Category Archives: United States Dollar

The End of the Dollar?

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While perusing various blogs I stumbled up something a bit unsettling. As I’ve been chomping on what the IMF bonds issues mean talks about moving away from the dollar as the reserve currency continue…

There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.”

It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.

Read the full article.

IMF issuing bonds…?

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Foreigners buying US Dollars?

I’m attempting to put a couple puzzle pieces together so here goes…

1) China has tons of US dollar and dollar denominated debt.  Additionally I heard suspictions that China may be purchasing land, companies, etc… with the debt.  Considering that we have no real access to their books, and they can really tell us anything they want I find this easy to believe.  If they had long-term dollar denominated deals they could exchange their dollars for tangible assets, which protects them from a declining dollar.  The US government will probably default on their debt via inflation so China goes and buyes an asset and says we will pay you in US dollars.  China’s holdings of US debt pays interest, and has a principle payement at expiration.  So, it seems plausible that they could use all their US holdings to buy up tangible assets.

2) BRICs (Brazil, Russia, India and China) are purchasing our debt.  Why?  What if they were willing to purchase dollars to placate the US only to use them to purchase raw materials, or IMF bonds (see #3).  We know China has been stockpiling commodities.  Oil has to be transacted in dollars. Are they paying for all the commodities with Yuan or dollars?

3) IMF Bonds… http://online.wsj.com/article/SB12441969…

China is thinking about purchasing $50b in IMF bonds.  Since when has the IMF sold bonds?  I didn’t see anything (see further down in my post) about which currencies would be used to purchase these bonds, but why can’t we make a leap and say that perhaps they would use US dollars.  The IMF holds a multitude of currencies so they buy dollars to keep the dollar stable for a bit and then use the dollars to purchase assets, which may be partially valued in dollars, but not a 100% exposure. The dollars are then held at the IMF, which issues bonds based on a basket of currencies.  This pulls dollars out of circulation (for now), helping to strengthen the dollar at least in the short term.

I don’t know if a scheme like this is even viable or makes sense, but it jumped into my head and I wondered if I’m completely off or there may be a bit of truth in it all.

Yet IMF is issuing bonds?

I’m pondering

a) the move by the IMF to issue bonds, and

b) that nations are cashing in their US obligations / cash for these newly created bonds.

So, I did a bit of digging…

http://blogs.wsj.com/economics/2009/06/01/imf-bonds-are-coming-soon-but-you-cant-buy-any/

The International Monetary Fund is putting final touches on its plans to issue its first bonds. Russia has already said it would buy $10 billion of the bonds, which would be priced in the IMF’s quasi-currency, “special drawing rights.” SDRs are a basket of currencies consisting of the euro, yen, pound sterling and U.S. dollar. As of Friday, 1 SDR equals $1.55.

So these are the major players when it comes to currencies, but excludes the Yuan.  All of these nations are in trouble.  The UK is in worse shape than the US and Europe is fracturing.  Perhaps this is an attempt to shore up some of the weaker currencies so they don’t collapse.  If hard currencies were to skyrocket (as many predict) this is a nail in the coffin to fiat currencies.

and

http://www.imf.org/external/np/sec/pr/2009/pr09207.htm

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), issued the following statement today welcoming Brazil’s intention to invest up to US$10 billion in notes to be issued by the IMF:

http://www.imf.org/external/np/sec/pr/2009/pr09204.htm

Same thing as with Brazil, but notice my bolded parts…

“This decision will be beneficial to all,” Mr. Strauss-Kahn added. On one hand, IMF members’ investment in Fund securities will boost the Fund’s capacity to help member countries—particularly developing and emerging market countries—cope with the crisis and thus benefit all members by facilitating an early recovery of the global economy. At the same time, the new notes will offer members a safe investment instrument with reasonable return.

Reading a bit into this I’d say that there is a huge and continued growing concern that the previously risk-free and safe investments are no longer considered so.  IE: US treasuries.  This is nothing new, but perhaps to prevent an all out run on our debt, by consolidating these first world countries many believe that it will shore up confidence in our debt.

More ideas:

http://blogs.reuters.com/felix-salmon/2009/06/10/switching-from-treasuries-to-imf-bonds/

Perhaps by backing these instruments by a basket of currencies priced in dollars foreign holders will feel better about holding dollar denominated assets backed by a multitude of nations.

What might be the effects of such actions?

Is this to shore up confidence with developing nations?  They have the oil, the raw materials, and everything we need to produce the stuff that we buy.  For now they need us as consumers, but that gig is about up if not over.

Unless I’m mistaken this look like a move away from the dollar as the reserve currency.  As this unfolds I wonder how much transparency there will be as far as IMF holdings with regards to the backing of these bonds.  I don’t know enough about the IMF to make any solid presumptions or predictions, except is this slowly a move to a global currency?

What I really want to know is if countries are buying US debt, yet are in serious talks about purchasing IMF bonds… something isn’t adding up here.  Say they purchase the bonds in US dollars then the IMF will have a bunch of dollars.  Unless the Fed reigns in the money supply somebody has to hold our dollars unless they dump them on the market causing a crash in the dollar, which doesn’t make sense unless they have found a way around this.

I know this is a lot of fragmented thoughts, but something is going on… Will someone please help fill in the missing pieces.

Congressional Budget Outlook :: CBO

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Hold your hats folks as here are some of the forecasts for 2009 (link):

  • GDP falling by 2.2%
  • Slow recovery in 2010
  • > 9% unemployment by 2010
  • Decline in inflation (hmmmm… if monetary policy says anything this will reverse or at least eventually destroy the dollar)
  • Continued decline in housing prices
  • Decline in real consumption of more than 1%
  • Indeterminate on the financial system

And the best of all

$1.2 trillion dollar budget deficit for 2009*

*That doesn’t include the proposed stimulus package
*That amounts to 8.3% of GDP

So, we have an economy in decline, and digging a deeper and deeper hole to climb out of.  What I really want to know is how are we going to pay for 1) a 1.2T dollar deficit, and 2) a large fiscal stimulus package of a indeterminate size.

Let’s see our foreign friends have been purchasing our debt, which enabled us to essentially live off of their productive labor.  China for example is seeing a marjor reduction in exports, its economy is contracting, and eventually it is going to have to decide if it is worth supporting the American lifestyle at their own expense.  Presently, everyone is so intertwined I think there is a fear that if one jumps the house of cards falls down and we all lose.  However, is it possible for say China to pull out of the house of cards with minimal damage?  Is there a way they can reduce their exposure to US debt, and not have their savings collapse?  This is something I’d really like to know.

Seems to me that if they slowly shift some of their dollar reserves into commodities and other currencies SLOWLY, especially when there is increased demand they will be able to lessen their exposure.  The US import market is tanking, and has been tanking.  With unemployment increasing Bloomberg people are going to have a smaller income and will be forces to save thus hurting exporting countries.  This isn’t a US phenomena alone as Europe and frankly the rest of the world is contracting simultaneously, while being fed a mouthful of credit from central banks to re-inflate the bubble.  Last I checked it is very difficult to inflate a popped bubble.

Let’s take the latest number from Taiwan Bloomberg.  Their exports dropped by a record 41.9%.  We all know that Taiwan exports electronics, which have been a major boon ever since the technological revolution, which also saw a major hiccuup in 2000-2003.  So, this is confirmation of a major exporting taking a major hit.  There will be ramifications for the Taiwanese economy.

I can’t imagine that after the dust settles the world’s economies will look the same.  The sea of money will shift to where is sees the most opportunity and in its movement will tear apart the economies of many.

Here are a few more headlines on Bloomberg alone that tell a um telling story:

Fed Revives Discussion of Inflation Target to Counter Risk of Price Slide

ECB Expanded Balance Sheet by 36 Percent Last Year to Revive Bank Lending

Apartment Rents Fall, Vacancies Rise to Four-Year High on U.S. Job Losses

Shopping Center Vacancies in U.S. Approach 10-Year High as Stores Fail

Procter & Gamble Fights to Refinance as U.S. Borrowings Reach $2 Trillion

U.S. Banks Will Need to Raise More Cash in 2009, Meredith Whitney Writes

I’ll leave it at that, but what I’m seeing is RECESSION coupled with the Fed trying to stave it off through any means necessary, which is now including outright purchases of securities on the open markets.  Again we have no savings and are either monetizing debt or borrowing it from somewhere.  To do this will be disastrous to the dollar and our reputation as a solid financial center of the world.  Sure there are plenty of other economies in dire situations, but in the end who will come out with the heads up high and who will come out still in the sand?

Taxes oh My

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Taxes:

The ubiquitous “necessity” that engulfs us continually. That sentence reminds me of just how complex and absurd the tax code is to follow and comply with every year and every day. On another board there was recently a discussion about the Auto companies with respect to their inefficiencies. Simply looking at all the rules and regulations they must follow in addition to the UAW well no wonder they need a bailout. Henry Ford was on the cutting edge and now Ford is close to falling off a cliff.  If I had to pay a worker $70.00 an hour for a repetitive task how could I be competitive?

So, back to the issue of taxes. I’d love to say they we don’t legally have to pay them, but you go right ahead and give that a try and see where you end up. The IRS will find you or your money and take it. Remember they have the backing of the US Government, which has plenty of people who will enforce the IRS rules if you decide to not comply.

Today is December 31, 2008 and in a few hours 2008 will be put in the history book. There will be plenty to say and perhaps in five years it might be considered the beginning of the end. Who knows…

I obviously have plenty to say about 2008, but at the end of each year investors have to decide if they are going to take any unrealized gains or losses to offset their other gains and losses to minimize tax consequences. You then have to wait 30 days before interacting (buying/selling short) with that particular equity if you want to take the loss.

Something about this just doesn’t sit right with me. So, 2008 draws to a close and I have to close out positions just for tax reasons, but I can’t buy them back for 30 days. Heaven forbid if I entered the market at the wrong time and want to reenter prior to 30 days. I’m sure someone gave a great reason when instituting this law, but really it punishes even a swing trader unless they are designated as a trader (which there are plenty of stipulations for). Once designated a trader you can elect mark to market status, which eliminates the wash rule as well as eliminates the limitation on carry forward losses.

Ultimately, I just don’t see how these laws benefit anyone except by “decreasing volatility”. If you trade more often than an “investor” you may be penalized. What happens if a trade is accidentally executed that then puts you in the wash rule category and you can’t take the loss? Bummer.

All in all these rules are supposed to “help” the taxpayer and average citizen, but really I’m missing something here. For all you commenters out there I’m sure someone will have something to say as to why it is needed. Go right ahead and show me.

Don’t we pay enough in taxes from inflation?

Purgatory….

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Ever watched a sci-fi movie where the crew goes into stasis while they travel from one end of the galaxy to the other?  Ever contemplated Purgatory where heaven and hell meet?  

I feel as though this is a period of semi-consciousness awaiting judgement…  Last night I was catching up on some news online when I was watching the futures markets turning deeper and deeper shades of red.  The morning was locked limit down and then we had an immediate spike — DOWN.  However, the day is turning out to be mild in comparison to what may have happened.  

The reason I label this as purgatory is because I think we are either going to swiftly swing in one direction or the other.  Emotion is in control at the moment and perhaps irrational.  Once the herd stampedes watch out.  If people want cash watch out markets.  As I said in a earlier post we haven’t really seen an exodus or pure panic yet.  

The news from around the world is to be expected given the size of the credit contraction.  

I think we may see a rally, perhaps not today, but maybe next week as people see bargains.  News will continue to be increasingly gloomy, spreading a shadow around the world.  The contraction will not abate and people in a moment of fear and panic will sell.  Hedge funds will continue to implode sending equity prices down further.  Mutual funds will have to begin liquidating.  The dollar will roar ahead.  

Only problem is that we have never seen such a huge monetary expansion. Once banks decide to start lending again that money they are now hoarding and using to purchase other banks will flow into the system.  Bam!!@! huge credit expansion at a completely unsustainable rate, and thus hyperinflation.  Equities may rebound, but given the recession they will probably be somewhat stagnant as the new capital investment will take time to be realized.  Meanwhile, gold, oil, and food will goto the moon as the dollar plummets.  Interest rates will also soar as the reality of our debt burden takes hold alongside major inflation.  People will want to be compensated for holding a worthless and bankrupt currency.  

My only real complaint with this prognostication is strength in the dollar.  I’m having a hard time comprehending or even believing that this dollar rally will continue.  It is a flawed currency, and has no basis for strength.  Then again what fiat currency really has any value?

 

my2cents

The US Dollar gaining? What?

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Hyperinflation, inflation, deflation, depression, recession, stagflation… well which is it? I have no clue, but there is a massive monetary inflation occurring, and a looming recession.  Hmmm so does this mean a inflationary depression?  Yikes.

Last week I took a break from overwhelming myself about the markets and the state of the economy. The timing wasn’t perfect, but I had personal reasons.

Before I start on the quest of exploring our present situation of the potententional…”ion”s I want to make sure we are on the same page. Therefore lets have a defining moment:

Money: Easily exchangeable, is relatively scarce, and is a store of value.

Inflation: An increase in the money supply
Deflation: A decrease in the money supply
Hyperinflation: A self-perpetuating unstoppable (more or less) state of inflation
Recession: A significant decline in business activity, mainly a contraction in the economy or slowing of growth
Depression: A long-term economic state characterized by unemployment and low prices and low levels of trade and investment
Stagflation: A period of time characterized by high inflation and recessionary conditions.

I’ve been looking at calls for the vaious scenarios and needed some clarification as to what happens in the various situations.  For the most part it seems obvious, but I’ve been struggling with the increase in the value of the United States dollar.  Our national debt is above 10 trillion and rising rapidly as the recent bailouts continue, and the most recent increase in military spending added another $612 billion that we have to pay for.

Why is the risk of deflation so frightening that the Fed, Treasury, governments, and foreign central banks will do anything to stave it off?  Deflation is like the grim reaper knocking on your door for a fiat currency.  A fiat currency survives on debt and inflation (credit expansion).  Too much inflation and it can become worthless, and negative inflation (deflation) and it gains value.  That sounds like a good thing but it isn’t.  As the currency gains in value debt becomes more expensive, and thus more difficult to pay off.  Imagine taking out a $100,000.00 loan with todays dollars and paying it off with dollars from 1930.  Good luck! During deflation prices also fall due to the decrease in the money supply and as there is no longer credit being handed out for people to use to consume and invest.  The whole system comes tumbling down and the reaper walks in the door to say hello!

When credit is created (a loan) that is an increase in the money supply, and when it is paid off that is a decrease in the money supply.  Say the loan is $100.00.  That is $100.00 of money put into existance with a very small percentage actually backing it.  Now I repay my $100.00 loan and that credit is erased and the money supply contracts.  This is the normal situation that occurs daily.  However, if people don’t want to lend or borrow then we have a problem.

No credit means no ability to borrow, which means no abilty to purchase goods and services.  Everything is based on debt today.  The change began in 1913 with the Fed, and the ultimate shift to fiat money was in 1972 during the Nixon presidency when we abandoned the gold standard and thus savers were punished from that day forward.

Okay this leads to me to the strengthening of the United States Dollar…  Why I ask is it getting stronger.  Many argue that it is because Europe is weakening, which may be part of the picture.  However, I read something that made a clear point that because European banks are required to hold dollars for various toxic debt they hold denominated in dollars they normally use the interbank markets based on the LIBOR rate.  However, that market is seized up and nobody wants to lend so they start using the EUR / USD credit swap market.  As they purchase dollars its value goes up.  Notice today that the Euro gained against the dollar when the Fed decided to start purchasing short-term commercial paper.  They are stepping in and becoming the new mainstay for that market: which one?  EVERY MARKET <Interesting…>

And tomorrow is a new day!

Fed inflating with no restraint – Hyperinflation?

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A picture is worth a trillion words…

 

Money Supply 09/25/2008

Money Supply 09/25/2008

Frankly I’m not surprise to see what the Fed is doing and can only imagine what this is going to look like if this bailout goes through.  There is a precedent throughout time that inflating the monetary supply only prolongs the inevitable.  This is a sad state of affairs and I see only troubled times ahead for the once mighty dollar.  Like the Romans who clipped their gold and silver coins the United States is creating more and more money from nothing.  Why do we need a bailout package when we can just print money?  It isn’t actually printed anymore, but issued through treasuries between the Fed, the Treasury, and private banks.  

We are headed towards a recession if we aren’t already in one.  Inflating the money supply while in a recession presumably means higher prices.  The contraction in prices we recently saw was perhaps a byproduct of the Fed contracting the money supply, which it has now reversed course.  During the Great Depression of 1929 many banks tried using their depositor’s money to help keep the market afloat just as the Fed is now doing… The outcome?  You know what happened…  

Now we are taking the opposite position and inflating.  What happened to Rome… and thanks to Mike Hewitt at dollardaze.org he lists many countries plagued by hyperinflation. 

  • Angola (1991-1999)
  • Argentina (1975-1991)
  • Austria (1921-1922)
  • Belarus (1994-2002)
  • Bolivia (1984-1986)
  • Brazil (1986-1994)
  • Bosnia-Herzegovina (1993)
  • Bulgaria (1991-1997)
  • Chile (1971-1973)
  • China (1939-1950)
  • Free City of Danzig (1923)
  • Ecuador (2000)
  • England
  • Greece (1944-1953)
  • France (1789-1797)
  • Georgia (1995)
  • Germany (1923-1924, 1945-1948)
  • Greece (1944-1953)
  • Hungary (1922-1924, 1944-1946)
  • Israel (1979-1985)
  • Japan (1944-1948)
  • Krajina (1993)
  • Madagascar (2004)
  • Mexico (2004)
  • Nicaragua (1987-1990)
  • Persian Empire (1294)
  • Peru (1984-1990)
  • Poland (1922-1924, 1990-1993)
  • Romania (2000-2005)
  • Ancient Rome
  • Russia (1921-1922, 1992-1994)
  • Taiwan (late-1940′s)
  • Turkey (1990′s)
  • Ukraine (1993-1995)
  • United States (1812-1814, 1861-1865)
  • Yap (late 1800′s)
  • Yugoslavia (1989-1994)
  • Zaire (1989-1996)
  • Zimbabwe (1999 – present)

The fiat money system that we presently have, which in its present form has only been in existence since 1971 when we went off the gold standard.  To say that we have a precedent for what may or may not happen is incorrect.  We are now in uncharted territory, however history has its lessons.

Copperfield & Houdini for Presidency!

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I’ve attended a few performances by David Copperfield and he has performed the unbelievable.  Before my very own eyes a group of thirty people vanished into thin air.  Where did they go?  I watched the unbelievable made real right in front of me.  How could this be an illusion created to fool me into belief?  I ask you… HOW?

David Copperfield and Harry Houdini would probably be a better pair to run the government at this point.  At least they would give us a good show.  The current officials in office make my gut wrench.  We have migrated from the land of the free to nationalization of private property in the name of free markets.  Whoa… okay let’s get something straight.  WE DO NOT HAVE FREE MARKETS… NOT EVEN CLOSE  

If we actually had a system that represented free markets the Federal Reserve (a PRIVATE bank made up of member banks that are also PRIVATE) would not exist, we would still be on the gold standard, and the government wouldn’t even consider a bailout of the taxpayer’s funding, and the United States Treasury would not be proposing this amazing relief package for those who are mainly responsible for getting us into this mess.  

So, I mentioned two masters of illusion… Why?  What is being pulled off at the moment is happening in front of our eyes and for some like me is atrocious.  However, for others they think it is essential to the integrity of financial markets, financial institutions, and YOUR house.  The entire bailout is being purported as a bailout for the helpless homeowner, the saver, the middle class.  

The problem is that nobody knows how much any of this debt is actually worth.  Say the government buys $700,000,000,000,000.00 worth of debt at $0.20 on the dollar, which is great discount.  If that debt is in reality worth less than that we have a problem.  When will these notes be paid back, and in what form are the notes?  

Chris Martenson managed to grab part of an article that later disappeared from Bloomberg that said:

“The Treasury’s thinking is to make it as big and wide as possible so they have the flexibility to act if need be,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. “There have been losses on a whole range of U.S. debts and as the economy deteriorates in response to the housing slump those losses could escalate.” 

Treasury officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide.

This effectively means any type of debt.  Let’s take a moment to see what forms of debt exist:

  • Credit Card DEBT
  • Mortgage DEBT
  • Automobile DEBT
  • Bond DEBT

………. and the list goes on ………….

So, we have the United States government wanting to take on all this debt in the name of saving the financial markets.  Let’s just take the debt from the banks to clear up their balance sheets so they don’t have to write it off, which would cause them to have to increase their reserves because their assets are now below the minimum.  We could lower that further, but it has already been lowered to 3% of total assets.  That means they most likely loaned out the other 97%.  

As the Fed creates money our dollar is worth less and less.  Where is the Federal Government going to come up with $700 Billion dollars?  They will create it from nothing, which the Federal Reserve is great at doing.  Inflation will not solve the problem, only exacerbate it.  Newt Gingrich opposes it, and admits that if he is wrong in not supporting it that it is the lesser of two evils.  

If this bill passes please say goodbye to the dollar as we know it.  Foreigners might finally reach the breaking point to where they are afraid to purchase dollars and realize that buying them to keep their currency less expensive is futile.

Down with the dollar, manipulation everywhere….

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I don’t know what to think about today. There was nothing normal about how the markets went about their day. Up down up down waaaaay up. And exactly when the market took off gold dove. There was a perfect inverse correlation between the two markets.

When gold gets too high this isn’t good for banks and especially the fed. It is a signal of losing confidence on the dollar, which is a piece of monopoly money that we are able to use as a medium of exchange.

For the whole fiat currency to continue to function there has to be debt and liquidity. Liquidy is drying up as banks don’t want to lend to eachother. Nobody knows for sure who is the next in a series of falling dominoes. With the Fed injecting over 100billion dollars into the system last night our dollar is looking ripe for a major devaluation.

I’m off to Newport Beach today for a real estate seminar led by John Schaub. It should be interesting and I’m excited to learn something new and get my mind off the rapidly deteriorating economy.

You just purchased AIG… Did you have a choice?

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The Fed is Heralded as a savior.  

 

 

 

I’d like to present a dissenting opinion and it will only take a moment.  The Fed is a quasi-governmental entity — read private bank.  It is a very large private bank that oversees the money flows between banks with the exclusive privilege of creating and destroying money granted per the United States government.  I don’t know when the destroying of money has actually ever occurred since 1913 when the Fed was created.  

Tomorrow (9/17/2008) will be a grand day for the markets as they celebrate the saving of AIG, which if left alone would have hurt a many people and companies.  In the long run it would have been better for everyone and helped people realize that the income’s of taxpayers aren’t for sale <pillaging> if they were left to fail.  It would also have prevented a precedent from being created that the Fed can and will purchase anyone if need or desire be.

However, the Fed is able to say they are “rescuing” AIG, Freddie, and Fannie all in a very short period.  Here is a thought to ponder…

If I am able to create money out of nothing or thin air then why wouldn’t I want to seem like a savior and help out distressed companies in the name of helping the economy?  I don’t have a great answer why I wouldn’t.  If I can shave a few cents off of everyone’s dollar who will notice?  At first it won’t be apparent, but eventually there will be consequences, and at the end of the day I will be the savior.  The consequences won’t be traced back to me.  Like committing a crime knowing you won’t be caught… do you commit the crime?

Revisiting the notion of buying low (through fictitious money that is treated as real money)… I’m the Fed and create $85 billion dollars to purchase 80% of AIG.  Great so now I own 80% of its liabilities and assets. No, not so great because nobody knows what the actual value of the assets are. <Remember I can create money>  For someone who can’t create money this is a problem, and the exact problem AIG ran into.  However, with the ability to create money I can now continue to add more “cash” to AIG’s balance sheet helping it though the crisis.  At the end of the day AIG, Freddie, or Fannie have been saved all though Monopoly money.  They will once again be players in the “free market”, but purchased at a unbelievably low cost. FREE  

Conclusion:  You and I purchased AIG, Fannie, and Freddie… however we will never see a dime of profit in return.  Do you see a problem with this?  Yet, the Fed will be treated like a king for saving the financial markets.  Perhaps the right thing to say would be using someone else’s money to purchase a failing company and then profiting without ever returning that money to the “lender”.  

That is Default. Fraud. Theft. Robbery. 

Final thought:

Do you think that income taxes are legal and necessary according to the constitution of the United States?