Onionskins

The CEOs of Merrill Lynch & Citigroup have resigned. BankAm, Citi, & Chase have set up a fund to solve the crisis. Each puts $5B into what is supposed to become a $75B fund. But from what I've heard, various financial institutions have set up over $300B in SIVs to hide their liabilities. And I haven't yet heard that the savings rate in America has even reached positive territory. (Honestly, I think that's the only way to truly solve the problem; these other shenanigans only delay the pain.) I pray to God the government doesn't decide to use my tax dollars to rescue people who spent themselves into ridiculous debt when I'm still scrimping & saving in a studio apt.

A Little More Clarity

The Fed has lowered rates a little and the president & Democrats in Congress have competing proposals for how to rescue the housing market (inc. the homebuyers). Unfortunately, this means w/ lower rates, foreign countries won't want as much of our securities. (Dare I hope it also means we have lower interest rates on the national debt?) We all know Congress & the president can't be taught to cut spending, so naturally there's going to be a push to raise taxes. And the taxpayers may also have to rescue a big corporation or two from collapse -- e.g., Bear Stearns, Countrywide. Don't forget the Social Security hanging over our heads.

I'm not eager to be the sole source of SSI funds for a retiree -- it makes me think maybe I want to be out of the country in a few years.

Fed's "Stability" on Interest Rates

In response to:
http://angrybear.blogspot.com/2007/06/cursed-on-bear-stearns-hedge-fund.html

I don't claim to know what the Fed will do in the next couple of years, but someone recently explained to me why the Fed won't lower interest rates to soften the landing on this housing bubble. He said governments around the world are raising interest rates on their securities (national debts), w/ the UK for example at around 8% right now. To keep our own marketable against the competition, we have to keep offering rates at least as high as what we offer now. Considering that we have an $8+ trillion debt growing at about 1/2 trillion per year, we have to pay for it by raising taxes & selling debt.

Granted, the Fed may lower rates to rescue housing investors & borrowers, but that would mean less money from overseas to fund national debt. More funding would have to come from raising taxes. So we're between a rock & a hard place. And that doesn't even account for Social Security: the oldest boomers turn 62 next year. Through abortion & birth control, they reduced the very taxpayer base from whom they can collect. It won't be long before I'm fully funding the Social Security account of one baby boomer (plus the cut the gov't takes for processing everything). When my generation hits that taxation level after years of 0% savings, what happens?