My deck chair on the Titanic

Linked with Jerry Mazza – USA.

Published on Online Journal, by Jerry Mazza, Nov 17, 2008.

Well, actually, it’s my adjustable desk chair in my den. And I’m not staring at the sea. I’m looking at my sea blue computer screen whose bright light is beginning to blind me. And I’ve got a major storm to read about: Proposed $700 Billion Bailout Is Too Little, Too Late to End the Debt Crisis; Too Much, Too Soon for the U.S. Bond Market.

It’s a white paper by Martin Weiss, Ph.D., and Michael Larson, interest rate and real estate analyst for Weiss Research, Inc. Their study was submitted to the United States Congress Senate Banking Committee and House Financial Services Committee on September 25, corrected October 1. I wonder if anyone ever took at look at this brilliant piece.

For starters, their message is that the Federal Deposit Insurance Corporation (FDIC) now claims to be covering 117 institutions with $78 billion in assets. The problem (part of it is), according to broader analysis by Messrs. Weiss and Larson is that there are 1,479 member banks and 158 thrifts with assets of $3.6 trillion, 36 times the FDIC number of institutions at risk of failure. So we’re going to run a bit short in bailout funds, worse comes to worse …

… This can double or triple the fed deficit in a very short time. It can drive up borrowing costs for the Treasury, and also for other kinds of bonds and for millions of mortgage seekers looking for that home credit or other credit, since Treasury yields are benchmarks against which most borrowing is based.

So deep, down deep, we go, diving on this wrecked ship of state, this lost Empire. And where’s my deck chair, my zazen seat. I have to center myself. Get in tune. Hear the cardinal sing. But I hear the US dollar collapsing. It’s an odd, frightening sound.  So what to do, oh wise bird, Martin Weiss?

  • 1. Avoid a sharp rise in interest rates which could collapse the US dollar. Congress must limit funds allocated to any bailout.
  • 2. Any agency that buys up bad private-sector debts should pay strictly fair market value for debts, plus a big discount reflecting the debt’s poor liquidity.
  • 3. Congress must disclose all this crap to the public. It can’t cover it up or the derivative collapse.
  • 4. Prioritize protection of government credit and ensure the stability of the US dollar. The private sector must handle any further spread of debt mostly without government financial assistance. Get it, fellas? Follow the money. Stay centered. Hear the cardinal. Enjoy life again. Sit with all people. This is a moral and financial imperative.

Between bathroom and kitchen, sitting zazen on a deck chair on the Titanic, I realize unless Congress greatly tempers its approach, it could produce the worst of both worlds: failure to resolve the current debt crisis plus create a new set of crises that will spread panic and prolong the pain. Much samsara. Sayonara.

And this for savers and investors: … (full text).

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