Saturday, September 6, 2008
The government's answer to the insolvency of banks and GSEs is to nationalize them. The latest maneuver, as reported by the Wall Street Journal, is to take over the prostrate mortgage outfits Fannie Mae and Freddie Mac. This will cost us taxpayers in ways that are hard to put a number on and impossible to calculate.
One way though is that the long standing decline in the purchasing power of the dollar will resume and accelerate. I believe that the dollar has been artificially levitated precisely in anticipation of a whole raft of nationalizations to come. At the same time the dollar was goosed higher, a massive engineered attack was orchestrated on precious metals, the canary in the coal mine with respect to the dollar's prospective condition. As George Bush senior was fond of saying, "This will not stand."
With respect to the nationalization of Fannie and Freddie, there is every reason to believe that the Chinese, owners of large amounts of Fannie and Freddie debt, have pressured the U.S. government to step in. At the same time, we have corporate shysters like Pimco's Bill Gross, who knowingly bought distressed paper, clamoring for the government to nationalize. In the case of Gross, it is a certainty that he purchased the items in full anticipation of a bailout. The criminality that has occurred over the better part of this decade, and is now occurring in response to earlier malfeasance is unspeakable. One wonders if and when the American people will wake up to it and do something about it.