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Dollar down, gold up, and markets down - bailout hits a snag (?)

Monday, September 22, 2008, 11:50 AM

Looks like the markets are not all that impressed with the bailout plan.  I suspect that his reflects concerns that the plan may not sail through smoothly, as hoped by Paulson and Bush.

Turns out a bunch of people wrote their representatives (thanks everybody!),and a lot of editorial pages came out against this massive act of larceny.  

But first, I am very close to sending out an Alert based on the behavior of the dollar.  Should interest rates also begin to climb here (so far not so much), then we enter the next stage of this crisis.

USD index chart

Gold
[Most Recent Quotes from www.kitco.com]

Bailout taking shape (emphasis mine)

Quote:

NEW YORK (CNNMoney.com) -- The Bush administration's proposed $700 billion financial rescue took fuller shape on Monday as Senate Democrats circulated a counter proposal that would require the government to receive an ownership stake in the companies it helps.

A provision offered up by Senate Banking Committee Chairman Christopher Dodd, D-Conn., would require companies who sell assets to Uncle Sam to give the government shares in the company, according to a draft obtained by CNN.

And the Senate Democrats' proposal would also require the government to come up with "a systematic approach for preventing foreclosures and ensuring long-term, sustainable homeownership through loan modifications and use of the HOPE for Homeowners Program" on the mortgages it buys in the bailout.

The Bush administration is pushing for a "clean" bill to be passed quickly and not be loaded up with provisions that would deter companies from participating.

"[T]he whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts," President Bush said.

Congressional leaders, however, say they don't want to give the Treasury Secretary a "blank check" without provisions that protect taxpayers.

At the same time, financial institutions are weighing in with what they want in the bill. On Sunday, the Financial Services Roundtable - a lobbying group representing the nation's banks - called on Congress to make the plan "broad enough to include different types of assets."

So we have the Bush administration trying to get something rammed through as fast as possible, but enough people on the other side are saying "not so fast," creating enough uncertainty that the markets are responding poorly.

Here's what independent Senator Bernie Sanders from VT has to say:

Quote:

While the middle class collapses, the richest people in this country have made out like bandits and have not had it so good since the 1920s. The top 0.1 percent now earn more money than the bottom 50 percent of Americans, and the top 1 percent own more wealth than the bottom 90 percent. The wealthiest 400 people in our country saw their wealth increase by $670 billion while Bush has been president. In the midst of all of this, Bush lowered taxes on the very rich so that they are paying lower income tax rates than teachers, police officers or nurses.

Now, having mismanaged the economy for eight years as well as having lied about our situation by continually insisting, "The fundamentals of our economy are strong," the Bush administration, six weeks before an election, wants the middle class of this country to spend many hundreds of billions on a bailout. The wealthiest people, who have benefited from Bush's policies and are in the best position to pay, are being asked for no sacrifice at all. This is absurd. This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor.

This looks like the old populist message that has been so long dormant/suppressed in this country.  Should that animal spirit re-awaken, social unrest will follow.  Hell hath no fury...

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8 Comments

bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 8 2008
Posts: 153
Pipe Dream
Quote:

>>And the Senate Democrats' proposal would also require the government to come up with "a systematic approach for preventing foreclosures

I believe that most people that have no equity in their over-priced house (they are significantly under water / upside down) want to live rent free and then give the keys back to the bank. It is in their best interest to walk away and start at zero, rather than keep paying an overpriced mortgage.

Quote:

>>continually insisting, "The fundamentals of our economy are strong,"

What a joke. A consumer/credit driven economy with industry that primarily only services itself and doesn't produce enough to balance its trade deficit. Hearing comments like this is where I stop reading or turn off the TV.

Reuben Bailey's picture
Reuben Bailey
Status: Silver Member (Offline)
Joined: Mar 17 2008
Posts: 138
Price movements
Not only have the major indexes moved back down to about where they ended last Thursday, but now oil has followed gold's lead and posted it's largest one day move ever.

Article here.

Welcome to interesting times.

EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
They think it isn't obvious?
The dollar drops and oil goes up - just like the markets' timely swing on gold the other day - gee . . .what a coincidence? More likely not. Someone (or something) is manipulating markets . . . my guess - the top 1%. . .AKA bottom feeders. Isn't that who really is getting the bail out $. I say - "Let'em rot". Take your money out of the bank before the "bail out vote". Keep contacting your politicians to them know - they vote for this bail in any way, shape or form - you will help campaign against them. I have my black paint and swastika to paint over every politician's campaign sign who votes YES. Can't say I've had this much fun since I went garden cooning 5 years ago.
srbarbour's picture
srbarbour
Status: Silver Member (Offline)
Joined: Aug 23 2008
Posts: 148
For the manipulation folk
[quote]Phil Flynn, analyst and oil trader with Alaron Trading Corp. in Chicago, said the late-session surge in oil appeared to be the result of a large investment fund scrambling to cover their short positions, or bets that prices would fall.[/quote] (emphasis mine)

Hmmm. That seems to feed some credence to the claims of commodity manipulation. Bloomberg also mentioned something similar about traders selling short having to buy back at huge prices.

--

Steve
Tesseractal's picture
Tesseractal
Status: Bronze Member (Offline)
Joined: Apr 18 2008
Posts: 25
Being from the other side of
Being from the other side of the planet - what is garden "cooning" ?
EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
Garden Cooning?
Cooning is acting like a masked bandit (racoon) and looting gardens goods. Watermelon and fresh sweet corn are favorites.

Other Subject: This market has such big players to manipulate the game - WHY PLAY? Wouldn't money be safer if everyone took theirs out and bought "real goods" like LAND (waterfront is always nice), farms are nice - no need to go cooning if I'm growing my own food, maybe buy into a local business which is somewhat more controllable than markets these days. Gold, oil, dollar - all ruses - illusions of wealth.

And, the meek shall inherit the Earth.

Te4t0n's picture
Te4t0n
Status: Member (Offline)
Joined: Aug 28 2008
Posts: 6
Gold up?
It says on that chart that gold is down and on the tv this lunch time, UK GMT+1 time, A dollar representation of gold was down too, in the 800's dollar regent. Why does gold have a lesser dollar worth? I thought that inflation was going to happen and gold would go up in its dollar representation?
Reuben Bailey's picture
Reuben Bailey
Status: Silver Member (Offline)
Joined: Mar 17 2008
Posts: 138
Gold price
Gold prices will go up and down like anything else. Just last week gold was around $775/oz at one point. It is now $100+ above that, and likely to continue rising over time as the dollar falls. It won't move in a straight line - prices rarely do for any amount of time, so there will be times when the price is falling. Those charts are live charts, they are constantly updating, so the price moves that Chris was talking about are no longer visible in them. If you go to a site like BullionVault and look at a longer term chart, it can still be seen. All the best, Reuben

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