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Financial Bailout: More like anti-Depression pill
Financial Bailout: More like Anti-Depression pill??? - 9/24/08
Much has been said about the financial bailout program introduced by the Bush
Administration, Treasury Chairman Paulson, and Fed Chairman Ben Bernanke this
Commodities reacted as if it was inflationary, with money being thrown at
the problem such that any irresponsible businessman simply had to cry wolf to
get a federal bailout. But this is not really a federal 'bailout' as it has
come to be called. Instead, Pro Ag sees it more as an 'Anti-depression pill' -
a government bottom put into financial stocks such that these instruments could
only take a large financial firm down so far, and then the government would step
Mind you, it is not good for the financial firms to go into gov't
receivership - just look at how much worse off investors were who bought Fannie
Mae or Freddy Mac stock! The irresponsible ones will be held responsible to the
extent they can, and then the gov't steps in! That appears to be a more
accurate description of the $700 billion plan, as really it involves an
investment of gov't money and in return we do expect to get some (or all plus
interest) of our money back!
In all the discussions to date, Bernanke and Paulson are clear that bailing out
irresponsible firms is not their goal, but to protect the US economy and other
banks from being bankrupted by the marketplace valuation deterioration from
every failure. You could call this the 1929 type of 'run on banks', where
investors pull out their money from anyone appearing to be at risk. And unless
the FED steps in, its likely all banks will be at risk.
To look at the net impact of this financial meltdown on commodities, one has to
be aware that this crises is not going to be good for any economy (the US or
foreign countries), and therefore the commodity demand outlook could very well
shrink considerably due to the financial mess the US (and world) might be in.
If we are talking clearly about a recession (which we probably are already in),
that isn't bullish commodities or stocks. If we are talking a depression - why
then it is clearly bearish both commodities and stocks.
The "bailout plan" is really more of an anti-depression pill for the US economy.
To see anything else is not listening to what our Fed Chairman Bernanke and
Treasury Sec. Paulson is saying. And it is clear that Congress is not going to
take on all the responsibilities of the irresponsible. The bitter pill of
failure and financial ruin will first hit stockholders and homeowners before the
gov't takes over, and that is probably as it should be. But when it starts to
affect other companies/citizens/world economies, that's where it appears the
gov't wants to step in. And appropriately so!
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opinions and recommendations contained are based on our judgment and do not
guarantee that profits will be achieved or that losses will not be incurred.
Recommendations should not be construed as an offer to buy or sell
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Financial Bailout: More like Anti-Depression pill??? - 9/24/08 Much has been said about the financial bailout program introduced by the Bush Administration, Treasury Chairman Paulson, and Fed Chairman Ben Bernanke this week.