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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Wednesday, September 24, 2008

Bankrupting America

If we bailout
If this bailout passes, our status of a debtor nation will become extremely problematic overnight.
Once we have shown we will not stop printing money, the countries that lend us money will require higher interest rates for the "loans" we require. This could spike immediately, causing companies to fail sooner, probably in other sectors not getting "Free money".

If we don't bailout
If the bailout doesn't pass, you can expect a cascade failure in the financial system quickly. Either way it isn't pretty. In anticipation that the bailout won't pass, or will take too long to get passed, the 3 month treasuries are seeing a panic run to them, interest rates are below 0.50%. Also for commercial paper, interest rates have risen to over 6%.

Money Markets are continuing to see a drain, and I'll remind those reading they are NOT insured by the federal government.

Safer place to be

In all directions, the best place to be in the "near term" is Federal bonds. 5K or so in cash on-hand can't hurt! There is just too much deflation right at this moment to be concerned over return on investment, the name of the game is not keep what you got.
We may see an immediate dollar collapse, and "imports' skyrocket over-night. That is a form of inflation, since the US is a major importer.

World Opinion
Europe and Asia have spoken out on the bailout, and as in previous blog entries, Russia, China, and Japan are separating from America's debt. Further Germany and England have stated they will not participate in the bailout process for the USA or in their own countries. Europe hasn't yet lowered interest rates, keeping a tight reign on inflation.

China is further pushing the agenda I mentioned before of using this time to transition America as world economic leader to China. I'm not 100% certain this will be the transition that occurs, but I do believe the USA will not emerge as financial world leader in the next decade. Since China has no debt, and is flush with American debt paper, they can use their financial position of power to push the USA debtor nation around.

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