BAILOUT DEFEATED....

[oly884]

http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown_1483

WASHINGTON - The House has defeated the $700 billion bail-out legislation for the financial industry.
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More than enough members of the House had cast votes to defeat the Bush administration-pushed bill, but the vote was held open for a while, apparently as efforts were under way to persuade people to change their vote.

On Wall Street, stocks plummeted as investors followed the developments in Congress.

http://finance.yahoo.com/echarts?s=^DJI#chart1:symbol=^dji;range=1d;indicat or=volume;charttype=line;crosshair=on;ohlcvalues=0 ;logscale=on;source=undefined

[tulsa_sr5]

Wow, i thought this was a done deal for sure. I'm so relieved they aren't going to pi$$ away billions trying to stop the market from making the correction it has to make. It's going to suck for a while no doubt, but better we not make it worse.

And I'm guessing a lot of speculators positioned themselves for a bounce off it passing today are get hurt in the market. My 401k is getting nailed, but in the long term this is just a blip.

Need to go write my congressman and thank him for voting right on this one.

[bamachem]

although i think this is going to make for a troublesome and "financially tight" upcoming fiscal year for a lot of companies, i do think this is the best thing for the PEOPLE of this Country, even if it does mean an economic retraction and loss of jobs for the short term. however, i also believe that this crisis (and failure to do anything about it) will actually give the republicans more of a black eye than the democrats, and i believe that this will be the deciding factor in obama being the next President of the United States. i probably won't loose my job, but it's a possibility since i rely on capital improvement projects to fuel my professional existence.

[mastacox]

This is great news for the country in the long term, even if it stings for a little bit. I for one am relieved, as I too thought it was going to be a "done deal."

If AIG is so big that it needs to be bailed out to "save" the market from a recession, it's better they die and are auctioned off in pieces to smaller companies willing to take up the slack. This will make the market more resilient against similar problems in the future.

Score +1 for the rational people that don't want to spend 1 trillion plus on saving some company that made poor business decisions. I do hope that any people that get bit by the company's failure are able to recover, however. Unfortunately, some people don't take the "investments may lose value" disclaimers seriously enough...

[corax]

here's one of my favorite rough indicators

http://www.kitco.com/charts/livegoldnewyork.html

Stocks dropped at about 1:30pm, gold prices shot up from ~$888 -> $908 ten minutes later - as a comparison, gold was at about $750/oz at the beginning of September (same as one year previous). Gold always goes up when people perceive $h1t hitting the fan

[Seanz0rz]

whoever becomes president, i want this guy as an advisor: http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

let the banks fail.... purge the system of the problem.

[oly884]

If we go into a great depression or worse, then so-be-it. At this point, looking at how things are being handled, I doubt that it is going to ever get better. We need a bit of 'house cleaning' if you catch my drift.

Too many people these days are not paying attention to what is going on, or understand what hard work is. They live their lives full of Gucci, Prada, and A&F. Everyone thinks they are a 'high roller', they are mistaken, big time.

If/when it really starts to hit, life is going to become very interesting.

[tulsa_sr5]

whoever becomes president, i want this guy as an advisor: http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

let the banks fail.... purge the system of the problem.


Sean, read that a bit ago, freaking outstanding.

I also read a comment earlier from one of the congressmen pushing the bailout saying he'd been assured "there's a wall of money waiting to flood back into the market after we pass this bailout" or something to that effect. I'd answer that 'wall of maney' is waiting for the market to finish correcting, not a bailout attempt. It's definitely going to be a rough ride for a while.

[oly884]

whoever becomes president, i want this guy as an advisor: http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

let the banks fail.... purge the system of the problem.

I like that guy.

[arjan]

-- Wrong thread, sorry --

[Bob98SR5]

Miron is a world renowned economist. You'll find his name in many textbooks.

Interesting thing I read today which Miron references in his opinion. In 1999, Bill Clinton signed the Gramm-Leach-Bliley bank deregulation bill which allowed investment banks to offer services like commercial banks did, as many European banks had been doing all along. This in effect, deregulated banking. Of note, BC signed this GLB deregulation bill even though the vote on the bill split along party lines (Reps were the majority). Bill Clinton of course, was a big proponent of providing more support and services to minorities and those with less financial means. So did GWB as we've seen in the video. Which is all well and good, but that opened the door to unchecked services and lending practices such as subprime loans and unverified income acceptance practices. This was one of many deregulated and unregulated services that allowed investment banks to purchase commercial banks over the last 8 years. I can tell you in CA that many small banks got swallowed up as a result of this and large banks such as Bank of America started to quietly offer subprime loans to people who could not provide ID, SSIs, etc. You know, as my local paper likes to call them "undocumented residents"

One thing that Clinton did recently is that he manned up and spoke about this and his involvement in signing this bill. Search "Bill Clinton + Gramm bill". Democrats are furious at what he's saying as of late. While the goals were noble, it was poorly executed by the greed of the banks and the greed of the people to get into homes that they couldn't afford and/or wanted to flip in a hot housing market. Bill has all my respect for going against the call to villify the Gramm bill and to tow the party line that this is all the doings of the Republicans and to focus the discussion on fixing the problem and not politicing. As I've said a few times now, there are many culpable people and institutions. I'm sure anybody here, regardless of political affiliation, can find articles to support who is to blame. Time to fix the mess. But i am really not certain what side i stand on. I'd probably take a hybrid position of letting those institutions, individuals, etc who showed gross negligence suffer while allowing those who truly were collateral damage to these practices be given a second chance. While that's probably more difficult to achieve than to write, something in my gut tells me that its inherently wrong to arbitrarily bail out those whom Paulson feels worthy of bailing out with a 700B warchest. Paulson is quite the smart man (25 yrs at Goldman Sachs), but to provide one person with such decision making with little or no oversite (or so i've read) is too much power for one individual.

[MTL_4runner]

The really scary part about this whole mess is that the politicians (on both sides of the fence) probably know less than the average person about the financial markets (don't even get me started about Palin) and what would work best for fixing the economy yet that is their #1 job right now. I'm sorry but this is a political failure of the highest magnitude and the fact that a majority of the republicans didn't come through as they had agreed to do to support their own president and the top financial architects for the country is complete lunacy and then finally to blame the reason for non-adoption on a few political jabs by the House speaker....please! This shows that politicians in the current administration are unable to rally their troops to the cause and it appears no one had the foresight to explain the mess in a marketing effort to the average public in language they could understand. This is no simple issue by any means.

The crux of the issue is the misperception that this is a bailout of people who made bad decisions. The CEO's making big bonuses for nothing is a separate issue completely. The issue has simply been a large scale case of "whack the weasel" and it's an ongoing cycle until the money supply in the market is reduced (remember all the talks about "soft" landings in the stock market, we're suffering the hangover from that now). The Y2K was the first problem for liquidity in the markets, then came tech stocks bubble and when that caved in all the money went to hard assets like real estate and commodities. What your are really seeing is the final deflation of a bubble (ie too much liquidity) that should have taken place earlier but finally came home to roost on the housing sector. Credit is real dollars leveraged many times over so the money from each successive bubble creates a larger bubble later on......and also makes for a steeper fall when that bubble finally disappears, ergo what you see today.

What this $700B pledge would do is to effectively set a bottom for the market.....essentially it is an investment by the government in the financial system itself. If they play it right they could wind up not only staving off a massive stock market selloff and a paralyzing credit freeze, but also actually making money for the taxpayers in the process. The free market system is a great ideal and sets the basis for the vast majority of the free world but the problem is that reality and ideals are not the same thing. People do have emotions, governments around the world do meddle in the market and if you just let an avoidable crash happen (as many people have indicated naively that they would), it can severely damage the economy to the point that it may take more than a decade or perhaps even a generation to recover. It's like saying a tsunami is going to hit but once the water is all dried up everything will return to normal.....it's not. True free market is an ideal, not a reality and we can't forget that when you're dealing with world markets like we are today. On it's current course I am predicting that you'll start to see a recovery sometime around late 2015 to mid 2016.

[oly884]

So, Jamie, in your views, what is your gut feeling we are going to enter? Recession, depression, complete collapse?

[hillbilly]

What Jamie says is very much accurate. A complete collapse will cause great devastation to our entire economy and how we go about daily life. Businesses and production facilities will fail, and directly impact the things we take for granted every day. Those of you fortunate enough to have grandparents around from the Great Depression Era, should sitting down and talk to them. The past several generations have *never* experienced such sacrifices, therefore we truly do not understand the extent of the devastation a complete collapse may cause.

I've talked with a very close relative with over 40 experience in the finance/brokerage markets. If some variant of the 'bailout' (what moron coined that handle anywy?!?) doesn't take place, it will only prolong the suffering that may already take a decade or more to recover from (i.e. INDP below 8,000).

Those of you currently struggling to find gas in the Southeast; image doing the same because local/regional food processing plants have had to close their doors.

I am by no means, saying or condoning any plan that salvages the lives of CEO's with parachute clauses whose power-hungry greed and lack of ethics created this mess.

[MTL_4runner]

So, Jamie, in your views, what is your gut feeling we are going to enter? Recession, depression, complete collapse?


I'd say more like a long grueling bear market (similar to the 70's) right now, but if this snowball finds alot more wet snow and a long hill it could become a much bigger problem. The government needs to dry up the credit but to do it slowly, not all at once like a crash would cause. This is why you need the "bailout" to keep the back of the train from crashing into the front as you slow down the wheels on the credit machine. The biggest thing is to stay grounded through all the mess and don't get caught up in all the fear mongering the media puts out there. This isn't armageddon, but it won't exactly be all that pretty either. Be conservative with your money (think capital preservation) and you'll come through it all just fine.

[tulsa_sr5]

Jamie, I respectfully disagree that the government can set a bottom for the market. Only the market can decide where that point is. If the governnment tries it will almost certainly do so above the real floor the market needs to find (just like the previous soft landings). Sooner or later the market is going to move as low as it needs to to fully purge this "bubble". The more we interfere the longer it takes to get back to an honest economy people can invest in without concern that they are jumping into a security at 150% of it's true value.

I do think there are things the government can do immediately to help, but I fail to see how buying overvalued debt does anything but temporarily prop up the market. While adding to inflation due to the fact that we don't have the 700 billion to spend. If this is truly an opportunity for someone to turn a profit then private investors would be all over it.

[MTL_4runner]

I don't disagree that a true bottom is not set by any move the government would make (I changed it to only effectively set a bottom.....I assumed people would infer this anyway.....it could go further but it indicates confidence at that level). I would also argue that the government should only buy the securities at market prices (have them liquidate some into the markets to find out what the real price should be for these bad debts). The issue you might run into is that banks may try and hold onto the debts thinking the feds will overpay for them. This is where I think the fed should make its stand.

[oly884]

So, Jamie, in your views, what is your gut feeling we are going to enter? Recession, depression, complete collapse?


I'd say more like a long grueling bear market (similar to the 70's) right now, but if this snowball finds alot more wet snow and a long hill it could become a much bigger problem. The government needs to dry up the credit but to do it slowly, not all at once like a crash would cause. This is why you need the "bailout" to keep the back of the train from crashing into the front as you slow down the wheels on the credit machine. The biggest thing is to stay grounded through all the mess and don't get caught up in all the fear mongering the media puts out there. This isn't armageddon, but it won't exactly be all that pretty either. Be conservative with your money (think capital preservation) and you'll come through it all just fine.


Good to know, thanks!

Yes, I have been getting a bit more food (canned foods, dried beans, rice, etc.) And while it could be overkill or 'crazy' it just means that if everything works out OK, I'll just not need to go to the store for a while!

Lucky for me, I have no money in the market, any my debt is quite small.

I am torn on a bailout. Part of me says yes for the clear reasons, the other part of me is feeling that it's time for a wake up call, for everyone.

[fustercluck]

I just want to know if I will still be able to buy guns after all of the dust settles...

[Tankota]

I just want to know if I will still be able to buy guns after all of the dust settles...


I dont think the gun manufactures will need a bailout. Fuster, single-handedly, keeps them roling in profits.

[MasterWIII]

I am torn on a bailout. Part of me says yes for the clear reasons, the other part of me is feeling that it's time for a wake up call, for everyone.
[/quote]

I agree. People today have more stuff than they know what to do with. Granted, those are the benefits to having a growing and successful (for the most part), economy. But now that things are spiraling downward, so many of those people don't even know what its like to live life with the bare minimum. All they know is they can't cancel their Dish Network or get rid of their 65" Plasma. Its ridiculous how greedy people can be...

[hillbilly]

I just want to know if I will still be able to buy guns after all of the dust settles...
Good question. If the economy tanks, everyone's 'spare' money will dry up. That may directly impacts gun manufacturers and gun sales. May even force some to close their doors. On the flip side, I've heard safe purchases have increased, supposedly because some decided to safe guard their savings, etc at home as opposed to some floundering financial institution. If that's truly the case, I'd expect home security systems and gun sales to increase accordingly.

[MTL_4runner]

If you guys aren't buying this plan yet, have a look at these bombshells:

http://www.marketwatch.com/news/story/economists-brace-biggest-us-monthly/story.aspx?guid=%7BCB47B337%2D74F8%2D4170%2DA4DC%2 D9E8046A31738%7D

http://www.marketwatch.com/news/story/pressure-mounts-dealerships-auto-sales/story.aspx?guid=%7B3DCE22EA-904B-4A51-9021-4CD7D7D1749A%7D&dist=hplatest

http://www.nakedcapitalism.com/2008/02/scary-credit-tightening-chart.html

These are very bad indicators folks, no way to sugarcoat this one, it's going to be ugly now.

[04 Rocko Taco]

Did anyone look at the bill?!?

It's got so many tax break amendments, and other crap stapled on to it, its ridiculous, I mean I know they traded the bill amendments for votes, but thats just crazy!!

The bill is titles the Paul Westerman Mental Health Equity Bill.

It is to be used "to ensure the mental health and blah blah security of health insurance, and for other purposes"

I suppose the 700 billion dollars is for "other purposes"

They have tax breaks for companies that make wooden arrows for children, tax breaks for the american samoa fund, tax breaks for rum producers in puerto rico and the virgin islands, its incredible....

If you guys get bored, look up the actual bill, it makes me sick all the crap they crammed in there....

but of course, no tax breaks for middle class white american born office workers.... they missed that one... :(

[oly884]

Pretty sure this is going to suck.

All the coulda, woulda, shoulda's are going through my head right now...

[Seanz0rz]

but of course, no tax breaks for middle class white american born office workers.... they missed that one... :(


musta got printed on that last page that always gets forgotten in these bills. time to stock up on food and ammo.

[Bob98SR5]

this video seems to be getting alot of traction and hits. this is one person's video view of why this all happened---it is actually organized logically for a home vid. my opinion is that there's probably some fact checking to be done, but there's definitely links to Franklin Raines, Tim Howard, and Jim Johnson to Obama. I did look up some of the links myself on Wikipedia and Google and there's definitely solid ties to Obama and how he benefitted from his relationship and how these guys are now benefitting from him as advisors.

http://www.liveleak.com/view?i=f67_1222761495

Feel free to refute though I'm sure there's some holes in the narrative

[oly884]

Excellent bob, there's also this:

http://www.glennbeck.com/content/articles/article/198/16171/

Glenn Beck: What happened?

October 6, 2008 - 13:01 ET
Glenn's letter to his family explaining how we got into this economic crisis...
Yes, another email letter from your crazy brother. You raised a lot of questions in your last email and I am going to try to answer all of them.

I think all of your questions fall into three areas: (1) how did we get here; (2) what's coming; and (3) what can I do to prepare myself and my family.

Consider this email as my answer to your first question, "how did we get here?". I'll be sending you 2 more emails answering your other two questions. Since there's a lot of misinformation out there I will document each of the facts in my emails so you know where I pulled the information from and where you can go to read and learn more.

What you shouldn't do is panic. We'll get through this--don't pull all of your money out of the bank but have enough cash on-hand to meet any possible emergencies.

First, you've got to get the stock market's ups-and-downs out of your mind. The recent drops and upticks are short-term. Our economic problems are much bigger and deeper. Too many people believe that if the stock market goes up our problems are behind us and that's simply not true.

Last week the market had big drops and big upswings. In the end, the market ended down more than 800 points and lots of 'experts' were shouting it was a time to buy. I don't see it that way.

Did you know that just two days after the stock market crashed in October 1929 the market actually gained ground the next two days? The New York Times reported that "the market quickly regained its poise and stability...." Today, Wall Street 'pros' are telling us it's a good time to invest because Warren Buffet is investing. A lot of people were probably using the same argument when the Rockefeller family was buying stocks right after the 1929 crash, what they didn't know was that it would take Wall Street ten more years to see those prices again.

Our current economic crisis was caused by politicians, both Democrats and Republicans, who perverted the American Dream by treating home ownership as an undeniable right rather than what it really is, a privilege. President Bush aggressively promoted the benefits of home ownership through various policy positions, including a reckless zero down-payment initiative for some homebuyers and praised Fannie Mae and Freddie Mac even after concerns about their accounting standards began to surface.

Home ownership has always been part of the American Dream. It allows individuals and families to build wealth by having them pay themselves instead of a landlord or rental company and vests people in their communities by grounding them in local schools, stores and government.

The concept that owning a home was a privilege and not a right began to change in 1992 following a flawed Boston Federal Reserve Board study which allegedly found subtle discrimination in loan and mortgage lending by banks and mortgage lenders.

Politicians didn't care that the study was full of errors. The study found discrimination took place when five minority applicants were rejected for special low-income loans even though the applicants were rejected because they made too much money to qualify for a low-income loan, not because of their race. The report also classified as 'rejected' the applications of eight minority borrowers even though these borrowers voluntarily withdrew their mortgage applications. The study's sloppiness also went the other way.

The study reported that a white applicant was approved for a $3,115,000 loan in order to purchase a home valued at $445,000. It was later demonstrated that the actual loan was approved for $311,500, far less than $3 million reported and more importantly, less than the home's purchase price. When these and other errors were corrected no evidence of discrimination existed.

But politicians didn't care. They used this report as the basis to fix a problem which didn't exist. Leading the charge for change was President Clinton who immediately set-out to rework the Community Reinvestment Act to give federal officials the power to pressure banks to make loans they otherwise considered too risky or uneconomical.

Traditional lending requirements were labeled 'outdated' and discriminatory. What 'traditional lending requirements' were viewed as 'outdated' and 'discriminatory'? (1) banks were told that a "lack of credit history should not be seen as a negative factor" and that "past credit problems"
should be viewed and considered in light of any "extenuating circumstances" so loans could be extended when they otherwise would have been denied; (2) banks were encouraged to let borrowers without enough money for a down-payment make-up any deficiency with "gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies" even though banks considered this risky as the home buyer would have little or no equity in the house; (3) banks were also instructed that borrowers who received child support, welfare payments or unemployment benefits could count that as 'income' for borrowing purposes.

Call me crazy but if you need to count child support money that's intended for your child, or are in such bad economic shape that you're relying on welfare payments to make ends meet or are unemployed, maybe, just maybe, you shouldn't be buying a house. Too bad our politicians and the 'best and brightest' on Wall Street couldn't figure that out!

Community groups like ACORN, threatened to cry racism if banks didn't increase their loans to subprime borrowers. Banks typically avoided subprime loans as they carried a greater risk of default, but with law on its side, ACORN and other groups intimidated lending institutions into making such loans.

Banks soon learned, however, that making subprime loans actually could increase their profits without increasing their risk. Once the banks extended a loan to a subprime borrower that loan could then be sold by the bank to Fannie Mae or Freddie Mac, two government sponsored entities charged with making home ownership affordable to all Americans.

Banks, Wall Street, and mortgage lenders were soon eager to extend mortgages to subprime borrowers because they could make lots of money without carrying any risk. Fannie and Freddie carried all the risk once the original lending agency sold the loan to them. And once Fannie and Freddie bought the loan this freed up the banks to make even more subprime loans.

So everyone was a winner. The subprime borrower got the money to buy a house. The banks generated mortgages and made a nice profit and Fannie and Freddie executives made tens-of-millions of dollars in salaries and bonuses by hitting their annual goals.

The problem was that in order to keep all of this going lending standards were continually lowered to help the next level of subprime borrowers qualify for mortgages and no one had an incentive to make sure that the new subprime borrowers would actually be capable of making regular mortgage payments. The banks which extended the loans really didn't care because they were just going to sell the loan off to Fannie or Freddie. Fannie and Freddie weren't too concerned because it wasn't their money-they knew that they were insured by the 'full faith and credit' of the federal government (that's government lingo for "you and me").

So when federal regulators began to warn the executives at Fannie and Freddie about the increasing risks of non-payment by subprime borrowers the companies did nothing and when the regulators took their concerns to congress their warnings were met with scorn and contempt. The politicians who received the most political contributions from Fannie and Freddie, by pure coincidence, just happened to be their biggest defenders: Chris Dodd (D-$133,900), John Kerry (D-$111,000) and Barack Obama (D-$105,189).

Representative Barney Frank, who has been a fierce defender of Fannie and Freddie, actually said, while arguing against more regulation, "I want to roll the dice a little bit more in this situation towards subsidized housing.... " It's nice to know that he doesn't mind gambling with our money. Senator Chris Dodd, in praising Fannie and Freddie said, "I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time.
"While Senator Charles Schumer said, "And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission."

Barack Obama has received more money from Fannie and Freddie than any other senator, with the exception of Senator Dodd, in the last four years. Before entering the senate, Obama filed a class-action lawsuit against Citibank, alleging that the bank was red-lining, or not doing enough lending in certain areas. That lawsuit was eventually settled. Arguably, Barack Obama helped cause the problem he now wants to fix.

The Federal Reserve Board was doing its part by throwing huge piles of cash at would-be home buyers by keeping interest rates too low. With low interest rates speculators began to look at houses as business opportunities, while others began to look at their homes as a giant piggy bank rather than a place where you actually lived and raised a family. Alan Greenspan encouraged this type of behavior and proudly said, "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgages..." President Bush, responding to September 11th unwisely encouraged us to "go shopping" rather than hunker down financially and contribute to the War on Terror in other ways (can you say home equity loans?).

The SEC also shares in the blame. It failed to do its job (failed to adequately regulate mortgage brokers, the credit rating companies, and naked short-sellers), acted only after the markets froze-up (finally addressed mark-to-market rules) and refused to examine how the credit-default-swap market could grow from $919 billion in 2001 to over $54 trillion by 2008 (which allowed companies to make wild financial bets with the false confidence that 'insurance' would be there if the deal went south).

So what happened? Home-ownership rates which had been relatively constant for 25 years began a 10 year upward climb beginning in 1995, around the same time that government began its push and pressure for banks to make more subprime loans. The politicians, banks, lenders and Wall Streeters were thrilled because they were all making gobs of money.

Today we are all paying the price for the decisions made long ago. I have spoken to people involved at the highest levels and they now are all saying the same thing, "it is worse than anyone knows" and "worse than I even thought." Political and business leaders who I respect have told me that the economy is on the edge of an abyss.

The bailout is an outrage and is designed only to buy time for the politicians. It will delay the real hard times from hitting until after the November elections. Not one politician has said that this bailout legislation will put us on a better financial footing or that our economic problems will be put behind us. In fact, we'll be worse off because our politicians, even in this crisis, can't stop themselves from spending. This bill includes an extension of the rum tax benefits for Puerto Rico and the US Virgin Islands ($192 million), tax benefits for companies which manufacture wooden arrows for kids ($6 million), car racing tracks ($128 million), a provision which forces insurance companies to treat mental health problems like physical problems ($3.8 billion) and many, many more.

International markets don't offer any better alternative. Germany, England, the Netherlands, and Russia have all come out with their own government backed bailout plans. There are now calls for more international regulation (presumably led by the United Nations) and China has taken this opportunity to call for "a diversified currency and financial system and fair and just financial order that is not dependent on the United States." Meanwhile, there is increasing international indications that the dollar will lose its place as the reserve currency of the world.

The politicians from both political parties continue to lie to us. They promise us better healthcare and more government programs. The only thing either party will be able to deliver is higher, much higher, taxes as the debt swells and government revenues fall. The same politicians remain silent, while capitalism, which brought us the highest standard of living in the world, is increasingly attacked and discredited by its enemies.

But it's not capitalism which has been discredited by our current crisis, it's greed that has been shown to be at the root of our present economic uncertainty, and greed is unfortunately a universal human trait and has demonstrated its reach in socialism, fascism, communism and capitalism. The greed of Wall Street is nothing compared to the greed of our politicians who have continued to expand their power and influence at the expense of their country.

Our children and grandchildren will ultimately pay the price for their failure to act prudently and in the best interest of our country because they will be the ones saddled with mountains of debt and diminished standard of living.

I hope that this summary gives you a better idea of how the people who caused this fire are the same ones who are now telling us that they know best how to put it out and a reason not to believe their current promises.

We have faced tough times before. We fought the Nazis in World War II, defeated communism in the Cold War and Americans fought each other to keep our country together in our own Civil War. These tough times require us to educate ourselves and help others understand what has brought us to this point and the grave consequences of what will happen if we let this continue-that is our fight.

In my next email letter I will answer the other question you asked, "what's coming?"

Sis, I know you will always consider me your crazy brother but please pass this message on to all of your friends. There are too many rumors circulating and I want to put the facts out there. This isn't about slamming the Democrats or Republicans--this is about getting the truth out to as many people as possible. The more people we can wake-up the more people we will have restoring the hope, promise and opportunity of our great country. Please pass this on.

Glenn

[MasterWIII]

More people need to understand the reason behind the failing economy. Most people are too lazy and don't do their homework, they just go with the flow. Great post Oly.

[oly884]

Guy's, here's the second of three messages from Glenn:

http://www.glennbeck.com/content/articles/article/198/16278/

Glenn Beck: What's Coming

October 8, 2008 - 12:29 ET

Guys,

If you thought my first email letter answering the question “how did we get here” was on the scary side you’re really going to find this email letter that answers the “what’s coming” question very sobering. I promise you though, my next letter addressing “what you can do to prepare you and your family” will be positive.

Here’s my answer to your question of “what’s coming.”

The economy is going to get worse. I know that’s hard to believe considering that in the past 15 months Americans have lost over 2 trillion dollars of retirement savings, that Iceland which has a GDP of $14 billion and liabilities in excess of $100 billion held by its banks and is on the brink of bankruptcy and the International Monetary Fund has just warned of a global “major downturn” in 2009.

A Second Great Depression?

Just how bad will things get? Recently, I had an off-air conversation with one of the titans in the business community. He has been in the thick of what’s happening on Wall Street, the credit crisis and the economy. I’ve been speaking with him about these issues for about two years and he has always been an optimist. Every argument I would make about how bad things were going to be he would counter with an equally optimistic economic prognosis. For the first time he’s now told me that our economy is in for a very “rough landing, at best” and that if our politicians don’t get the bailout exactly right we could see our GDP (a measurement of the total value of all the goods and services produced every year) falling between 15%-20% in one year.

So what does that really mean? A 15%-20% reduction of GDP would be like wiping out between $2.1 to $2.8 trillion dollars from our $14 trillion GDP. To show you how big that number really is, consider that in one year we spend about $583 billion to run the entire Defense Department, $43 billion to fund the entire Department of Homeland Security and have spent less than a trillion dollars fighting in Iraq since that war began.

By way of comparison, in the Great Depression, our national GDP fell 29% over a four year period (1929-1933) and in that period we saw 7000 banks fail, a 25% unemployment rate and a Dow Jones industrial Average suffer an 80% decline. And that was when the pain of a shrinking GDP was spread over 4 years!

About three weeks ago I had the opportunity to walk with very successful billionaire who has spent over seven decades doing business in America. I asked him what it would mean if our economy suffered a 15% reduction in GDP in one year. He stopped mid-stride, thought for a few minutes before saying, “I can’t begin to imagine how bad things would be if that ever happened.”

Credit Card Debt and Greedy Politicians will Prolong our Problems

All the financial ‘experts’ are telling us that whatever is coming our way will be short-lived. Yes, times will be tough, but we’ll quickly emerge and be stronger. I agree that we’ll survive and that we’ll be stronger, but I don’t think it will be a quick recovery.

Unlike the Great Depression we don’t have a large industrial base that will assist in our recovery and too many people don’t have the savings to help them weather the storm. Instead, the average American household carries at least $8,000 in credit card debt. Lastly, our political leadership will be a burden, rather than a help, in getting us back on track. Barney Frank, Chris Dodd, Nancy Pelosi, President Bush and Secretary Paulson wake-up each morning and gobble-up larger pieces of the economy and American businesses. They tell us that ‘we need to do this or things will get bad’ but none of them have gone on record and told us that if we follow them we’ll be better off.

The Great Depression showed us that government intervention, at best, will only delay the eventual belt-tightening and pain that must take place to bring the marketplace back into balance. The overbuilding and liquidity excess of the past 10 years has to be brought back into balance. Despite 10 years of government programs under Hoover and Roosevelt accompanied by massive government spending it was not until World War II began that unemployment fell below 10%. It was not a coincidence that the stock market finally regained the strength it had in 1929 only when the prospect of global war appeared to be inevitable in 1939.

How Hedge Funds Could Make things Much Worse

If the government regulated banks can be in as much financial trouble as they are now, just imagine the problems lurking in the unregulated hedge fund world. Hedge funds are a 2 trillion dollar industry. That 2 trillion has been leveraged by several multiples giving it much more influence than the 2 trillion would suggest.

The super-rich invest their money in hedge funds because of their traditionally higher returns. Along with the super-rich, teacher unions, government employee unions and large mutual funds invest in hedge funds, in short, if you have money invested in the market there’s a good chance some of it is held and managed by a hedge fund.

In September, hedge funds around the world recorded their biggest drop since August 1998. Investors that wanted to pull their money out were prevented from doing so by mandatory ‘lock-up’ periods imposed by hedge funds that prevent investors from pulling their money out without giving advanced notice, typically 60 or 90 days. I can only imagine that lots of people have given notice and when they can, will be pulling out their money. When that happens the smaller hedge funds will be wiped out and the larger ones will take big financial hits. The next big test for hedge funds will be October 23rd when an estimated $400 billion in Lehman related credit-default swaps will have to be auctioned and settled, those hedge funds that can’t come up with the money will be wiped out.

Our Politicians keep Playing Politics while our Country is on Fire

Look for our politicians to take advantage of this crisis to promote their own agenda. They keep treating this like a game and are taking actions only after weighing whether their action will help or hurt ‘the party’ at election time. Our country is at the edge and our politicians are worried about elections. This can’t be about Democrats or Republicans. This has to be about saving America.

It’s shameful that Obama and McCain haven’t told the American people that there is no money for all of their proposed spending plans. No, our candidates continue to promise us new plans when we don’t have enough money to pay for the ones we already have.

During the last debate Obama told us that America is the richest country in the world and that we need universal health care. Maybe one of his advisors should tell him that this richest country in the world is borrowing 2 billion dollars a day from foreign countries because that’s how much more we spend than take in, and that was before we started bailing out Wall Street, Main Street and homeowners.

Obama is unbelievably still planning on redistributing wealth in the middle of an economic crisis by taxing those who earn in excess of $250,000 and then redistributing that money to those who make less than $200,000, including sending people who don’t pay any taxes at all $1,000 check. His plan has been called a New Tax Welfare Plan. Call it what you want, we don’t have the money to pay for it.

McCain’s plans for revamping our health care system and his support for a carbon-tax plan are also unaffordable. He should come clean with the American people and tell us that. His failure to so demonstrates that he really doesn’t understand what is taking place in our homes and businesses.

Congress wants in on the action too. Nancy Pelosi, Harry Reid, Barney Frank and Chris Dodd will flood our country with new programs. The progressive ultra-left has taken over the Democrat Party. They are so liberal and so out-of-touch with mainstream America that Senator Lieberman, a longtime Democrat, left the party and is now an Independent who is publicly thinking about no longer caucusing with the Democrats. Longtime Democrat and chief fund-raiser for Hillary Clinton, Lynn Forester de Rothschild, has said that her party is too far left and is now actively campaigning for John McCain.

Politicians Waiting to Exploit the ‘Right’ Tragedy

Too many politicians are anxiously waiting for the right moment to expand government. They’re waiting for the “Megan Law” moment. That moment when the stars align so politicians can pass legislation over any objections, whether it’s good or bad.

Megan’s Law is named after a 7 year old girl who was kidnapped, raped and murdered by a repeat violent sexual offender. The public had finally become so outraged that the politicians had to act. Megan’s Law requires the posting of information about sexual offenders to the public. Passing Megan’s Law was the right thing to do but it shouldn’t have taken this tragedy to do it—but it took Megan’s tragedy in order to overcome the opposition from the ACLU and other groups who kept screaming about the rights of the accused.

Pelosi, Reid and the progressive left as well as many Republicans still don’t believe that our very survival is at stake with what is going on today. They still look at this meltdown as just another opportunity to score political points. If the Democrats in the House of Representatives really believed that our country’s economic security was at stake then they would have passed the bailout bill. They didn’t need any Republican support. They had the votes. But Pelosi and the Democratic leadership didn’t want to risk a massive voter backlash so they didn’t push the bill through. That is playing politics. If the Senate believed that our country’s economic security was at stake they would have passed a bailout bill without the $100 billion in ‘goodies’ attached. That is playing politics. Do the right thing for the country, stop playing politics.

As the crisis worsens and takes a higher emotional toll on the public we will see tragic stories. We will see more stories about people giving up hope, losing focus on what’s truly important and ending their lives and the lives of people they love. And when the ‘right’ story comes along, it will be exploited to take away more of our freedoms, to shred the Constitution just a little more and grab more money for the government from the people who earn it.

We can also expect our international/foreign enemies and competitors to take advantage of our current economic crisis.

Inexpensive oil is the lifeblood of our economy. It helps us plant our crops, is needed to make the clothes we wear, and keeps us moving freely by car, plane, and ship. America benefits when oil prices are low. Russia, Iran and Venezuela (along with several other countries) benefit when oil prices are high. Iran recently misreported that it forced a U.S. military airplane to land (it turned out to be a Hungarian plane carrying relief supplies). This was an attempt by Iran to spike oil prices temporarily, and it worked, until the truth came out.

Russia’s invasion of Georgia wasn’t about South Ossetia. It was about sending a message to the West that our efforts to build and maintain an oil pipeline through Georgia relied on the good graces of Russia and they didn’t want the West to forget that. Iran has continually petitioned OPEC to cut back on production in order to keep oil prices high and Venezuela is using its petro-dollars to spread his form of socialism.

Russia is also using its massive petro-dollar supply to buy influence on the international front. Remember all those banking problems Iceland is experiencing? Russia is now working with Iceland on a bailout package in an attempt to leverage this crisis into strengthening its international influence. Russia is also reaching out and strengthening its ties to Syria and Iran. Syria announced that it is dredging its fishing port of Tartous so it can accommodate Russian warships.

Iran will continue to develop its nuclear program. The countries of the world will increasingly be focused on reviving and in some cases, saving, their economies. Iran will take advantage or our collective distraction. I am increasingly in the camp that thinks Israel will have to take unilateral action against Iran before it develops a nuclear weapon and that would explain why we’ve decided to sell Israel 1,000 bunker busting bombs.

In the past four weeks Venezuela hosted two strategic long-range Russian bombers, and held joint navy exercises with a fleet of Russian ships, including a nuclear-powered missile cruiser. President Chavez has also been busy working with Columbia’s FARC terrorists and last week renewed his goal of building a ‘civilian’ nuclear program and has called for revolution throughout South America.

These countries will increasingly use more aggressive methods to drive up the cost of oil and expand their sphere of international and regional influence by generously spreading around their petro-dollars.

Meanwhile, North Korea doesn’t have any oil so it’s using the next best thing, the threat of nuclear weapons to get what it wants. It wasn’t too long ago that President Bush was touting a new ironclad agreement between America and North Korea. Well, after promising to verifiably dismantle its nuclear power plants in exchange for financial aid and fuel, the North Koreans have vowed to resume their suspended nuclear program. You can expect the guy with the crazy haircut and glasses to demand more money, fuel and aid for him to play nice again.

Closer to home you will see that Americans are increasingly feeling isolated and detached from their government. Part of the reason is that we don’t think politicians care what we think anymore. The $700 billion bailout bill passed the Senate at a time when only 30% of the country supported it. We felt that a giant stick was poked into our collective eye!

59% of Americans would vote the entire Congress out of office but due to the self-serving way the politicians have drawn their election districts it’s just this side of impossible to do it. Only 49% of the people believe that this congress is currently doing a better job than a group of individuals selected randomly from a phone book would do and 33% of us actually believe the group selected at random would do a better job!

Politicians play Politics with our Economy by Playing Politics with Energy Policy

But our politicians just don’t get it. Look at energy. We need inexpensive oil to make our country work and maintain our standard of living. To be perfectly clear: without inexpensive energy our economy doesn’t work and our standard of living dramatically falls.

You would think that our politicians, who understand this, would put our national interest above their petty desire for re-election, but they don’t. Look at what happened with offshore drilling. The federal moratorium on offshore drilling legally expired at the end of September. In theory, oil companies could have started drilling the first week of October but instead no oil company is even drafting plans to drill, why? Because they know that the politicians aren’t serious about offshore drilling. They know that too many congressmen are servants to the extremist environmental movement and as soon as the election is over will vote to either prevent offshore drilling or impose onerous conditions on any drilling. So the politicians will go home to their districts and tell the voters they are for drilling and then turn around and collect big fat donations from the environmental lobbyists who oppose drilling.

The same thing can be said about coal and nuclear power. Obama tells a national audience during his nomination acceptance speech that he and Joe Biden are for clean coal. Less than 90 days later Joe Biden is captured on tape telling a woman that coal isn’t going to play a role in an Obama Administration energy plan.

Obama and McCain have talked-up nuclear power on the campaign trail but have done little to actually make it happen in their many years of service in the U.S. Senate. Meanwhile China plans on building about one nuclear power plant a year up through 2020.

There’s a real disconnect between our elected leaders and the people, but the majority of Americans are willing to work through this disenfranchisement. We want to reform government. We want to improve our country and communities but there is a fringe that is actively trying to exploit this disenfranchisement. I have someone on my staff that monitors the extreme blogs—stuff that most people, thankfully, haven’t even heard of. These blogs contain a call to revolution. One writer said that we need to “join with your brothers in arms and through force, return what is rightfully the peoples to the people” and another entry encouraged the reader to “rise up and join us before our nation is taken from us by the crooks and bastards that waste our air, one nation, taken back by the force of the peoples militia…”.

Guys, I told you that this was going to be a sobering letter. We are on the edge of a giant abyss that could swallow not only our economy but the freedoms and security we have enjoyed for over 200 years. Believe it or not, I don’t think that this letter captures the urgency that I feel, but I didn’t want to include wild speculation because I can’t see into the future but I wanted to give you a sense of the Perfect Storm that I have talked about and how the pressures that our economy and country face at this time are once again placing our “lives, fortunes and sacred honor” at stake.

Please ponder and pray about what I’ve said and then pass these email letters along to as many people as possible so they can prepare themselves and their families. Then, the more people there will be to help us overcome fear and desperation.

There is good news. We can prepare ourselves and our family for what’s coming and work to prevent the worst from happening. We have to focus on value and values. Those things that our parent and their parents lived but somehow too many of us have forgotten. But that’s for my next letter to you.

With love, glenn

[fustercluck]

http://widgets.nbc.com/o/4727a250e66f9723/48ed40f9e0234514/48ec366e31e7539a/74f9fda7/-cpid/267872bcde6272ce/clipID/727521/video_title/Saturday+Night+Live+-+C-Span+Bailout?storeInPid=true

[MTL_4runner]

David, surprisingly I am in agreement with what Beck mentioned in his 2 installlments thus far. The one problem that we are going to be fighting higher and higher energy costs because even if peak oil has not occurred, the number of people consuming oil in developing countries will continue to grow. The smartest move the government could make at this point would to heavily push for development in the renewable energy sources (wind, solar, tidal, biomass, etc......forget ethanol and biofuel).

[oly884]

Jamie, I think that this is one event that we can all come together on. I'm really tired of politics, both parties have done nothing for us, and both have caused this mess.

When the hard times really hit, political differences won't matter much anymore.

[fustercluck]

http://www.nepalibwatch.com/images/bosmoke.jpg

[fustercluck]

courage...

http://img87.imageshack.us/img87/9412/obamaaslion2tu3.jpg

[MTL_4runner]

Jamie, I think that this is one event that we can all come together on. I'm really tired of politics, both parties have done nothing for us, and both have caused this mess.

When the hard times really hit, political differences won't matter much anymore.


X2

The partisan politics should be completely thrown out the window in the face of a crisis this dire/deep. Quite honestly I have serious doubts whether either party's man is going to cut the mustard during this mess. The country really needs the best and the brightest from any side to come to the forefront and lead because when the dust settles the world economies will be very different than at the start of this debacle. The US is going to slide down on the economic ladder among the world's economies but having the best talent working for us will effectively keep that to a minimum. Washington is going to need to seriously tighten its purse strings and get with the program so they don't make a bad situation even worse.....again something I saw neither candidate willing to explore. The public needs to become grounded again in the old fashioned (and time tested) method of at least not spending more than you make......seems so simple but changing old habits can be o-so-difficult.

[oly884]

Jamie, I think that this is one event that we can all come together on. I'm really tired of politics, both parties have done nothing for us, and both have caused this mess.

When the hard times really hit, political differences won't matter much anymore.


X2

The partisan politics should be completely thrown out the window in the face of a crisis this dire/deep. Quite honestly I have serious doubts whether either party's man is going to cut the mustard during this mess. The country really needs the best and the brightest from any side to come to the forefront and lead because when the dust settles the world economies will be very different than at the start of this debacle. The US is going to slide down on the economic ladder among the world's economies but having the best talent working for us will effectively keep that to a minimum. Washington is going to need to seriously tighten its purse strings and get with the program so they don't make a bad situation even worse.....again something I saw neither candidate willing to explore. The public needs to become grounded again in the old fashioned (and time tested) method of at least not spending more than you make......seems so simple but changing old habits can be o-so-difficult.


nail on the head, Jamie.

I have been fortunate enough that even as a young kid, I was taught to be very self reliant. Cooking, canning, dehydrating foods, Hunting, fishing, gardening, building tables, chairs, etc.

A lot of the things that we take for granted could be going away. What IF you can't go to the grocery store to get food? What if you can't afford the food?

As much as I hate to say it, we need shakeups every now and then to, as you said, ground us.

The money problems would most likely never been seen had our society/culture stayed a bit closer. Instead, we have so many things we see people coast through life and get all the things we desire so easy, that when presented with an offer, people take it.

I'm not blaming anyone but the individual on this one. Personal responsibility is where this problem originated, and it is where the problem will end.

We must take these matters into our own hands. The lack of responsibility is what sent us into this mess, but it is going to be the people who stand up and take the responsibility that will lift us out. Face our problems, pull our head up, and take the bull by the horns.

[MTL_4runner]

Wow........anyone see the close on the market today.

I'm going to make a prediction that you're going to see the stock market bottom out around 7500, make a good size bear market rally (maybe 20-30% gain in very short order, look for it to be very quick) towards the end of October or early November and then look out below. My suggestion for people will be to use this rally to sell into and move your investments over to cash. Like I said the game is capital preservation and I can't make it much clearer than that. I've moved 95% of my stuff over to cash myself already even with taking losses. It's my bet you'll get much better buying opportunities in the next 1-2 years which will more than make up for the drops you've seen so far. This is really a once in a lifetime event we're going through right now. The one bright light I have seen in all this is the sign that we won't be recreating the great depression.....this was signaled by the fact that you had an international and coordinated rate cut by all the central banks. This is a very good sign indeed and it shows that we are now entering a period of true world economy as I suggested earlier. :thumbup:

[Bob98SR5]

jamie,

yup, better to lose a little now than a lot more later.

[MTL_4runner]

I wanted to add one more prediction to what I said above and that is that I believe you'll see the price of precious metals hit amazing highs this time. For the past few yeras now the world central banks have been deliberately supressing the price of precious metals in order to keep people in paper money. This works as long as they have metal reserves to sell but this crisis is so bad that I believe it will blow through their reserves and market forces will take over again. So in addition to being mostly in cash you should be looking at buying at least some gold and especially silver (real metals like coins and bullion, not metal mining stocks, not metal mutual funds nor metals futures) while it is still relatively low. I'm looking at silver $35+ per ounce and gold shooting to over $2000+ per ounce possibly higher. I hope this helps a few people at least.

Have a look at gold's inflation adjusted price (it was over $2200!):

[oly884]

Jamie, great info on the gold/silver/precious metals!

[MTL_4runner]

Here's my guess at the rally support levels I mentioned above (1st support is the bear market rally bottom and the 2nd support would be a true market bottom). The actual markets bottoms may occur just slightly above these lines. You can also see why how much of a bubble occurred during the last few years and that it was not only lacking fundamentals but also completely unsustainable.

[oly884]

I'm going to open up a new theme park...

the signature ride is going to be "the dow" I will literally take the 2 year average graph of the dow and turn it into a ride!

Other games will be the duck shoot one, except they will just be politician's heads (all of them)

The lie detector. But this time, you get to hear a line from a politician, then guess what % they are off. If you're within 5%, you get a prize!

The next ride will be "The Partisan Ride" The ride will just spin 50 people around until they are all sick to their stomach of the ride and end up helping one another try and stand up together...

More rides to come as I think about it!

[MTL_4runner]

Good heavens what a mess the financial system has become. Looks like the dow is going to be putting my chart theory to the test as we're seeing new lows getting set towards the end of the year. Funny how my post back in October is now starting to match alot of the professional predictions of a bottom around 4,000-5,000 when the financial storm is finally over. Either that shows how overpaid the Wall St guys really are or I'm in the wrong line of work. :laugh: Now the tough part is to keep congress from bailing out any more firms.....folks, how plain do you want it, just let them go into bankruptcy protection and restructure with a much lower debt load (ie far more competitive again). The treasury team needs to be cleaned out too because all those bozos did was to give money to their buddies instead of buying up the toxic debts they said they were going to do with the money. They can't clean house in Washington fast enough IMHO.