Rafe's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/272508/comments http://seekingalpha.com/article/110581-an-economic-nightmare-before-christmas?source=feed#comment-329157 329157
My take is that the US Federal Reserve has been acting as the Big Bank for the world. Foreign entities deposit (lend) money to the Big Bank, knowing they can redeem their loan (withdraw their deposit) at any time. I'm not sure people (and maybe countries) care exactly what is happening deep inside the bank, as long as its doors are still open and their money appears to be safe at or near face value.

Since there has been no viable alternative global bank available, countries and investors worldwide have been using the US for that purpose. Where, then, will they put their money if the US Big Bank goes out of business? Switzerland?

I'm not claiming this system can go on forever! Obviously it can't. But I don't think a theory that fails to explain why the world is still lending to the U.S. now, can be relied on to predict when there will be a serious (currency-destroying) run on the Big Bank.]]> Sun, 14 Dec 2008 13:11:08 -0500
My take is that the US Federal Reserve has been acting as the Big Bank for the world. Foreign entities deposit (lend) money to the Big Bank, knowing they can redeem their loan (withdraw their deposit) at any time. I'm not sure people (and maybe countries) care exactly what is happening deep inside the bank, as long as its doors are still open and their money appears to be safe at or near face value.

Since there has been no viable alternative global bank available, countries and investors worldwide have been using the US for that purpose. Where, then, will they put their money if the US Big Bank goes out of business? Switzerland?

I'm not claiming this system can go on forever! Obviously it can't. But I don't think a theory that fails to explain why the world is still lending to the U.S. now, can be relied on to predict when there will be a serious (currency-destroying) run on the Big Bank.]]> http://seekingalpha.com/article/98534-mark-to-market-vs-mark-to-history?source=feed#comment-273950 273950 Sun, 05 Oct 2008 11:22:56 -0400 http://seekingalpha.com/article/97810-bye-bye-u-s-dollar?source=feed#comment-269023 269023
Rather, I think the Bush admin will now, with the failure of the bailout package, be forced to quite consciously inflate the currency. They have no other way to get rid of all that bad paper, all the mountains of debt, stretching as far as the eye can see. Congress understandably rejected their stupid "bailout" bill as a gift to the politicians' friends in the world of finance. Since the companies in question are actually insolvent -- not just low on cash -- the only way to help them is to either put money directly into their hands, or else buy them and use pure US government "capital" (ie., cash) to get them out of debt. Buying the bad assets is inflationary, of course, but it won't pass Congress and in any case I don't think it will work. There isn't enough money in the world to buy up all the bad paper out there.

So I predict they will have to buy (nationalize) the failing banks, then create the money to save them out of thin air. The result will be massive inflation, I think.]]> Mon, 29 Sep 2008 18:43:12 -0400
Rather, I think the Bush admin will now, with the failure of the bailout package, be forced to quite consciously inflate the currency. They have no other way to get rid of all that bad paper, all the mountains of debt, stretching as far as the eye can see. Congress understandably rejected their stupid "bailout" bill as a gift to the politicians' friends in the world of finance. Since the companies in question are actually insolvent -- not just low on cash -- the only way to help them is to either put money directly into their hands, or else buy them and use pure US government "capital" (ie., cash) to get them out of debt. Buying the bad assets is inflationary, of course, but it won't pass Congress and in any case I don't think it will work. There isn't enough money in the world to buy up all the bad paper out there.

So I predict they will have to buy (nationalize) the failing banks, then create the money to save them out of thin air. The result will be massive inflation, I think.]]>