To date, the Fed has spent only half of the advertised $700 billion bailout fund. But it is absolutely certain that the other half, $375 billion, will be spent soon after Obama takes office, if not sooner. The reason it has not been spent yet is because there are 23 other underreported bailout programs to tap into totaling $8.5 trillion! $3.2 trillion has been pissed away to executive bonuseswasted spent so far. That number will increase quickly to $3.5 trillion after Obama takes office. And it is virtually certain that 100% of the approved $8.5 trillion bailout will be wasted away spent before this financial crisis is over.
Rather than reinvent the wheel, I will refer you to the Bloomberg chart below that outlines the total cost of the bailout. But just a few notes on how and why we will likely hit the $8.5 trillion mark:
Commercial paper program - These are the “loans” made to destitute financial institutions, who in turn use the absolute worthless, shittiest mortgage loans they have as “collateral”. There are slim chances of the government getting paid back. And there are even slimmer chances that the government will get more than 5 cents on the dollar for the worthless assets posed as “collateral”. Only $271 billion has been wasted so far, but give it some time, and the $1.8 trillion mark will be hit, and likely raised!
Money market guarantees - $540 billion approved to guarantee the money markets, which in my opinion, are very likely to fail.
Loan guarantees - $1.4 trillion posted by the Fed to guarantee bank to bank lending. Now the banks have no fears about transacting with other insolvent banks because they will turn to the government to guarantee their losses. And those losses WILL occur as the rate of bank failures does not seem to be slowing. You can expect the full amount of that $1.4 trillion guarantee to be spent.
The Troubled Asset Relief Program (TARP) may have only approved $700 billion of taxpayer funds to kick start the economy, but the total of taxpayer funded bailouts is $3.5 trillion and growing!
The breakdown goes as follows:
$700 billion in approved TARP funds
$300 billion for Hope Now (new mortgage workout deals)
$110 billion in AIG loans that it may never pay back
On top of that nearly $3.5 trillion, there are also significant and unquantifiable taxpayer incurred costs for government funded FDIC insured account bailouts, the Bear Sterns rescue guarantees, the government money market guarantees, and likely many more line items on the way. And let’s not forget that the government is now on the hook for all the bad debt obligations for Fannie and Freddie, aka Phony and Fraudy!
Barrack Obama was “accidentally” referred to as Barrack Osama on some 300 absentee ballots mailed out in early October to voters in Rensselaer County near New York. That was a mistake that some say was an intentional racial crack to his Muslim background.
Now that Obama has been elected, the latest ethnic remarks are referring to him as Japanese. The Wall Street Journal referred to the president elect as Obama-san, not for his dna or facial features, but for his insistence on following through with every policy mistake Japan made during its own real estate collapse a decade ago.
In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa’s Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a “lifestyle superpower.” The country embarked on a great Keynesian experiment:
August 1992: 10.7 trillion yen ($85 billion). Japan passed its largest-ever stimulus package to that time, with 8.6 trillion yen earmarked for public works, 1.2 trillion to expand loan quotas for small- and medium-sized businesses and 900 billion for the Japan Development Bank. The package passed in December, but investment kept falling and unemployment rose. By the end of the year, Japan’s debt-to-GDP ratio was 68.6%.
The Wall Street Journal goes on to summarize Japan’s fiscal recklessness and exploding government debt from 1992 through 1999. Despite clear evidence of Japan’s failed policies, Obama is insistent on abandoning his earlier call for fiscal discipline, and now embraces reckless deficit spending that far eclipses even Japan’s attempts.
The WSJ article breaks down Japan’s failed stimulus programs as follows:
1993 - 13.2 trillion yen and 6.2 trillion yen stimulus, and debt to gdp 74.7%
1994 - 15.3 trillion yen stimulus, and debt to GDP ratio of 80.2%
1995 - 14.2 trillion yen stimulus, and debt to GDP ratio of 87.6%
1998 - 16.7 trillion yen and 23.9 trillion stimulus, and debt to GDP ratio of 114.3%
1999 - 18.0 trillion yen, and debt to GDP ratio of 128.3%
2008 was a tough election year for many Americans due to the lack of quality candidates. Once again, Americans were forced to choose amongst the better of two evils. I wrote back in August that the election would be determined by the best vice presidential choice, since neither of the two main party candidates were serious about the number one issue facing this nation - fiscal discipline.
Sometime between August and the November election, Obama updated his candidate website and added fiscal discipline as one of his listed top issues. In fact, he now hosts his fiscal discipline plan on his campaign website. In the document, he mentions the following:
The cost of our debt is one of the fastest growing expenses in the federal budget. This rising debt is a hidden domestic enemy, robbing our cities and states of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of
critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on. … If Washington were serious about honest tax relief in this country, we’d see an effort to reduce our national debt by returning to responsible fiscal
policies.
Faced with the choice of the McCain and Palin team, a handful of unqualified third parties, or Obama and Biden, I voted the only way I could:
With evidence of Obama’s fiscal plan, why did I only reluctantly vote for him and Biden? Despite his words, Obama is not really serious about fiscal discipline. As I mentioned, he only added it to his campaign issues list after August when he realized Americans wanted it. Since that time, he has reverted once again to embracing reckless fiscal policies, runaway government spending, and fruitless handouts to ignorant financial CEO’s and underwater home owners.
Like virtually every president before him, Obama has cracked under pressure to spend more. He hasn’t even been inaugurated yet, but already he has flip flopped again, and abandoned his call for fiscal discipline.
The consensus is this: We have to do whatever it takes to get this economy moving again — we’re going to have to spend money now to stimulate the economy. … [W]e shouldn’t worry about the deficit next year or even the year after; that short term, the most important thing is that we avoid a deepening recession.
Obama is now planing a massive drunken deficit spending spree stimulus plan that is rumored to be in excess of $1 trillion. That’s an additional $1 trillion on top of the trillions of dollars already handed out to greedy and incompetent CEO’s everywhere. That’s $1 trillion of new unfunded government spending on:
Direct bailouts of irresponsible mortgage borrowers
Tax cuts
New infrastructure projects
Spreading broadband access
Promoting healthcare information technology
Renewable energy projects
Bailing out state and local governments overrun with their own bout of fiscal recklessness
The number one issue facing America today is the economy. We need a new leader that will work to steer our ecomony in the right direction, enforce fiscal discipline, and work to resolve the underlying problems that caused the chaos in the financial sector. Sure, there are other issues - position on abortion, civil rights, immigration, health care, Iraq, privacy, taxes, education, etc. But they all stand a distant second to the number one issue on the economy. If we do not fix our economy, then you can forget about every other issue on the table, because there will be no money left.
2008 has proven a very difficult year for endorsing a presidential candidate. On the republican side, you have John McCain, the very kind hearted, but unfortunately economically illiterate man, and Sarah Palin, the housewife from Alaska that just spent $159,000 in campaign money on her new sexy wardrobe. And what about Sarah Palin’s position on the economy and the $700 billion wall street bailout? In the video below, she mentions that she is still unsure about her position.
On the democratic side, you have Obama and Biden, magnitudes more intelligent then either McCain or Palin, and without a doubt more fit to lead this country then their republican contenders. They are both top notch public speakers and leadership comes natural to both of them. They answer rapid fire and often difficult questions from the media directly and without hesitation. That is exactly the kind of public speaking we need in front of the international media to help stem the influx of criticism still reigning from two Bush terms. What are Obama’s view on the bailout? Watch this short video of him responding to Paulson’s initial 3 page $700 billion bailout bill. His thoughts are well organized and clearly communicated.
What about the Obama endorsement? - In the words of John McCain himself, Barack Obama is a “decent person and a person that you do not have to be scared of as president of the United States.” I completely agree with McCain, but that does not mean I’m completely encouraged by the thought of an Obama presidency. There is one sticking point that I can not get beyond with Obama, and that is his call for a foreclosure moratorium. This is where Obama and I have fundamental differences. Obama wants to use taxpayer money to pay down the principal of overpriced American homes. I want those homes to be foreclosed and I want the market to reset their prices to reasonable and affordable levels. Obama does not want to see former “homeowners” living on the street. I want those “homeowners” living in apartments. I think of that family of 4 struggling to buy food because of the burden of their $4,000 mortgage payment. I want that family to realize the gain of $2,000-$3,000 in additional monthly cash flow when they save that much money by living in an apartment.
The Obama endorsement (barely) - Geldpress endorses Barack Obama and Joe Biden as the democratic ticket of choice in the 2008 presidential election. We do so freely and not from bribes, torture or threats. The choices were limited. We searched long and hard for viable third party candidates but could not find one. In the end, we came back to the two party system and started the elimination round. McCain and Palin were the first to be eliminated, leaving Obama and Biden as our endorsed candidates (barely) for president and vice-president of the United States.
This youtube video is one of the most important videos you can watch prior to making your vote heard in the 2008 presidential election. Many people in government and on the streets will tell you that the financial crisis we are facing today was unavoidable and that nobody could have predicted it. But in reality, the 2008 financial crisis has been discussed at length for at least the last 10 years. There were countless economists, savvy investors, book authors and blog writers warning of such a collapse to our financial system. The only issue is that 90% of our government chose to ignore the warnings because they were to busy cheerleading for the phony debt based economy.
We need smarter people in government and advisers just won’t cut it in today’s economy. I have heard some people defend McCain’s economic illiteracy because he will probably “choose a good economic adviser”. Now that the 2008 financial crisis is in full swing, those people really need to watch this video of former economic adviser Arthur Laffer being schooled by Peter Schiff.
Don’t wait and hope to determine who the next president chooses as their economic adviser. Instead, vote for the more intelligent presidential candidate, and preferably a well researched candidate amongst ALL of the choices, not just Republican and Democrat. We can’t afford 4 more years of economic illiteracy in the White House and congress. Please vote responsibly!
I wrote back in August how this year’s election would be determined by the VP nominee of Obama and McCain. Despite John McCain’s warm heart and good will, he is simply not fit to run this country. The financial crisis of 2008 only serves to strengthen the need for a true economic leader in office, and McCain simply does not qualify. He may have earned my vote with a more competent running mate, but his choice of Sarah Palin is nothing more than an insult to the American people. Obama is clearly the more qualified choice of the two major parties. He and running mate Joe Biden will likely win in November and be an adequate pair to run the country for the next four years. But I stop short of endorsing Obama. My endorsement for president requires fiscal conservatism, something the Democrats and Republicans alike severely lack.
Both Obama and McCain are supporters of the huge government bailout packages supporting incompetent financial institutions. Obama takes it a step further, calling for foreclosure moratorium’s to keep unqualified “homeowners” with unpaid mortgages in their houses at taxpayer expense. But the real solution to a family struggling with a $4,000 mortgage payment is for them to move into a $1,000 rental apartment and immediately reap the rewards of the additional $3,000 monthly cashflow. Unfortunatley, neither McCain nor Obama understand basic economics, and would rather disrupt the natural law of supply and demand then to allow market forces to adjust housing prices to stable and affordable levels.
So who will I vote for in November? It’s a tough choice for a qualified candidate, but my search will certainly include the other choices that main stream media conveniently ignores. Watch and listen as these ignored candidates discuss the 2008 bailout.
Bob Barr & Wayne A Root- Libertarian party
Ralph Nader and Matt Gonzalez - Peace party
Cynthia McKinney and Rosa Clemente - Pacific Green party
The global credit crisis is starting to restrict the ability of Canadians to obtain loans for mortgages, cars and investments, Canada’s finance minister said Thursday.
But the rest of the article goes on to say that “Canada’s banks are the world’s strongest”, and that “Canada will avoid the mortgage meltdown and banking crisis that are hitting the United States and Europe hard”.
It would not be entirely surprising if Canada escapes the financial crisis entirely, or at least fares better then the rest of the world. This is a testament to Canada’s transparency on public finance, as well as their drive to reduce reckless spending. Canada’s current national debt stands at $457.6 billion, as of the end of 2007-2008 fiscal year, but it has declined every year since the 1995-1996 fiscal year, as shown in the graph below. Canada had a surplus of $9.6 billion for 2007-2008.
Canadian accounting methods - Not only has the national debt of Canada been decreasing, but the government is using accepted and well defined accounting standards, unlike the United States, which intentionally conceals the truth behind their national accounts. The annual financial report of the government of Canada is a model of transparency that employs generally accepted accounting principals (GAAP). If the United States is looking for a way out of the current financial mess, they can start with looking toward Canada’s example of responsible accounting.
Who exactly is to blame for what future historians will cause the 2008 financial crisis? There is no shortage of answers to this question, just as there is no shortage of questions about how we will get out of the crisis. But one thing that everyone agrees on is that we need more transparency and more effective regulation (not necessarily more regulation) in the financial industry. But if really expect our private corporations to have better transparency, shouldn’t we expect the same from our government?
In a previous article, I reported on the rampant deception in the US Government accounting practices. The US government accounting standards are so morphed, they have even fooled CNN into thinking we are much better off then we actually are. The deception goes far beyond the national government, and extends to state and local government as well. In Washington state, for example, we have political campaign advertisements based on erroneous information related to the fiscal state of Washington. It’s not entirely surprising, given the chaotic accounting and reporting methods employed by the state of Washington, and other municipalities. And California is even worse. I would challenge California treasurer Bill Lockyer to accurately answer questions related to the budget of California. I’ve studied the Califronia treasury reports, and the numbers are anything but straight forward.
The total amount of debt is 57.610 billion. The other figure included lease revenue debt which is not a part of the GO debt. Lease Rev debt is paid with lease revenue.
I’m not entirely sure what type of lease revenue they are referring to, but I’ll just let this one go for now. What about the yearly trend of California’s state debt, determined by their total outstanding and unpaid bonds? Unfortunately, California makes this question very difficult to answer, but the short term trend can be determined by trudging through the Treasurer’s Debt affordability reports, one by one. Unfortunately, there is no rhyme or reason to these reports; each one uses a completely different template, a different set of headings, and obscures the total debt in an entirely different section. Here are the results, as of July 1st of each year listed:
Just how bad is the fiscal situation in California and the trend of increasing debt? It was bad enough that California issued an emergency request for a $7 billion dollar loan from the federal government, because the market for its own bonds was drying up due to the increased risk. California had $96.38 billion in general fund revenue for the 2007-2008 fiscal year, which gives them a debt to income ratio of over 60%. But California prefers to use the less realistic and less shocking measurement of measuring only the yearly interest payments ($4.42 billion) of their debt as a percentage of their revenue, which came to 4.92%.
California prefers to blame their current financial woes on the rating agencies, and not their own economic policies that got them into the mess they currently face. The 2008 debt affordability report is worth reading cover to cover for hints on their reckless spending, and blame game. One noteworthy excerpt from the report follow below.
Letter to rating agencies - This letter to the rating agencies appears in the appendix of the 2008 debt affordability report.
We, the undersigned representatives of major municipal bond issuers, urge the rating agencies you head to create new rating standards for U.S. municipal debt. For years, municipalities have been held to a higher standard than corporate issuers… For investors, the current system greatly inflates the risk of investing in municipal bonds relative to alternative investments, leading to investment decisions that are not based on the best information…
I can’t decide if I should laugh or cry about municipalities being held to a higher standard than corporate issuers. For all the financial problems being exposed in private corporations, at least they are held to reasonable accounting practices (GAAP), something municipalities have never embraced!
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