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Fire! The theater really is on fire!

by Mr. Chuckles

Dec. 9, 2007

PERMANENT LINK

The "Bush-Paulson Plan" is all that I expected -- and more! This is bigger and better than Iraq, and far more stunning than Katrina. It is fair to say that yesterday's announcement of the plan was the equivalent of the Prez's aircraft landing announcement of "Mission Accomplished!" And in comparison to Iraq, we are still in 2003 of the credit crisis.

The very idea of the government rewriting private contracts, even with just verbal arm-twisting (and unspecified threats) has the bond markets shaken up.

If contracts are broken now then who is to say that more contracts won't be unilaterally rewritten later?

Here is the Real Truth as I see it. The Bush-Paulson Plan is at attempt to kick the can down the road to:

A) Bestow problem on Dems in 2009

B) Buy time (literally) for The Powers That Be to go massively short all markets

C) Avoid entirely justifiable panic by We The People (until TPTB are ready to capitalize on the panic);

D) Intentionally fail to solve anything so that eventually, Resolution Trust Corp #2 can auction off $1 trillion of real estate for, say, $50 billion in cash -- of which the government will lend the borrowers $48 billion (and the borrowers will be well-connected insiders associated with DC and Wall Street.)

Bush-Paulson aren't just a pair of arsonist-firemen, they are cruiseliner captains who, realizing that USS Titanic is unavoidably approaching an iceberg, quietly evacuate in the lifeboats without telling the passengers... and after looting the vaults, and then pumping laughing gas into the passenger section so that everyone else dies happy in their sleep.

The only way that the financial markets don't crash is if "Helicopter Ben" Bernanke prints up another couple of trillion dollars and socializes the corporate losses (naturally the individual borrowers are Shit Out Of Luck... because, WTF, hey, this is a free market, right?)

* * * #1 -- Mike Shedlock, ace investigator, has actually read the darned thing and postulates that a) the plan is actually quite bad for many borrowers, and that b) most of the Prez's proposals, like IRS forgiveness after foreclosure, actually increase the motivation of borrowers to mail in the keys and walk away.

#2 -- Herb Greenberg has the inside scoop from an industry insider, and uh-oh, the "Bush-Paulson Plan" doesn't begin to address the /real/ problems, because "sub-prime" is a small portion of the exotic mortgage species that are going belly-up, and then there are the second mortgages piggy-backed on top of prime mortgages. Wells Fargo has $84 billion of these, for example.

#3 -- The very idea of the government rewriting private contracts, even with just verbal arm-twisting (and unspecified threats) has the bond markets shaken up. If contracts are broken now then who is to say that more contracts won't be unilaterally rewritten later? It seems most likely, in fact, because the U.S. is heavily indebted at all levels, from consumers to local, state and federal!

#4 -- Commercial real estate had a nice bubble too, and that is apparently popping!

#5 -- Junk bond defaults to surge!

Excerpt: Though at a historically low level presently, the speculative-grade default rate is expected to skyrocket over the next year.

(((So, if the "Bush-Paulson Plan" is not really a fix for much of anything, more likely just a way to buy time for The Powers That Be, then what is the Real Truth?)))

#6 -- Surge in auto-loan delinquencies is latest trouble for the economy

Consider that the corporate media are not about to communicate the Real Truth. Even if they knew it! In 2005 Bernanke denied that there even was a real estate bubble (just as it was peaking...). Here is a "debunking" of the Media Myth of the real estate bubble, in which the author concludes with an admonishment to the media to be more fair and balanced in the future (haha):

#7 -- Corporate media is unlikely to warn theatergoers about the very real fire!

Remember, this person was so befuddled by the media Kool-Aid that in 2005 he penned a serious warning to the liberal media to quit alarming people needlessly!

Excerpt: Media claims about a “housing bubble” are nothing new. Since before the 9/11 terror attacks, the media have been calling the housing market a “bubble” while predicting an imminent, devastating decline. Not only have they been wrong in forecasting such a top, they have thoroughly mischaracterized what an investment bubble is. Now that the market for homes has finally slowed a bit, the media are declaring the bubble has burst. ...

Mr. Chuckles

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