We're from the Government and We're Here to Help

Random thoughts on the Global Economic Crisis (TM):

1.  Somewhere in a cave in Waziristan, a bearded millionaire terrorist is smirking.  After all, bin Laden had written to his buddy Mullah Omar in October 2001:

"...Thus our plan in the face of this campaign should focus on the following:
—Serving a blow to the American economy, which will lead to:
a) Further weakening of the American economy
b) Shaking the confidence in the American economy. This will lead investors to refrain from investing in America or participating in American companies, thus accelerating the fall of the American economy …"

Who knows, he may have even shorted Lehman and Bear Stearns all the way down.

2.  Intrade betting site has the odds of Congress passing a bill to fix the current crisis at 0.77.   We all know a bill will get passed this weekend by our spineless representatives on Capitol Hill.  The best trade out there is taking the Intrade for passage for a quick 23% return.

3.  Aren't we all glad that Grandma and Grandpa didn't put their Social Security into Fannie, Freddie and AIG stock like President Bush wanted in 2004?

4.  So much for President Bush being conservative and keeping government small.   The Bailout 2008 will push the federal deficit to record levels and expand governmental agencies to record size.  Who voted for this guy?  Seriously, who?  If you voted for him because he is "conservative", then you fail basic economics (and need to return to civics class to re-learn the Constitution as well.)

5. Be advised as the drama unfolds this week, as the president urgently calls for a "robust package" to bailout Wall Street, and Secretary Paulson urges immediate passage of a "clean bill" that gives him comically unchecked power, that these guys have been mulling this thing for "months."  Months.  That seems like enough time to have convened a bipartisan group of Congress critters and other assorted principals to the White House for a pow-wow before now.

Defending the package, White House spokesman Tony Fratto said Tuesday that the bailout had been "months" in the making but insisted that lawmakers should pass it "this week."

"This was not a program that was conceived of, or put together, hastily. There was an enormous amount of analysis and debate and discussion before we came forward with this program," said spokesman Tony Fratto.

"Some of the policy staff have had months to think about what a program like this would be like and how it would work. Others have had at least weeks to think about it," he told reporters on a conference call.

"We do need to get it done quickly and urgently and would oppose efforts to delay it," the spokesman said. "I think we want to be confident that it will get done this week."

In a subsequent email exchange, Fratto declined to say when the administration first began internal discussions on the mammoth plan, but told AFP: "It shouldn't come as a surprise that we think about contingencies."

Methinks we're being played.

6.  Nobody says it better than The Cunning Realist:

Regular readers know that I don't give financial advice here. But I'll say this. It's clearer than ever that one's after-tax savings are not safe if kept within this system. When two or three unelected statists can decide on a moment's notice that the nation will embark on something as costly as another Iraq -- and then dictate the terms to a cowed Congress -- does that need much explanation? The chances are rising for a sudden and massive dollar devaluation at some point in the future. Moreover, we know now that the system is capable of anything. We've already seen rock-bottom interest rates, new credit facilities, expanded repurchase agreements, unprecedented liquidity, well-timed futures goosing, interventions, conservatorships, and now short-selling bans and bailouts. If all that proves insufficient, expect literally anything: national bank holidays, market shutdowns, restrictions on gold ownership, and capital controls. You really don't need much of a historical perspective to predict this stuff, just a little intuition about what happens when a jingoistic, militarized, increasingly socialistic nation overextends itself and is confronted with the consequences. Evaluate your exposure and plan accordingly.

Indeed.