The US government is throwing hundreds of billions of dollars at the financial crisis. Look at Citigroup. Just over the past weekend, the government, in exchange for $27 billion in Citi preferred stock, will inject $20 billion of capital in the struggling firm and guarantee $306 billion in troubled mortgage assets. Next up will be auto makers with their new plan. For both Citigroup and the automakers “we the people” are again riding to the rescue. You see these companies “are too big to fail”.
Citigroup at one time was the largest bank in the US (world?). Read the Bloomberg article about Citigroup by Bradley Keoun here. The consensus is that if Citigroup failed it would be “disastrous” for the world economy. Maybe, but at some point these bailouts will be disastrous for the US dollar and taxpayer. How many toxic assets can the US taxpayer assume?
The only way out of this never ending mess may be reinflation, hopefully not hyperinflation. Help to the debtors will come at the expense of those who have been prudent. Those of us who are benefiting in the current disinflationary environment, with a strong US dollar, may be in for a rude surprise later if not sooner.
Expect a turning point soon, with a falling US dollar, increased gold and oil prices and a jump in long term interest rates as more programs are added to the $5 trillion already spent or promised. Obama can’t wait to add his bailouts come January. One has to ask: Just how much can the US government do? The piper will have to be paid at some time and that time may be sooner rather than later.
Citigroup at one time was the largest bank in the US (world?). Read the Bloomberg article about Citigroup by Bradley Keoun here. The consensus is that if Citigroup failed it would be “disastrous” for the world economy. Maybe, but at some point these bailouts will be disastrous for the US dollar and taxpayer. How many toxic assets can the US taxpayer assume?
The only way out of this never ending mess may be reinflation, hopefully not hyperinflation. Help to the debtors will come at the expense of those who have been prudent. Those of us who are benefiting in the current disinflationary environment, with a strong US dollar, may be in for a rude surprise later if not sooner.
Expect a turning point soon, with a falling US dollar, increased gold and oil prices and a jump in long term interest rates as more programs are added to the $5 trillion already spent or promised. Obama can’t wait to add his bailouts come January. One has to ask: Just how much can the US government do? The piper will have to be paid at some time and that time may be sooner rather than later.
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