As I write this, the United States congress is preparing a bailout
response of some kind for the US economy.
If I can put aside my normal cynicism, I can allow myself to believe that
the confluence of the greatest financial opinions should result in a solution
that will sustain the US and world economies until the market straightens all
this out.
I’ve
heard a lot of propositions, but the one I like most is the idea of not having the US government “buy” the 700 billion of bad debt, but to have
them guarantee the debt (or the notes created to pay that debt) at some later
date. The difficulty there is to establish an actual value for the depleted
assets. But assuming a number can be arrived at, these “bad debts” can be
packaged and sold and a future value could be guaranteed by the Federal
government at a future maturity date. Kind of like an FDIC situation.
I
prefer that to any solution that requires the US to borrow more money from the
international community (read oil countries and China). We have already started
to see the hints of that foreign influence on US policy. It has been reported
elsewhere that the US was “reluctant” to publicly chastise the Chinese about
human rights issues because they had recently lent several billion dollars to
shore up US markets. Ditto the
Darfur situation. It would have
“displeased” the Chinese government if the US had come down too strongly
against a government supported by the Chinese. There are many out there more cynical than I who believe
that the Saudis were consulted every step of the way before Bush attacked Iraq.
The billions the Arabs have invested in the US makes the Chinese investment
look like pocket change. I had this conversation recently with a client I met through
Blue Water Partners. He doubted that influence was being used as I described
it. I proposed that if he had a
house that needed renovations, and he did not have the money to make these
renovations and I agreed to foot the bill, did he not think that I would have a
say in what he did with that house in the future? I don’t know why people think
money lending governments somehow loose that “human” element of greed, or at
least, quid pro quo. Having the government back the value of the packaged notes
eliminates the pressing need for capital, and the need to go with hands out to
the wealthy oil countries of the world.
