The second fact is that the major oil producers of the world all take US dollars for their product. That means that Europeans, Asians, and anyone else who wants to buy oil has to buy it in dollars. This is true simply because the Middle Eastern nations that have oil say so. They could change their minds tomorrow about which currency they want to be paid in. Think about this: if you had a valuable commodity, which currency would you want to be paid in: euros or dollars? Would you want the currency of a nation of debtors? Right now, the US dollar is somewhat stable because everyone else *must* buy our currency in order to buy oil. We have absolutely no guarantee that that will continue to be the case. All it takes is someone in the Middle East deciding that they’d prefer to be paid in yen, euros, Canadian dollars, or rubles.

So now how likely does the total collapse of the US economy look to you?

Last Friday, 9/19/08, a major change in the world of money market funds took place when the U.S. Treasury stepped into to insure all money market funds against loss. This is a HUGE, although temporary, change that effectively makes money market funds as safe as federally-insured deposit accounts. You may want to inform your readers about this change.

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=a9oT3F7XFBYo&refer=home
“The U.S. will insure money-market funds against losses for the next year as it seeks to prevent a run on $3.35 trillion of assets that average investors and institutions rely on as a safe alternative to bank deposits. The U.S. Treasury will use an existing $50 billion emergency pool to offset any losses incurred by investors as fund managers cope with the worst financial crisis since the Great Depression. The plan is similar to federal insurance on U.S. bank accounts, though it’s temporary and doesn’t carry the same $100,000 limit on reimbursements, a Treasury official said today on a conference call.”

If you want to be able to make financial and health care decisions for any adult loved one, spouse, partner, parent, or other, at the minimum you will need to have power of attorney for both health care and durable POA for finances.

Though I prefer a revocable living trust to manage finances (banks, etc. have more leeway to say no to a POA vs. a trustee)

If not, you get to go through the agony that is a guardianship hearing (and spend several thousand dollars)

Why go and blame the government for the actions of the unrelated individuals that caused the crisis?

The other parts of the bailout aren’t that clear, but again it seems the government wants to buy risky loans but only after reverse auction. If I understand it correctly – they tried to explain it on CNBC today, it means the companies will need to bid the lowest amount for which they would sell these loans or something like it. Depending on the details, they could get them for 40 cents on a dollar. Depending on which percent of these loans will actually default and on the price, this may not be such a losing proposition.

Some of the past bailouts weren’t bad deals: the government did end up making money on Chrysler bailout. Having government go into controlling companies is a bit scary, though… Will have to wait and see, but it seems to me that it is a bit too early to tell if it would really be such a bad deal.

It’s my belief that one side is more responsible than the other. Both sides had good intentions. One to increase profits (yes, that’s a good thing!) and one to get people living in homes (debatable, but probably a good thing).

But one side didn’t want to regulate the collateralized debt market or the credit default swaps that grew up around them. This is despite an outcry from those in the know. This basically comes from an Ayn Rand-style ideology that free markets will form a perfect market and don’t need regulation.

It is true enough that the repeal of the Glass Steagall Act was bipartisan – and that helped add speculative fuel to the fire.

The repeal of the uptick rule got us here faster… and that you can blame on the SEC.

But about raw politics, yeah. Both parties take lobby money. It’s sad, but true. It’s not all that new, just better reported now.

http://www.cdars.com/index.php

I don’t disagree… certainly the banks and investment firms bear a great deal (the brunt) of responsibility for the problems in which they found themselves. My point was regarding the political context of the issue, and the degree to which both sides of the aisle were complicit.

While foolish or lying borrowners and predatory lenders may have been the direct cause of the mortgage meltdown, the indirect cause was the federal guarantee of Fannie Mae and Freddie Mac, which allowed those entities to retain all the benefits of making risky loans while shifting a major part of the risk to the taxpayers. This plan was originally floated during Democrat Lyndon Johnson’s presidency, under a Democrat controlled Congress, and was fully implemented during Nixon’s term, while the Democrats still controlled Congress. Not that Republicans haven’t often gone along, because it’s really, really hard for politicians to tell people they have to save for a down-payment and buy within their means. Home-ownership has been the “chicken in every pot” of many politicians from both parties, and when the inevitable happens, as it is now,”greedy Wall Street” is the easiest to blame, as if there isn’t always enough greed to go around for everybody.

In fairness to Alan Greenspan, he has been warning for years about the dangers to taxpayers and risky lending practices encouraged by Fannie Mae & Freddie Mac. See http://money.cnn.com/2005/05/19/news/economy/greenspan_fannie/

Others, mostly a minority of Republicans, also warned all along about the moral hazard problems of Fannie Mae/Freddie Mac, Sallie Mae, Community Reinvestment Act, and other government scams, but they are drowned out by the voices that have always shouted “yes, we CAN have our cake and eat it too.”

By the way, I normally love this blog. I felt like the marriage comment along with the Wikipedia recommendation was a double whammy.

Over on the wesabe blog one person who went through this noted they had problems with one direct deposit, and IIRC bill payments as well.

If your bank is forcibly resold to someone, be prepared to set up automatic payments and direct deposits again.

(Note that I don’t completely agree with the thrust behind econtalk.org and the Chicago School of economics. But they do have good guests and well thought out arguments.)

I wouldn’t worry so much about FDIC… the Fed controls the money supply. They can just print more and hand it out to you.

Where do you think the money for the last set of Wall Street rescues came from? Poof! It came out of thin air – or actually it’s just some bits on a Fed computer as they issued a special set of bonds.

Yes, that is inflationary. But odds are that this will be a deflationary environment, so it might not be noticed.