The bailout of Fannie and Freddie is now official. Billions upon billions of dollars will be printed by the U.S. Government to bailout people who bought mortgages they could not afford in the first place.
What a sad and pathetic country we have become. No one can fail. No one can lose everything they have for being
stupid in the first place. The rest of us,
all of us, have to pay for it.
The number $25 billion is being thrown around as to how much it will cost to bail out Fannie and Freddie, but both of them are losing money at astronomical rates. The government will print money to serve as influx capital to keep them afloat all while they are losing BILLIONS of dollars at the same time and will continue to for YEARS to come.
Where does the money come from? The government prints it. (Actually, it's all digital now.)
What happens when you have, let's say, ten bills of currency in your hand and they are the only of their kind in the world and each has a certain value. Now you print ten more. Their value would have to fall right?
The dollar has plummeted the last few years and is about to go over a cliff. This latest bailout is only one additional straw on the camel's back. All fiat currencies in the history of the world have failed, and the U.S. Dollar will not be an exception.
Sub-prime is only the beginning too as far as the financial crisis goes. So far this year seven banks have failed. The FDIC announced at a press conference last week that they have 90 to 100 banks on their "watch list". Indy Mac was only on their watch list for one month before it failed. The lady giving the press conference says she doesn't make predictions but then went on to say that she predicts the number of failure to increase this year and next.
There are roughly 7,000 banks in the United States and I conservatively expect at least 300 to fail in the next two to three years, but I would not be surprised if the ending number is hundreds more.
The FDIC has $55 billion in reserves, and there is no possible way that is going to cover all of the banks that are about to fail. The FDIC will need a bail-out too of at least $500 billion to one trillion.
What does this mean to you? It means that if you are an American citizen your savings in U.S. Dollars are about to be
worthless.
Americans are going to see the buying power of their earnings continue to decrease and decrease with rapant inflation all while the money they have in savings continues to actually be worth less and less.
The dollar will only continue to fall. Other countries which have their currencies pegged to the dollar are already under intense pressure to uncouple from the dollar, and it is only a matter of time before they do so.
In case your reading this and thinking our leaders are so smart that they'll find a way to pull us out of our problems and everything will "go back to what it used to be", read what they were saying only a few months ago:
Mr. Paulson said in a speech March 13th, 2007: "The fallout in subprime mortgages is going to be painful to some lenders, but it is largely contained."
Chairman Bernanke before the Congressional Joint Economic Committee on March 28th 2007, just a few days later: "Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."
Chairman Bernanke at the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, May 17th, 2007: "We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."
Chairman Ben S. Bernanke speech to the 2007 International Monetary Conference, Cape Town, South Africa, June 5th: "The troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system."
Mr. Paulson on Bloomberg, July 26th, 2007, just days before two Bear Stearns Hedge Funds imploded: "I don't think it [the subprime mess] poses any threat to the overall economy."
Mr. Paulson's Press Roundtable in Beijing, August 2nd, 2007, likewise, just days before the hedge fund explosion and Ben Bernanke’s unprecedented “emergency†discount rate action: "I also said I thought in an economy as diverse and healthy as this that losses may occur in a number of institutions, but that overall this is contained and we have a healthy economy."
Chairman Bernanke to Committee on Banking, Housing, and Urban Affairs, U.S. Senate, April 3rd, 2008: "Clearly, the U.S. economy is going through a very difficult period. But among the great strengths of our economy is its ability to adapt and to respond to diverse challenges. Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year."
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