Yup.  You read that right.  Here’s what’s going on.  It’s almost unbelievable.

We know foreign money has been fleeing the U.S. dollar as out assets sell-off. This ordinarily should cause tremendous dollar weakness. However, it has not. This has confused currency traders of late. Here’s why - What other reserve banks have been doing is to engage in currency swaps (see yesterday’s $630 billion) so when investors dump American stock and cash out, the market is flooded with dollars. Other banks have taken those dollars and traded to us their own currencies. Why? Well, up to now we thought it was because if America goes down, we take them all with us so they had better keep our dollar strong.

BUT NOW…it seems a deal had been reached whereby the American taxpayer will bail out THEIR toxic garbage while in return, foreign governments backstop our weakening dollar and increasingly horrendous balance sheet.

Proof…when Congress didn’t pass the bill yesterday, Merkel, Rudd and every other world leader came out and said [wink wink, nod nod] “We fully expect a bill to be passed in the next few days”.  I will provide links at the end.  Today, as the markets rallied, we saw RECORD DOLLAR STRENGTH.  Why was today the ***greatest day ever*** for the dollar?  Or was it a message on a day when it looks like the bill will now pass?  Additionally, why would other reserve banks hold U.S. dollars at a time like this???  Were we purchasing tons of Arentinian Pesos during their debt crisis?  Or were we DUMPING it?  And finally, WHY, at a time of such critical importance, are Bush and Paulson threatening VETO over any bill that prevents foreign assets from being purchased by the Treasury as part of the $700 billion?  I thought we needed to help OUR banks and quickly!  Why does the bill not address housing, foreclosures, NOTHING???

Now we know.

Well, what probably happened was 2 weeks ago (when we had the negative tape on the T-Bill), other countries that have been buying our debt (and supporting us by doing so) finally called up Bush/Paulson and said, that’s IT!!!!  We’re DONE!  You guys are a MESS!  If you want us to keep lending to you, we need some MAJOR concessions.  This is why the ONLY bill Bush/Paulson will sign is the one where the American Taxpayer buys up FOREIGN assets (not just U.S. bad mortgage paper).  Don’t believe me?  Why doesn’t each country fix their own problems?!  Links attesting to all of this are at the bottom.

This means that Paulson’s bill has NOTHING to do with housing, stocks or the economy.  It is a MARGIN call from foreign governments that purchase our debt and fund our economy.  If they stop purchasing our Treasuries we will default very quickly and defaulting on Treasuries is B.A.D.  This shows us how deeply in trouble we are.  ANY economic problems here are completely ignored in a desperate attempt by Bush/Bernanke/Paulson to buy us some time.  Maybe even enough time for them to split office.  We won’t even be bailing out Wall street and the people here in the U.S. that bought in over their heads - we will be bailing out anyone and everything ALL OVER THE WORLD and to the tune of many, MANY trillions - hence the “$700 billion on the balance sheet at any one time”.  We will max that out for YEARS.  Expect major spending cuts AND tax raises as the U.S. will now need to not only balance its deficit, BUT its DEBT!!!!!!

CHOICE QUOTE:

“Even staunch U.S. allies like Colombian President Alvaro Uribe blasted the world’s most powerful country for egging on uncontrolled financial speculation that he compared to a wild horse with no reins.

“The whole world has financed the United States, and I believe that they have a reciprocal debt with the planet,” he said.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9MTZEgukPLY&refer=home

http://www.cnbc.com/id/15840232?video=873682522&play=1

http://www.iht.com/articles/ap/2008/09/30/business/EU-Germany-US-Bailout.php

http://www.theaustralian.news.com.au/story/0,25197,24418475-12377,00.html

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

Zoicks. And not unbelievable.

Russia’s Finance Minister Alexei Kudrin on Wednesday gave his backing to the U.S. bailout package for Wall Street, adding that the United States had responsibility to other countries.

“I think (U.S. Treasury Secretary Henry) Paulson’s plan is essential,” he said at a financial market conference organised by Vedomosti business daily.

“It is the responsibility of the United States to other countries.”

[quote author=“Mayor Quimby”]Russia’s Finance Minister Alexei Kudrin on Wednesday gave his backing to the U.S. bailout package for Wall Street, adding that the United States had responsibility to other countries.

“I think (U.S. Treasury Secretary Henry) Paulson’s plan is essential,” he said at a financial market conference organised by Vedomosti business daily.

“It is the responsibility of the United States to other countries.”

The Australian Prime Minister said the same thing on Mon.  More here from Mon

This bill is now full of earmarks - this is disgusting - business as usual:

A few of the earmarks stuffed in the bill:

- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

Tax earmark ?extenders? in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia (Sec. 322)
- Wool Research (Sec. 325)

[quote author=“garetjax”]This bill is now full of earmarks - this is disgusting - business as usual:

A few of the earmarks stuffed in the bill:

- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

Tax earmark ?extenders? in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia (Sec. 322)
- Wool Research (Sec. 325)

Glad they’re finally financing the Wool Research, I thought they’d never get to that. 

The Devil is in the details.

And to think this was supposed be a bailout for the credit markets.   

I guess it is just politics as usual.

FWIW - It looks like those “earmarks” (none of them are spending, they are all tax relief) are not part of the underlying economic recovery bill; they’re part of the tax relief bill that will be attached to the economic rescue bill. The same tax relief bill that the Senate passed 93-2 (two Democrats, Carper and Conrad, were the only ‘no’ votes) a couple weeks ago with the same, exact provisions and that the House refused to take up because it didn’t raise taxes to ‘pay for’ the tax relief.

[quote author=“artman1033”]

Bailout is to save Treasuries

IMHO:
If treasuries are selling at par or below par, there is a mad rush to treasuries.

Treasuries are safety.

Folks are taking their money out of money markets and putting them in treasuries.

The first thing to do is to increase FDIC guarantees to 250K or 1 million

That way folks will get out of treasuries, where they are making no money and go back into money markets.

We don’t need no stinking bailout. The credit markets must be stabilized, not the toxic derivatives.

I’m confused.

One say bailout is to save treasuries, implying that nobody want them.  Another say many folks rush to buy treasuries, implying that there are huge demand for treasuries.  Doesn’t bailout mean need to sell more treasuries which mean bailout can be successful since there are huge demand.

Please enlighten this poor soul.

Please re-read the initial post.  The general point here is the following:

Foreign governments fund us daily by purchasing Treasuries.  We need $2billion + every single day for our government to function.  Think of it like a huge business line of credit.  Consequently we pay ENORMOUS interest on all of this debt.  When our banking system flew out the window, the foreign governments got together and called us in a rage.  They no longer want to purchase our crappy low-interest debt.  They are seeing their holdings of Treasuries and MBS threatened.  They (our bank, so to speak), are giving us, in effect, a giant margin call.  Which means we need to sell assets to pay them back or in this case, buy crappy ones (THEIR toxic MBS).  So they basically have a gun to our heads and are saying, help fix OUR problems or we cut off funding.  If they cut off funding, the U.S. could quickly start to default on Treasury notes which could end up being like WW III without the explosions.  It’s basically a larger version of what has happened to some of the investment banks.

So…the people that flew to Treasuries HAVE NOTHING to do with this thread.  Treasuries have always been considered the safest investment in the world but as we saw a couple of weeks ago when CDS rose on US Treasuries - the rest of the world no longer thinks they are safe and they are fearful of default - to what extent is unknown.

Put another way….imagine the government is just your average Joe.  It’s as if Joe wants to take out a 24% APY loan (bailout package of trillions in toxic crapola) to pay off the bookie that lent him $10,000 to pay off his $150,000 interest payment for the next 3 months!!!  Something along these lines…

Mayor Quimby,

Is an odd game.  Simplistically speaking, is to exchange Treasuries (just a piece of paper with no gold backing) for toxic assets (which is backed by a tangible asset).  Sound like Uncle Sam gains.  If those toxic assets default, Uncle Sam becomes the largest landlord in the world.  Wow!  Did I get it wrong?

[quote author=“Mace”]Mayor Quimby,

Is an odd game.  Simplistically speaking, is to exchange Treasuries (just a piece of paper with no gold backing) for toxic assets (which is backed by a tangible asset).  Sound like Uncle Sam gains.  If those toxic assets default, Uncle Sam becomes the largest landlord in the world.  Wow!  Did I get it wrong?

No.  SELL Treasuries (iow pay 3 - 4%) for the PRIVELAGE to BUY crappy assets so we can BARELY pay off our interest.

Mayor,

I still don’t get it .  Because of financial crisis, folks rush to buy Treasuries, the safe haven, which mean:

a.  Easy for Uncle Sam to raise cash by selling Treasuries.  Uncle Sam can then spend the cash to buy toxic assets which is a form of fiscal policy to prime economy.

b. Stronger US dollar.  Hence, lesser import (oil) inflation and hence more dollar to spend.

So, isn’t the bailout plan brilliant looking from above perspective?

[quote author=“Mace”]Mayor,

I still don’t get it .  Because of financial crisis, folks rush to buy Treasuries, the safe haven, which mean:

a.  Easy for Uncle Sam to raise cash by selling Treasuries.  Uncle Sam can then spend the cash to buy toxic assets which is a form of fiscal policy to prime economy.

b. Stronger US dollar.  Hence, lesser import (oil) inflation and hence more dollar to spend.

So, isn’t the bailout plan brilliant looking from above perspective?

No…you’re confusing Joe Investor with China Central Bank.  We need China Central Bank to buy a billion bucks of Treasuries A DAY.  And the same for other central banks.  Joe Investor that buys $100K worth of treasuries is inconsequential in the face of all of this.

THE PROBLEM IS THAT UNCLE SAM’S ABILITY TO RAISE CASH IS NOW IN JEOPARDY.

Hence WEAKER DOLLAR, deflation etc.  Now, go back to the top and re-read the first post.  It should start making sense now.

[quote author=“Mayor Quimby”]No…you’re confusing Joe Investor with China Central Bank.  We need China Central Bank to buy a billion bucks of Treasuries A DAY.  And the same for other central banks.  Joe Investor that buys $100K worth of treasuries is inconsequential in the face of all of this.

THE PROBLEM IS THAT UNCLE SAM’S ABILITY TO RAISE CASH IS NOW IN JEOPARDY.

Hence WEAKER DOLLAR, deflation etc.  Now, go back to the top and re-read the first post.  It should start making sense now.

SInce you have thought this through, what happens if we don’t raise $1B/day?