(A slightly different version of this post appears at NolanChart.com )
The government’s plan to fix the financial crisis? Buy the bad assets.
Last night, an emergency Capitol Hill meeting was called to address the nation’s financial crisis.
One theory behind this solution is that by cutting financial institutions free from the mortgages in default, banks will be free to make investments and loan money out to get businesses and individuals back on their feet.
You can’t make this stuff up! But, apparently it can be pulled from thin air.
Where will our drowning-in-debt government find the money to make this purchase? It’s simply not there. This burden is going to be reshuffled to the taxpayer by way of inflation – because even in 2008, even though “green” investments are en vogue, we still can’t grow money from trees. Every action has an equal and opposite reaction. The money has to come from somewhere.
Even scarier than inflation, this bad assets solution requires the unconstitutional nationalization of financial institutions. I wonder if the act of Congress will include an amendment? How will Congress legally get away with this otherwise? It will be an entertaining song and dance for sure – the opening act to a muddy Presidential election.
Continue reading “Bad Assets and Band-Aids”