card" it has trickled all the way to the top and all the way back down again.

Other countries have figured this out already like you say. Japan has a lot of cool toys they export all over the world. A lot of the Asian countries have industries that produce clothing, etc. (I guess some would call them sweat shops, regardless of your thoughts on them they are making the country money).

It seems to me the problem lies with a constant struggles of Business VS. Government. Two completely seperate mentalities. If they could find a way to work together then everything would be dandy.

 

[fanocks2003]

I think the key point that is being brought up over and over again is that the government needs to be run like a business.

The simple idea of making more money than you spend would solve most of the issues. Instead of purchasing $10,000 note pads (or other ridiculous expenses) go over to the Wal-Mart down the street and pick up a low-low priced notebook for $0.69. Spend less than you earn!

I think it's the American mentality that "if I can't afford it I will just put it on my credit card" it has trickled all the way to the top and all the way back down again.

Other countries have figured this out already like you say. Japan has a lot of cool toys they export all over the world. A lot of the Asian countries have industries that produce clothing, etc. (I guess some would call them sweat shops, regardless of your thoughts on them they are making the country money).

It seems to me the problem lies with a constant struggles of Business VS. Government. Two completely seperate mentalities. If they could find a way to work together then everything would be dandy.

As RK said: Goverments know how to spend. They do not know how to make money.

My aim: Printing money lowers purchasing power. Export and no printing of money raises purchasing power.

Simple concepts to grasp if you want to.

 

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[andviv]

so, how do I profit from this?

How does this help me?

All of this sound like my macro-economics class... a lot of important stuff, no doubt, I just can't do anything about it... or am I missing something?

 

[fanocks2003]

so, how do I profit from this?

How does this help me?

All of this sound like my macro-economics class... a lot of important stuff, no doubt, I just can't do anything about it... or am I missing something?

Yes, you are missing something. You're missing the fact that you can make money and helping your own country. No matter if you are an american or a swede, you can contribute.

Contribute to your own gain and your countries gain. If you're country gain, your savings will be more secure. It may even be profitable to save again. Today it is more profitable to borrow money, because what you pay back is worth less than what you borrowed. Isn't that funny? Talk about Alice in Wonderland.

 

[unicon]

Look at the parameters of this thing it is either:
1) Conspiracy
2) Mass Ignorance

This is simply the packaging of worthless securities and re-leveraging them with even more derivatives. You mean to tell one that the bankers who did this did not understand??

They had the perfect product, real estate is long term and could be artificially inflated by simply buying time, keeping the lending going and inflating. Which intern generated more turnover and more leverage. People pay their payments for 2 to 3 years dipping into savings before the strain comes to the surface.

The securities went in order to oversees, fanimae, major investment banks, then local banks - 4 major areas. The US economy probably got the majority of this cash.

In the meantime the US was exporting and outsourcing services and imported goods via Walmart, etc (cheap labor produced), this was actually very efficient, and contributing to China's direct growth and independance.

Now the US will print more money for the bail out devaluing the dollar and nationalizing the debt. The joke can only be played once, the world will catch on.

Even though the securities may be worth cents on the dollar they still extracted inefficient money from the home buyers and have those security interests.

This will be a double wammy for those local consumers to rebuy at a discount in a state of contraction. A redistribution of assets which really cannot be prevented.

The US has then stolen the money legally, deflated the money, and lived off the inflow of cheap goods for years. This has come to an end along with the capacity to deceive.

This is simply exporting worthless securities throught the world wide investment bankers, stealing the cash, then nationalizing the debt. This will hurt us, but the rest of the world more.

This was away from real production to a systematic fleecing with the tool of worthless securities. The scale was so great that the back lash from the rest of the world may be more when we cannot be independant again.

Conspiracy? Sell and manufacture worthless securities and derivatives off those securities to the rest of the world which later default at a high percentage with a few local investment banker casualties but accomplish the goal of nationalizing the debt and deflating world currencies.

Again the perfect product for the sale of those securities was real estate. A true pyramid scheme - the ones who start it make the money at the top.

 

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[fanocks2003]

Look at the parameters of this thing it is either:
1) Conspiracy
2) Mass Ignorance

This is simply the packaging of worthless securities and re-leveraging them with even more derivatives. You mean to tell one that the bankers who did this did not understand??

They had the perfect product, real estate is long term and could be artificially inflated by simply buying time, keeping the lending going and inflating. Which intern generated more turnover and more leverage. People pay their payments for 2 to 3 years dipping into savings before the strain comes to the surface.

The securities went in order to oversees, fanimae, major investment banks, then local banks - 4 major areas. The US economy probably got the majority of this cash.

In the meantime the US was exporting and outsourcing services and imported goods via Walmart, etc (cheap labor produced), this was actually very efficient, and contributing to China's direct growth and independance.

Now the US will print more money for the bail out devaluing the dollar and nationalizing the debt. The joke can only be played once, the world will catch on.

Even though the securities may be worth cents on the dollar they still extracted inefficient money from the home buyers and have those security interests.

This will be a double wammy for those local consumers to rebuy at a discount in a state of contraction. A redistribution of assets which really cannot be prevented.

The US has then stolen the money legally, deflated the money, and lived off the inflow of cheap goods for years. This has come to an end along with the capacity to deceive.

This is simply exporting worthless securities throught the world wide investment bankers, stealing the cash, then nationalizing the debt. This will hurt us, but the rest of the world more.

This was away from real production to a systematic fleecing with the tool of worthless securities. The scale was so great that the back lash from the rest of the world may be more when we cannot be independant again.

Conspiracy? Sell and manufacture worthless securities and derivatives off those securities to the rest of the world which later default at a high percentage with a few local investment banker casualties but accomplish the goal of nationalizing the debt and deflating world currencies.

Again the perfect product for the sale of those securities was real estate. A true pyramid scheme - the ones who start it make the money at the top.

Those making money of this now are those coming up with a solution for getting people out of the problem. Exports are a good way, if not the sanest of ways. Common sense.

 

[unicon]

Real Production and real added value is the way out - no escaping this!!

The distortion was in inflating valuation and leveraging that inflated value.

Valuation / Insurance

Commodities / Futures
Stocks / Options
Bundled Debt Securities / Credit Default Swaps

The insurance was becoming the control, in other words the underlying asset was a function of the insurance instrument, it was backwards the tail wagging the dog.

Hedge funds then further leveraged the above by manipulating the stocks with naked shorts in combination with the Credit Defaut Swaps.

This directly affected and could only affect the Investment Banking Sector which was another leveraging factor.

This is the study of valuation and leverage at the core and its transparency.

 

[HCBailly]

Out of curiosity, what would have happened if the government didn’t bail out the banks? I’m not an economics expert, so I don’t really know.

Obviously, the money wouldn’t just disappear. It has to go somewhere. I would think that at some point either the banks would call on as many loans as they could get, go broke, and move on, or some investor would buy the notes of the banks for pennies on the dollar. Wouldn’t it have eventually gotten to the point where it would be more profitable for the banks to sell to some investor for less, than to go broke? Of course, the banks will take the free money from the government, since they made it available to them.

While the banks and the government are certainly large factors in this debacle, I don’t blame them, as much as I blame society or the people who put them where they are. People want to defer their responsibilities (debts) as long as possible, keep their entitlements, and use other people’s productive effort (taxes) to support their lifestyle. So, they use credit cards, banks, and elect politicians to support that.

Fortunately, those of us who actually know what they are doing can thrive even better under these circumstances. I’ve been talking to a lot of people in the upper-middle class lately about the current economy. Now, maybe I’m living in a bubble world here, but very few people around here are complaining about the economy.

With exception to the elderly, whose income is dependent on the stock market, everyone else doesn’t seem to really care about the economy. We still have our jobs, income seems to be keeping steady with the cost of living, and most importantly, gas prices are crashing. Granted, no one seems to like the government bailout, but they seem more relieved about gas prices.

 

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