Originally Posted by HappyTexan
Why do you think Bernake said yesterday that the Fed would start buying Treasuries ?
China announced a few weeks ago that it would be spending it's money in it's own country to help its own economy.
When the Fed has to start buying Treasuries that indicates that no one else will.
The writing was on the wall..just not printed by the MSM.
Despite the wishes of Paulson, Bernanke and that ilk, it is unlikely that the Chinese, Arabs et al
will lend consumption-heavy Americans another $2 trillion to reflate the bubble.
The question is, will they turn the spigot off all at once, or still allow a moderate stream?
The article cited is more than a year and a half old, though probably still valid to some extent. Equally interesting on that site was the story about behind the scenes in the Citigroup bailout.
The US banking system, like housing before it, is in the process of being nationalized. The question is, to what extent will the nation, if its integrity is maintained, will channel enough resources to producing long-term real income-generating productive assets
(not centers of consumption, like housing, and not paper assets, like MBS), and whether the pace of any shift in that direction is faster or slower than the slowdown or cut-off in global credit to the US.
The best case scenario is a balance between a shift toward domestic production and a slowdown in global credit. This is possible if the US cooperates in the upcoming G-20 meetings, implying to some extent a loss of sovereignty, and there are many who would lament this, even build an ideology around it in an attempt to force
What does a responsible parent do with a teenager than abuses a credit card, for example?
Sooner or later, we'll see who is spoiled, possibly a spoiled monster, and who isn't, who is responsible and who isn't, we'll see who deserves sovereignty and who doesn't.
Current US leadership is horrendous, nor does the incoming leadership inspire confidence: they keep talking about ways to prop up consumption based on some magical formula of high housing prices, itself a center of consumption.
These people are too dense to realize and make realize:
production - consumption = saving + investment