Never forget exactly who is being rescued by Central Bank/Political bailouts! Here’s a hint: It ain’t you or me:

“…it is important to remember that the attempt to rescue distressed European debt by imposing heavy austerity on European people is largely driven by the desire to rescue bank bondholders from losses. Had banks not taken on spectacular amounts of leverage (encouraged by a misguided regulatory environment that required zero capital to be held against sovereign debt), European budget imbalances would have bit far sooner, and would have provoked corrective action years ago.

The global economy has not been well-served by the financial companies that leaders are trying so desperately to protect. Our vote is for receivership and restructuring so that losses can be taken by those who willingly accepted the risk of loss, and the legacy of bad investments and poor capital allocation doesn’t have to be converted into a future of suppressed economic growth.” (emphasis added)

John Hussman, January 3, 2012  “The Right Kind of Hope”

Let’s hear it for “receivership and restructuring” . . .

Category: Bailouts, Credit, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “QOTD: Who Is Being Rescued”

  1. mrevy says:

    Agree bond holders, equity holders should be at risk – but I think some of the motivation for bailouts is to avoid depositors becoming creditors and/or triggering bank runs. Government subsidized deposit insurance has masked risks at many banks and introduced moral hazard a long time ago. I think average depositors would be bewildered to discover they become creditors in a fractional reserve bank credit meltdown.

  2. AtlasRocked says:

    And if the banks restructure, the shock to the economy disrupts the tax revenue stream, which imperils the social welfare programs’ revenue sources. No politician nor their party wants to own the resulting contraction in the economy. It’s the ultimate kick the can act, pretending to be wanting to reign in the corporate influence while they depend on corporations’ and corporate employees’ tax revenue to keep the scam going.

    This is what politicians are really trying to save, they don’t give a crap about the bankers nor the corporations. Their constituents will be VERY upset when their checks get reduced because the politicians tried to let the normally healthy, but painful, defaults occur.

    The system must be flushed out. We are living in a house of cards right now.

    Fear the young adults when they figure they’ve been massively lied to about the fiscal health of their government and the benefits programs, when they realize they are being left holding the debt grenade. We have sewn the seeds of a great conflict with a great deception: Borrowing makes us rich.

  3. Rick Caird says:

    Exactly. All these manipulations are about the banks, not about the countries.

  4. Petey Wheatstraw says:

    I assert that there is enough of everything for everyone — even the greedy and gluttonous.

    The threat to “social welfare” programs includes those programs that benefit the Corporatocracy. Show mw a person who got rich in finance, government contracting, or by virtue of preferential treatment by the government (in terms of taxation, licensing, regulatory capture, or legal immunity), and I’ll show you a real welfare whore.

    The great deceptions are the Trickle Down theory and the idea that wealth or capital is somehow generated extra-governmentally.

    Our currency is pure fiat. The debt is fiat, the assets are fiat or valued in fiat units of currency. The Haves and Have Nots are decided by fiat and for the benefit of those doing the deciding and their cronies.

    WTF did people think would happen when both the creation and distribution of an unlimited resource was concentrated in the hands of a few? We put the shackles on ourselves, but fail to realize that they are imaginary.

  5. AtlasRocked says:

    @Petey – Trickle down is a gigantic lie told by the left to describe the conservatives fiscal plan. It is not in any textbooks, it is not researched nor documented nor analyzed. It is a myth, created by the left so they can attack it, the mother of all strawman lies.

    Go look at dailykos.com – last time I looked it mentioned 100s of times there. Conservatives and libertarians don’t preach it, don’t believe in it, and don’t spend any time talking about it.

    If you’re going to attack, you should have something better than a made up lie to vent against.

    ~~~

    BR: You are adorable !

  6. notakid says:

    “WTF did people think would happen when both the creation and distribution of an unlimited resource was concentrated in the hands of a few? We put the shackles on ourselves, but fail to realize that they are imaginary.”

    Yep, it is beyond silly.

  7. Haigh says:

    “…it is important to remember that the attempt to rescue distressed European debt by imposing heavy austerity on European people is largely driven by the desire to rescue bank bondholders from losses.”

    No argument with the problem statement or proposed solution, but we NEVER see these bank bondholders named.

    I have a suspicion that they could be the largest, most politically powerful pension funds. And the banks fulfill their responsibilities by hiding this information from the public.

  8. Iamthe50percent says:

    @Haigh

    And I have a suspicion that they could be the largest, most politically powerful campaign contributors such as the Koch brothers.

  9. Theravadin says:

    The problem is that we actually need to do both : bailout countries and let the market determine the real value of the debt. But some of the key countries (Greece, Italy, although not Spain) have structural deficits – their economies are significantly founded on deficit spending. In that situation, it’s hard to avoid the inevitable economic hit as this is unwound. So we end up with the nasty trifecta – tanking economies, crashing banks, and bailouts. I really think that the cleanest solution may be printing money at this point – even if that stokes some inflation we’d be down to one problem instead of three. In fact at a 50% haircut, the central bank could print the other 50% to buy back the bonds, and the net increase in money supply would be +/- zero over the medium term, the debts could be reduced to a manageable size, and the value of the bonds to the holders would be more or less what the market already says it is.

    Then you’d just be left with the structural deficit problem, and the central bank buying the new bonds until that could be unwound. Plus possible some bank rescues, which should be structured to hit the equity holders through government purchase of new shares on the kind of terms that a hard nosed money manager would demand from a company in need of rescue. Still going to be nasty to the economy, but probably less nasty.

    I don’t think that there is any way out of this that isn’t going to be nasty – we just need least nasty.

  10. bsmi021 says:

    All the bond holders,bankers,politicians all the people who have been protected need to feel all the same if not worse pain all the normal people feel, if anything is going to change for the better. It is simple if they are always left whole with no risk then they will always do as they have been doing for the last 50 years, and it has proved horrible for the people of the world.

  11. thordeer says:

    Consider how all us ultra educated folk don’t have any farking idea how this works, why bailouts are necessary, who gets the $ and who is losing out. Then think about the voting public. Then think about how hard it will be to reregulate banks to have conservative portfolios and/or to have decent reserve requirements and/or to have commercial banks separate from investment banks and/or to have antitrust or other forms of breaking up too big to fail institutions. None of this happened in any way after the meltdown, and we are assured of having further meltdown after meltdown with no end in sight. There are now effectively no checks whatsoever on the risktaking, malfeasance, and bailouts of private financial institutions–in many forms. They will continue to suck the system dry. The capital allocation mechanism is no longer functioning because now the game is too take as many risks as will be bailed out as possible. Economic growth and sensible investment is over.