[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

Let’s see an example. “Bank” has a mortgage-backed security (MBS) with original par (nominal) value of $100. In 2008 Bank “marked-to-market” and now values the MBS at $95 in its books. But we all know that this MBS is worth a lot less, maybe less than $60, but Bank won’t acknowledge reality.

In 2009 we have the new Treasury plan, whereby “Peter” buys this MBS, for say, $90. That’s because the bank won’t take anything less. If it did, Bank would be shown to be insolvent and would be out of business.

Peter puts only $6 out of pocket. Uncle Sam puts another $6, and the remainder $78 is a nonrecourse loan from Uncle Sam to Peter. (Total, $90).

Then Peter turns around and sells the MBS to his pal “Paul” for $48. Paul pays $48 b/c he thinks the MBS is actually worth $58 as justified by what the homeowners will actually pay in monthly mortgage payments.

Peter’s $6 investment is wiped out. So is the govt’s $6. And the $48 Peter gets from Paul goes to pay back the govt loan of $78. So now, Peter lost $6 but Uncle Sam lost $36 ($84-$48).

Since Peter and Paul are buddies (co-conspirators), the latter can compensate Peter. Say, Paul gives Peter his $6 plus another $2 for his troubles. Paul pays $48 for something worth $58, but because he gave $8 to Peter, his profit is only $2. And the banks get fully $90 for paper that is worth actually $58.

Summary:
Peter puts in $6, makes $2 profit
Paul puts in $48, makes $2 profit
U.S. puts in $84, makes a $36 LOSS
Bank had paper that was really worth $58 but got $90 for it, makes a $32 profit

Yes, I agree with the OP, this is wholesale looting of the US Treasury. Us taxpayers foot the bill and will pay for it in a combination of higher inflation and higher taxes. The important thing is that the Wall Street types who caused this crisis will get to keep their Ferraris and juicy bonuses, and won’t have to fly coach or go without their manicures, god forbid.

[Diego Mamani]

[quote=partypup] Diego, get a grip. This crisis, like everything else in life and in our universe, is moving in STAGES. That means that you won’t get killed for your precious can of beans, and I won’t be killed for my gold, anytime soon. What it DOES mean, however, is that your standard of living will erode rather rapidly, as will those around you, and over a period of months and years it will become increasingly expensive for you to buy the things you need, and as more time passes, those items may not even be available. And that’s when the real trouble starts.[/quote]

Stages or not, it’s the end point that I find unrealistic. From reading your text above, then you’re saying that you don’t expect the US govt and the dollar to collapse? I ask, because that (total collapse) is what most gold bugs believe.

But apparently you don’t expect total collapse of law and order, but rather a slow deterioration in our standard of living as the dollar, euro, etc. lose value against gold? If that’s the case, then land is a far better option than thinly traded gold that is already quite expensive.

If we’ll enter a period where currencies lose value rapidly (high inflation), then not only gold, but also land, and stock prices will go up very steeply in nominal terms. The key is simply to not hold cash.

[Diego Mamani]

[quote=partypup] Diego, get a grip. This crisis, like everything else in life and in our universe, is moving in STAGES. That means that you won’t get killed for your precious can of beans, and I won’t be killed for my gold, anytime soon. What it DOES mean, however, is that your standard of living will erode rather rapidly, as will those around you, and over a period of months and years it will become increasingly expensive for you to buy the things you need, and as more time passes, those items may not even be available. And that’s when the real trouble starts.[/quote]

Stages or not, it’s the end point that I find unrealistic. From reading your text above, then you’re saying that you don’t expect the US govt and the dollar to collapse? I ask, because that (total collapse) is what most gold bugs believe.

But apparently you don’t expect total collapse of law and order, but rather a slow deterioration in our standard of living as the dollar, euro, etc. lose value against gold? If that’s the case, then land is a far better option than thinly traded gold that is already quite expensive.

If we’ll enter a period where currencies lose value rapidly (high inflation), then not only gold, but also land, and stock prices will go up very steeply in nominal terms. The key is simply to not hold cash.

[Diego Mamani]

[quote=partypup] Diego, get a grip. This crisis, like everything else in life and in our universe, is moving in STAGES. That means that you won’t get killed for your precious can of beans, and I won’t be killed for my gold, anytime soon. What it DOES mean, however, is that your standard of living will erode rather rapidly, as will those around you, and over a period of months and years it will become increasingly expensive for you to buy the things you need, and as more time passes, those items may not even be available. And that’s when the real trouble starts.[/quote]

Stages or not, it’s the end point that I find unrealistic. From reading your text above, then you’re saying that you don’t expect the US govt and the dollar to collapse? I ask, because that (total collapse) is what most gold bugs believe.

But apparently you don’t expect total collapse of law and order, but rather a slow deterioration in our standard of living as the dollar, euro, etc. lose value against gold? If that’s the case, then land is a far better option than thinly traded gold that is already quite expensive.

If we’ll enter a period where currencies lose value rapidly (high inflation), then not only gold, but also land, and stock prices will go up very steeply in nominal terms. The key is simply to not hold cash.

[Diego Mamani]

[quote=partypup] Diego, get a grip. This crisis, like everything else in life and in our universe, is moving in STAGES. That means that you won’t get killed for your precious can of beans, and I won’t be killed for my gold, anytime soon. What it DOES mean, however, is that your standard of living will erode rather rapidly, as will those around you, and over a period of months and years it will become increasingly expensive for you to buy the things you need, and as more time passes, those items may not even be available. And that’s when the real trouble starts.[/quote]

Stages or not, it’s the end point that I find unrealistic. From reading your text above, then you’re saying that you don’t expect the US govt and the dollar to collapse? I ask, because that (total collapse) is what most gold bugs believe.

But apparently you don’t expect total collapse of law and order, but rather a slow deterioration in our standard of living as the dollar, euro, etc. lose value against gold? If that’s the case, then land is a far better option than thinly traded gold that is already quite expensive.

If we’ll enter a period where currencies lose value rapidly (high inflation), then not only gold, but also land, and stock prices will go up very steeply in nominal terms. The key is simply to not hold cash.

[Diego Mamani]

[quote=partypup] Diego, get a grip. This crisis, like everything else in life and in our universe, is moving in STAGES. That means that you won’t get killed for your precious can of beans, and I won’t be killed for my gold, anytime soon. What it DOES mean, however, is that your standard of living will erode rather rapidly, as will those around you, and over a period of months and years it will become increasingly expensive for you to buy the things you need, and as more time passes, those items may not even be available. And that’s when the real trouble starts.[/quote]

Stages or not, it’s the end point that I find unrealistic. From reading your text above, then you’re saying that you don’t expect the US govt and the dollar to collapse? I ask, because that (total collapse) is what most gold bugs believe.

But apparently you don’t expect total collapse of law and order, but rather a slow deterioration in our standard of living as the dollar, euro, etc. lose value against gold? If that’s the case, then land is a far better option than thinly traded gold that is already quite expensive.

If we’ll enter a period where currencies lose value rapidly (high inflation), then not only gold, but also land, and stock prices will go up very steeply in nominal terms. The key is simply to not hold cash.

[Diego Mamani]

[quote=jpinpb]I’m inserting Partypup’s post from another thread: (…) When the hammer falls, you absolutely don’t want to be caught with paper.[/quote]

Geez… You gotta love these “the sky is falling” posts in cyberspace. They predict a cataclysmic collapse, yet for some reason they think there’ll be enough lawfulness so that you don’t get killed for a can of beans, let alone a few ounces of gold.

Look, if it gets so bad that the US dollar becomes worthless and the government fails, you’ll have more pressing needs than preserving your savings. Such as eating again, or maybe even surviving overnight.

Thanks for the entertainment, though 🙂

[Diego Mamani]

[quote=jpinpb]I’m inserting Partypup’s post from another thread: (…) When the hammer falls, you absolutely don’t want to be caught with paper.[/quote]

Geez… You gotta love these “the sky is falling” posts in cyberspace. They predict a cataclysmic collapse, yet for some reason they think there’ll be enough lawfulness so that you don’t get killed for a can of beans, let alone a few ounces of gold.

Look, if it gets so bad that the US dollar becomes worthless and the government fails, you’ll have more pressing needs than preserving your savings. Such as eating again, or maybe even surviving overnight.

Thanks for the entertainment, though 🙂

[Diego Mamani]

[quote=jpinpb]I’m inserting Partypup’s post from another thread: (…) When the hammer falls, you absolutely don’t want to be caught with paper.[/quote]

Geez… You gotta love these “the sky is falling” posts in cyberspace. They predict a cataclysmic collapse, yet for some reason they think there’ll be enough lawfulness so that you don’t get killed for a can of beans, let alone a few ounces of gold.

Look, if it gets so bad that the US dollar becomes worthless and the government fails, you’ll have more pressing needs than preserving your savings. Such as eating again, or maybe even surviving overnight.

Thanks for the entertainment, though 🙂

[Diego Mamani]

[quote=jpinpb]I’m inserting Partypup’s post from another thread: (…) When the hammer falls, you absolutely don’t want to be caught with paper.[/quote]

Geez… You gotta love these “the sky is falling” posts in cyberspace. They predict a cataclysmic collapse, yet for some reason they think there’ll be enough lawfulness so that you don’t get killed for a can of beans, let alone a few ounces of gold.

Look, if it gets so bad that the US dollar becomes worthless and the government fails, you’ll have more pressing needs than preserving your savings. Such as eating again, or maybe even surviving overnight.

Thanks for the entertainment, though 🙂

[Diego Mamani]

[quote=jpinpb]I’m inserting Partypup’s post from another thread: (…) When the hammer falls, you absolutely don’t want to be caught with paper.[/quote]

Geez… You gotta love these “the sky is falling” posts in cyberspace. They predict a cataclysmic collapse, yet for some reason they think there’ll be enough lawfulness so that you don’t get killed for a can of beans, let alone a few ounces of gold.

Look, if it gets so bad that the US dollar becomes worthless and the government fails, you’ll have more pressing needs than preserving your savings. Such as eating again, or maybe even surviving overnight.

Thanks for the entertainment, though 🙂

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