REUTERS ARTICLE!
Posted February 13th, 2008 by MatthewS
output
NEW YORK (Reuters) - Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.
That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.
In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.
"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.
"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.
Legal changes would be needed to give the Federal Reserve and the U.S. government the authority to buy stocks. Currently the Federal Reserve can buy only debt issued by the Treasury, as well as U.S. agency debentures and mortgage-backed securities.
While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.
The build up of a credit bubble in recent years was similar to the late 1920s run-up to the Great Depression, he said.
ENTIRE ARTICLE HERE:
http://www.reuters.com/ar...
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Pay close attention to paragraphs 5 & 6
Anyone care to speculate on where this is going?
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THE ROAD
TO SERFDOM
Here's some assets for em...lol
Fitch Ratings, while telling investors last Friday to expect additional "widespread and significant downgrades" on $139 billion worth of subprime loans, has cited a new factor in their "worsening performance."
"The apparent willingness of borrowers to 'walk away' from mortgage debt," the analysts noted, "has contributed to extraordinary high levels of early default" on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007.
Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They're perfectly capable of acting rationally without political interference.
http://online.wsj.com/art...
But..
What does it all mean? How many different places can this lead? Giving people who can print money the ability to chose who to invest limitless amounts of cash in?
Something like this could mean total economic dominance buy a handful of men.. Oh.. wouldn't they just LOVE that?!?
I'm still learning everything I can about economic issues, but I know enough already that that article scares the sh^t out of me. Can you guys lay out the possible ways this could go for me?
Do you think this is all part of the plan? devalue our dollar into the dirt and propose granting them this power to 'save us all' ?
What an ugly situation..
My friends, this would be the kiss of death
For any private company that the Fed buys into on the open stock market.
devalue our dollar into the dirt
Then introduce the amero to save the day! Thank you government! Thank you for taking care of me and my family.
Well, this is something else too...
Instead of just a dollar devaluation. It would give the US government and the Fed the right to own stock... meaning the right to own companies. Meaning they could leverage purchase pretty much the whole US.
As in we'd finally be actually owned, instead of just figuratively owned (taxes).
Kinda like Communism... only the same.
To save "capitalism"
To save "capitalism" from the "terrorists," they had to convert us to communism!
"We don't have to start a brand new revolution...All we have to do is restore the original Constitution." -Ron Paul
You read between the lines.
The US Government will begin purchaing major interest in American corporations.
With fake money.
yep
Pretty screwed up world, isn't it.. blah
Well
then we'll all be owned outright.. great solution.. ~sigh~
Good catch Matt
And Connolly as an advisor.. got figure. He's killed more currencies than Father Time.
We May have to become Communists outright
How about that Ron Paul March on Wash, now?
feudal system
Sounds like a great plan. Maybe we can go back to the feudal system and slavery if we're lucky.
"We don't have to start a brand new revolution...All we have to do is restore the original Constitution." -Ron Paul