The problem, as I see it, is that unless the Treasury wants to back the entire credit market (likely reducing Treasuries to junk status – and no, I’m not kidding), we’re simply delaying the inevitable failures yet to come. When we’re losing 500,000 jobs per month, you can let these guys get our money at 3% – but it won’t be enough to stop the tide of foreclosures and defaults.In fact, a case could be made that once these programs run out — and once our Treasuries have become one gigantic SIV — the pain will eventually be felt.
Bennet Sedacca, Minyanville
World governments have received praise from numerous quarters regarding their interventionist strategies. Indeed this praise often seems to be circular-referencing itself has one government gives the thumbs up to the next. Meanwhile though, the markets gyrate wildly on the possibility of where the public fund bucket will pop up next. Let’s face it, what else would cause a 1500pt rally on the Dow amidst the economic crater of over half a million jobs lost in a month?
People say markets are not listening to the fundamentals. Neither are governments whose main weapon against bad debt has been to bail it out. Banks with remarkably positive market risk betas, subprime mortgage holders & illiquid automakers have benefitted. The dot com bust came when people realised there was no business case for pumping money into pipe dreams.
When will the ‘old’ [read ‘The’] economy bust come?