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02-02-2009, 07:43 PM | #2 | |
Project Avalon Moderator
Join Date: Sep 2008
Location: Northeastern Brazil
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Re: Obama predicts more bank failures
This news article is not one that shows President Obama as a great thinker and world leader.
It doesn't take a crystal ball nor the Spiritual leader from his village in Kenya scatter chicken bones on the floor to see what is in store for the future. To say that some banks won't make it is another way to say that those banks and companies with little or no pulling power in the American government will be left to hit the wall first. The others will deposit their rotten papers (bad debt) in the new banks created to take them in and fold. Quote:
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02-02-2009, 10:33 PM | #3 |
I dont need a label !
Join Date: Sep 2008
Location: The Shire of Wilt
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Re: Obama predicts more bank failures
I could have told Obama that
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02-02-2009, 11:56 PM | #4 | |
Avalon Senior Member
Join Date: Sep 2008
Location: Turtle Island
Posts: 2,776
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Re: Obama predicts more bank failures
Steve A's post at: The time has come for me to bail out.
Quote:
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02-03-2009, 05:54 AM | #5 |
Avalon Senior Member
Join Date: Sep 2008
Location: Turtle Island
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Obama Understands Part of the Correction
Blessings Newshound,
Interesting statement in that article from BBC: The interview was short on details, with the president declining to comment on whether he planned to create a "bad bank" to buy toxic assets from other financial institutions. He said he did not want to pre-empt an announcement planned for next week. Similar article available here: More banks likely to fail, Obama warns President: Financial system ‘very vulnerable,’ with full losses still unknown http://www.msnbc.msn.com/id/28940067/ And this article from Campaign for Liberty Website: Obama Understands Part of the Correction Source: http://www.campaignforliberty.com/ Posted by Anthony Gregory on 02/02/09 "It is likely that the banks have not fully acknowledged all the losses that they're going to experience," says President Barack Obama, and so more banks are likely to fail. The president apparently recognizes that the bubble in the banking industry has yet to pop, and more unsustainable projects are subject to liquidation if economic sustainability is to be restored. If only he understood that this phenomenon is endemic throughout the economy. When there is an artificial bubble, massive malinvestment requires that many economic undertakings must be abandoned, shut down and sold off if the recovery is ever to commence. This is one of the most pernicious consequences of central bank inflation. The easy money and credit are concentrated in some entrepreneurial ventures, as there is a false expectation for their profitability. This is because in a market setting, easier credit is a signal for less demand for credit and therefore more savings. More savings, in turn, signifies more money in the hands of consumers for future consumption. Easy credit inspires investors to finance huge long-term projects that they expect will pay off in the long term, as today's savers become tomorrow's consumers. But in an artificial bubble, these consumers never come. In an inflationary setting, interest rates are lower and credit is easier even though no corresponding credit is taking place. So the boom is the simultaneous mass investment in long-term projects -- and all the employment and activity they spur -- along with people still buying a lot for current consumption and encouraging economic activity in the present. Eventually, those long-term projects become unsustainable, as consumers do not have the money to buy all that has been produced and to keep financing their long-term construction. This boom and bust together constitute the Business Cycle. This is only a systematic problem in the economy when government artificially lowers interest rates and makes credit unnaturally easy. The Business Cycle is a consequence of government meddling and it can only be corrected in one way: The malinvestments must be liquidated. The long-term projects that do not make sense anymore must be abandoned, converted, sold off, turned to profitable use. Losses are inevitable, but they must be cut. Lemons must be made into lemonade. Instead, the government will tend to try to prop up the inherently unsustainable assets, as it has been doing with banking institutions. The government tries to keep prices high even as they do not make any economic sense. The correction, which when left alone will necessarily be sharp and painful but need not be prolonged, is drawn out and obstructed by this further government interference. Obama is right that some banks will keep failing, but does he understand why? And does he see that this is true of much else in the economy? The United States, given our economic reality, has too many banks, too many hotels, too many casinos, too many strip malls, too many trendy restaurant chains, too many houses and many other malinvestments that must be liquidated and have their prices plummet for us to experience recovery. Those interests directly involved do not want to see their assets lose value, so they ask for bailouts, price supports, nationalization or any other fix. This just delays the day of reckoning. The longer correction is delayed, the worse it will be. Another intriguing tidbit from the article: One of the proposals discussed in Washington is the creation of a so-called “bad bank” with the authority to acquire troubled assets from lending institutions and other credit-related companies. Obama refused to confirm or deny that such a plan was on the table, saying, “If I say that we’re doing one thing, then the markets might interpret it differently from what it ends up being.” Obama does not seem to understand, however, that his entire agenda of massive and conspicuous and unpredictable intervention is going to confuse the market. This is just what happened during the Great Depression: Investors were intimidated by President Franklin Roosevelt's radical New Deal regime, which put their property rights in constant jeopardy. They feared that investments might be nationalized or made unprofitable by FDR's capricious intervention, and so this slowed down investment and delayed recovery. For the definitive work on this phenomenon, which economist and historian Robert Higgs calls "Regime Uncertainty," see his paper of the same name. Link for Robert Higgs paper: http://www.independent.org/publicati...icle.asp?a=430 Last edited by peaceandlove; 02-03-2009 at 06:07 AM. |
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