How Geithner’s Plan Will Cost The Taxpayer (Yet Again)

Tim Geithner is just another Wall Street lackey. His plan to bail out the bank through taxpayer-guaranteed private buyouts of toxic assets is yet another stupid idea. Called the “Public-Private Investment Program”, its going to spend between $500 Billion and $1 Trillion on toxic purchases (euphemistically called “assets”).

Ceny Uygur from The Young Turks, does a great job at explaining the latest plan and why it is terrible for the American taxpayer.

Which idea is dumber?

Buying $300 Billion of Treasuries or up to $1 Trillion in Toxic Assets?

Buying Our National Debt

I got this email from Randy Johnson, author of the best book I’ve ever read on the topic of real estate mortages. If you own a home or are thinking of ever buying a home, you need to get How to Save Thousands of Dollars on Your Home Mortgage. It’ll probably be the best $12 you’ve ever spent. Buy it. Even if you have an MBA in finance from a top tier school. 😉

Up until about 30 years ago the American people always funded most of our own national debt. We went into World War II with a national debt of less than $100 billion, maybe $500 billion dollars adjusted for inflation. We came out of the war with about $300 billion, a piddling amount by today’s number as today the National Debt stands at about $11 trillion.

When we embarked on WWII, how did we finance the expenditures necessary to build all those battleships, airplanes, and tanks and pay for the soldiers and sailors to man them? We sure as heck didn’t sell Government Bonds to the Germans and the Japanese. Europe that wasn’t under Nazi control was worse off than we were. We financed the war ourselves.

Ordinary Americans put the money they saved into Savings Bonds, and that is what financed the war effort. But, to be truthful, we were on a wartime economy and, as I here put on my old-timer hat, it was a lot different world than young people are willing to acknowledge today. Can you imagine your teen- ager’s reaction to having the whole family being rationed four gallons of gas per week?

Consumerism came in a distant second place to building war materiel. And there was rationing. We only got limited access to gasoline, tires, and metals, all of which had a higher military priority than civilian use. See

Even food was rationed. Remember the old economic trade-off “guns versus butter.” It was real. Butter was rationed which mean that the civilian population turned to margarine, and not the “I can’t believe it’s not butter” type. This was a white globule of hydrogenated vegetable fat. It came in a bag with a little yellow button that you broke and then kneaded into the mixture to make it look like butter. The problem was that it still tasted a lot like hydrogenated vegetable oil. Each family got a little bit of beef and a little bacon every week. And we saved bacon fat and it was used in the manufacture of explosives.

It was time for Rosie the Riveter as the overwhelming majority of American men and women supported the war effort. We all looked at the sacrifices we made as small in comparison to the millions of soldiers, sailors and marines who were risking their lives to win the war on the battlefield.

What did kids do? For openers we saved paper and took to what we would refer to today as recycling centers. We cut out both ends of “tin cans,” stomped them flat and saved them to turn into collection centers to be made into steel to help the war effort.

But we all helped financially too. We had little coupon books and when we saved a nickel or a dime, we bought stamps that went into books. I forget the numbers but it seems to me that if you saved $37.50, you took it to the bank or Post Office and traded it for a War Bond with a value of $50 some years hence. The $12.50 was interest.

As to marketing of the War Bonds, I have a dim recollection of Bing Crosby singing a song Buy Bonds. We didn’t need much encouragement. We all wanted to win the war.

All of which brings me to 2009. I don’t see much difference between 1942 and 2009. We are in the middle of a crisis that to my mind is every bit as dangerous to American families as was World War II. No, except for Iraq and Afghanistan, no one is shooting at our troops, but economic events are very serious, perhaps even more so than in 1942. Back then we had the most important economy in the world, and while we are still the leader in GDP, citizens of other countries are much more effective in their ability to compete successfully for Americans’ jobs.

Ever since 1946 we have had a society based upon consumption. We used to save and then buy. But for the last 45 years or so our consumption has been financed by the extension of great gobs of credit. We used to balance the Federal budget and much of the debt stayed at home, but recently the debt was ultimately bought by someone in China or Japan or Europe. I think China holds over $1 trillion of our bonds.

Frankly, I do not believe that it is healthy to depend upon the largess of others to finance that debt any more than families who depend on someone else to finance their excess consumption. Quite bluntly, the counter-parties may not want to continue to do so. The sooner we wean ourselves from the teat of foreign largess, the better off this country will be.

We need to adopt a mentality that is based upon a higher national savings rate, which has indeed spiked in the last few months. But my feeling is that it may be more a knee-jerk, fear-based reaction to the crisis that rather than a newly found sense of financial responsibility.

What better way to restore America’s fiscal health and the American family’s financial well being than to have American citizens finance the necessary increase in the national debt. We can’t do it a nickel and dime at a time, inflation being what it is, but we can sure have teenagers save a few dollars every week, and when they get $37.50 then go buy a $50 Series EE Savings Bond. Who would you rather have a buy that bond, your kid or some Chinese government official?

You see what I mean. I want to get along with China and I hope that they continue to be our trading partner, but I would rather have us keep our debt between the American Government and the American citizens.

What would happen if we all adopted a policy of buying T-bills? What if our Government tried MARKETING the concept? Heck, we can sell almost anything fattening to our citizens. Why don’t we try marketing something that is good for them, and the rest of us too. I think that if Madison Avenue got involved in this project, they could instill a lot of Patriotic Pride into buying T-Bonds.

As to buying the Bonds or Bills themselves, you can buy them through your stockbroker or it can actually be done online at http://www.savingsbond

Seriously, as a measure of your Patriotic commitment, why not go online right now, open an account, and buy some T-bills. I did it and I can tell you it really feels good, better than a trip to the mall.

Jim Rogers: How To Get Out of This Mess

A lot of people think Jim Rogers is an alarmist with strange ideas. However, he is a very rich alarmist who sold his Manhattan home at the peak and moved to Asia.

Check out this great video where he explains the mistakes of the 30s which he sees repeated again now.

One of my favorite books is Adventure Capitalist: The Ultimate Road Trip, which chronicles his road trip around the world. I strongly recommend it.

Check out Part 2 of the interview:

Part 3:

Government Bail-Out Of The Auto Industry – Part 2

About 4 months ago, I protest against the government bail-out of the auto industry. I said they were inefficient operations that were being driven out of business by the Auto Workers Union and they’d be back asking for more money pretty soon.

Well, it looks like the time to ask for more money has arrived! GM just announced it would need another $16.6 Billion if economic conditions continued to worsen, in addition to the $13.4 Billion it has already recieved.  Of course economic conditions are going to worsen. GM’s statement that it may achieve profitability in 2 years and might be able to pay off its loans by 2017 sounds completely bogus to me.

GM claims it will be out of money by March. That means it spent the $13.4 Billion it recieved in December in just 3 months, or nearly $4.5 Billion every month! The company claimed that if it had to file Chapter 11, the cost to the government could reach $100 Billion, so in fact, pay them $16.6 Billion is actually a good deal.

When are we going to pull the plug on this loser?

Many people say that the economy can’t withstand the shock from the loss of nearly 1,000,000 jobs that the auto-industry provides. But the US lost nearly 600,000 jobs in January. Why aren’t we bailing out all those people too? Who decides which jobs get preferential treatment and which ones get axed? Does it help if the CEOs have friends in Congress? Or the Federal Reserve?  (We know Ben Bernanke bailed out his old friends at Goldman Sachs while letting Lehman fail).

With the government spending all this money on things that don’t affect me, I can only think of one thing.

Where’s my bail out?

Deleveraging Is Not Deflation!

I read a very interesting article on called De-leveraging is Not Deflation.

Here’s a partial extract:

“Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation’ to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages.”

— Ludwig von Mises

It’s true that just about every asset class is coming down in price right now. This, however, is not deflation — as I have said so many times recently, much to many readers’ unqualified chagrin. To the contrary, these declines are the products of de-leveraging — not deflation — and the distinction is nearly incalculably important, although the subtlety seems to elude even the most astute these days.

If the previous premise is true (which it is), any removal of money from the economy would eventually result in an increase in the value of our currency, relative to everything else. And that, in turn, would eventually translate into lower prices in dollars. But that’s clearly not what is happening. No, the Fed is printing money, sending the amount in the economy higher than ever seen in U.S. history. That’s not deflationary. That’s inflationary.

Just so you’ll know, here’s the definition of inflation I’m using. And before you pooh-pooh it with too much eagerness, remember that one of its authors, F.A. Hayek, won the Nobel Prize in economics in 1974.

Look, the thing we should be worried about is relative value, not “inflation,” per se. It’s not about the growth of M0, or M1, or M2 (or even M3, if you keep up with, so much as it is about what the money supply is doing relative to everything else that is happening. I know assets are falling in price — believe me, I get no shortage of reminders every single day. But the amount of money in the system — not just M0 — is increasing at a tremendous rate. I won’t argue that the relative value of things like real estate and equities are going to continue to drop — maybe even dramatically, and for a long time — in terms of demand (or lack thereof). No, what I’m most concerned about is that demand will stay extremely low, and yet prices will rise anyway because of the increase in the amount of money in the system.

But it’s not just money; it’s also Treasuries. The Fed has specifically stated that its objective is to stimulate “inflation” (by its definition). It wants prices to rise, and it’s going to do everything it can to find success. But the amount of money in the system is unprecedented. When the Treasury bubble starts to collapse, yields are going to explode. Yes, the Fed will probably print more money to buy down the long-end of the curve, but how long will that work? Some people say years, but how? Do you really think the Chinese and the Japanese are going to keep funding that sort of behavior? Or even more importantly, do you think they’re just going to sit on their current holdings? Probably not, and if they start dumping Treasuries, yields are going much higher.

It’s not a matter of if this is going to happen. Yields can’t stay where they are for any sustained amount of time, and once they start rising, so will prices. But will demand for, say, houses have increased? No. Cars? No. Boats? Televisions? No. Why? The American consumer is tapped out.

Credit card companies are tightening limits prodigiously. Teaser rates are all but gone. Home equity has dried up. The consumer has driven two-thirds of our economy for at least the last few decades, and now the consumer is dead. There’s another aspect to this that I won’t go too deep into: the American consumer protects his or her credit score for one reason — to obtain future credit. But the consumer also knows that loans have dried up — not just today, but for the very distant future as well. You know these consumers have to be thinking about defaulting; if they can’t get loans anyway, why would they not default on thousands of dollars in unsecured credit card debt? I plan on writing more about this in future articles, but suffice it to say, I think credit card companies are going to give us the next blow to our collective stomach, and it’s going to hurt.

So here we have a situation in which demand is gone, and yet prices and rates are rising — because of inflation (printing money) and the Treasury collapse. And that’s the point: it’s not going to come from just one source. It’s not just going to be inflation (printing money). It’s not just going to be the collapse in Treasuries. It’s not just going to be the nearly unfathomable costs of the stimulus packages that are coming online in the next two years. It’s going to be the confluence of all of it. And if I’m right about the continued deterioration in credit markets, things will be even worse.

You think it’s not different this time? Add it all up, in real dollars — the staggering amount of debt, the parabolic rise of currency in the system, the annihilation of real-estate investment, and the demise of the consumer. $8.5 trillion committed to bailouts and stimulus packages. Oh, yes it is different this time. It’s very different.

Credit cards didn’t even exist in 1930, and the dollar was backed by gold. Credit cards barely existed in 1973. Nixon had just taken us off the gold standard, and look what happened? Volcker was immensely lucky to have stopped hyperinflation, and look at the extreme measures he had to employ to do it.

Of course, every time I bring all of this up — which is a lot lately — somebody starts talking about the velocity of money. And pretty soon after that, somebody starts talking about the multiplier effect.

Yes, the U.S. employs a fractional reserve system, and while that system certainly lends to rising prices and yields, the amplifier effect is not inflation. Like the printing of money, the fractional reserve system is only one ingredient in the poison that lends to the ultimate catastrophe inspired by central banks: rising prices and increased costs of borrowing.

And then there’s velocity…

While I am eternally grateful to my critics for forcing me to defend the theories I hold dear, I sometimes fatigue of the incessant snapping at my heels by people who want me to know that the velocity of money has slowed down. I know the velocity of money has slowed. It doesn’t matter. It’s not going to stay this low for long, and when it starts speeding up, it’s not going to be a “good thing.” Treasuries are going to break, rates and prices are going to rise, and all that money pressing against the dam is going to find a crack. Why? It has to. People will flee from dollars that are losing value. They will extract all the dollars sloshing around the system, and they will buy commodities and durables in order to preserve the value of their wealth.

Remember, just because the dollar is losing value does not mean that the concomitant subsequent rise in certain asset classes necessarily means that demand for all assets has increased dramatically — as it did during previous eras of easy money. Demand for assets economy-wide can continue to wane even as people spend dollars as fast as they can get them in the midst of rising prices. And this is a very important distinction: prices can rise because of demand, but prices can also rise because of excessive increases in the amount of money in the system. If prices are rising without a simultaneous increase in demand, well, I can’t think of a more dangerous economic environment to be in.

You don’t believe it can happen? You think there’s a huge demand for houses, cars, and boats in Zimbabwe? Prices there are rising exponentially, but there is very little demand for assets — other than staples, of course. What do you think their velocity of money is?

Do you think’s long Gold? You bet he is!

In my next post I’ll talk about an interesting long-short bond trade I entered on Tuesday.

What Happens When Demand for US Debt Dries Up?

Over a year ago, I wrote about China threatening to stop buying US Treasuries.

According to an article in the New York Times, it now looks like China is losing it’s appetite for US debt :

In the last five years, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September, it surpassed Japan as the largest overseas holder of Treasuries.

But now Beijing is seeking to pay for its own $600 billion stimulus – just as tax revenue is falling sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports, and to local governments to build new roads and other projects.

All the key drivers of China’s Treasury purchases are disappearing – there’s a waning appetite for dollars and a waning appetite for Treasuries, and that complicates the outlook for interest rates, said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland.

By itself, this is a concern for our government. Recently, it sold billions of 3 year treasuries at a 1.2% yield! But when the demand for treasuries eventually dries up, yield should start jumping higher. But to make matters worse, the government will start a slew of public works projects and bailouts, for which we will have to borrow even more money. At some point the demand will simply fall short of the supply.

Here’s an interesting note by James Quinn on

As the politicians scurry to “save” capitalism through the use of communist measures, more Americans are becoming disheartened. The definition of communism according to Webster’s is:

A system in which goods are owned in common and are available to all as needed.

George Bush, Henry Paulson and Ben Bernanke have decided to seize money from the vast majority of Americans who lived within their means, utilized debt sparingly, and worked hard to get ahead, and give it to the most appalling failures in our society. They have shoveled billions to banks that operated their businesses like gambling parlors. They have shoveled hundreds of millions to people who bought houses with no money down, interest only mortgages and fraudulent loan applications. They are now rewarding automakers who made the wrong vehicles, pay 30,000 workers per year to not work, and have only been able to “sell” cars by giving them away with 0% financing to any schmuck who could sign on the dotted line. These acts fit the definition of communism. We are now more communist than China.

So what are the repercussions of our monetary policy? According to Chuck Butler of (which I highly recommend):

US government will have to ratchet the yield on these bonds up so high to attract investors… OR… Allow a general debasing of the dollar to allow those purchases of Treasuries to be made at a discounted clearing price.”

A lot of people will disagree, but during these economic times, we’ll see inflation and not deflation. And gold will continue to be a store of value and a hedge against inflation. Even though its quite popular to bash gold and call it a lousy investment, the fact remains that gold has been one of the best performing assets during the past decade. I’ve been buying gold coins since 2005 and while the price of gold is up around 50% since then, the premiums on gold and silver coins has increased more than twice that. (Premium is what you pay over the spot price of gold). This shows an increasing demand for gold coins.

Gold and silver coins will be the next bubble! The bubble has barely started and should take 2-3 years to play out.

Will 2009 Be A Good Year For Stocks?

Prof. Jeremy Siegel, author of the excellent book The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New, seems to think 2009 will be a good year for the stock market:

All of this means that, although the first quarter of 2009 will see negative growth, GDP should stabilize in the second quarter, earlier than most economists now anticipate. In real terms, housing prices have already retraced most of their gains from 2000, and by midyear prices should stabilize in this low-interest-rate environment. Year-over-year inflation should sink to zero, especially in the first half of 2009.

This year, as the economic slide abates and investors realize a catastrophe has been avoided, stock prices should enjoy a 20 percent or higher return. All equity sectors should recover.

The financial stocks will still be burdened by bad loans and government obligations. Nevertheless, new lending will prove extremely profitable to the banks whose cost of funds is now essentially zero. The Fed might find that it will be forced to raise rates during the summer, earlier than planned. And I believe long-term Treasuries are in a giant bubble and their prices will fall to earth once the economy improves.

All of this doesn’t mean there are no risks to stocks. The Fed must do more to encourage banks to lend to credit-worthy, non-delinquent customers. And the Obama administration must carefully structure its recovery plan so as not to bail out those that have been profligate and penalize those who have been thrifty.

Still, just as 2008 disappointed us on the downside, 2009 might surprise with better numbers than most are expecting.

Of course, just like everyone else, he didn’t exactly predict the worst bear market since the Great Depression! In fact, he thought the market would be led higher by financial stocks.

One of the few people who got it write was Nassim Nicholas Taleb or NNT for short. NNT was an options trader who achieved public fame after his awesome 2001 book Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets became a best-seller. His hedge fund actually did very well last year returning in excess of 50%.  Check out his video:

Also check out this great NYT article on how misunderstanding of risk management tools caused the financial mess.

Russian Prediction: US To Collapse by 2010

According to to the WSJ, Dr. Panarin, a Russian former KGB analyst, predicts that the US will disintegrate by summer of 2010. He actually made his prediction back in 1997 when this scenario really sounded ludicrous. Now its simply improbable!


Before you dismiss him as another crazy, check out his credentials. “Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry’s academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.”

Here’s the gist of his argument:

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar.

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.

California will form the nucleus of what he calls “The Californian Republic,” and will be part of China or under Chinese influence. Texas will be the heart of “The Texas Republic,” a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an “Atlantic America” that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls “The Central North American Republic.” Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

Interest in his forecast revived this fall when he published an article in Izvestia, one of Russia’s biggest national dailies. In it, he reiterated his theory, called U.S. foreign debt “a pyramid scheme,” and predicted China and Russia would usurp Washington’s role as a global financial regulator.

Americans hope President-elect Barack Obama “can work miracles,” he wrote. “But when spring comes, it will be clear that there are no miracles.”

While I agree that the Federal Reserve is running the world’s largest Ponzi Scheme and that Obama may have a tough time working any miracles, I doubt that will necessarily result in complete disintegration of the US.

The US Dollar might lose its status as the world’s reserve currency and we might see a period of high inflation. The average American might also see a contraction in his or her standard of living, which is more of a regression back to living within one’s means since the days of excess spending are over. But so what if we become a little poorer or our standard of living drops a little. Poor people in the US still live better than poor people everywhere else.

And if, like Dick Cheney, you diversify your investment holdings into foreign currencies & bonds and buy some gold & silver coins you’ll be able to hedge yourself against any collapse in the US dollar or financial system.

Mortgage Meltdown: The Worst Is Yet To Come!

Check out this 12 minute video from 60 Minutes. There’s another wave of mortgage defaults on the way, this time from Alt-A & Option-Arm (also called Negative-Amortization or Neg-Am) loans. As opposed to the subprime loans which were worth almost $1 Trillion, these two groups make up nearly $1.5 Trillion.  According to Amhurst Capital, they expect a 70% default rate on the Option-Arms based on the current default rate which is occurring at 3% interest rates!

Right now there’s a 3-5 year overhead supply of housing inventory on the market. Along with these coming defaults and the fact that 10% of Americans are behind on their mortgage, you should expect house prices to be depressed for a very long time. I’ll think we’ll have more clarity when home prices actually hit bottom, which might be another 12-24 months from today.

I’m sure glad I sold my condo in summer 2005! The bank now owns and I’m thinking of putting in a very low-ball offer. An offer so low, it’ll cashflow well and at least break-even if rents drop 50%!
(Check out these cheap real estate deals).

If you’ve been reading the news, you know that at yesterday’s FOMC meeting, Bernanke dropped the interest rates to an unbelivable 0.25% (a cut of 75 basis points). Apparently he thinks that cheap credit will solve the problems facing the US economy right now. Unfortunately, its not the cost of credit but the availability of credit that is the issue. Credit is drying up and making it cheaper isn’t going to make any difference.

Last Monday, the Treasury was able to auction $35 Billion worth of 3 month T-bills at 0%, which means there’s a demand for liquidity and safety. Return of principle is more important than return on principle!

However, the government is using this money (and another few hundred billions) to bail out bankrupt financial firms, insurance companies, and auto manufacturers. It is running printing presses around the clock creating pictures of dead presidents and is inflating the money supply at a 17% annual rate. This is inflationary in the long run and will cause the devaluation of the dollar.

In the long term, Bernanke (or Bernie for short) is more worried about saving the economy than fighting inflation. (He’s not really concerned about the devaluing dollar either). And while the price of everything may increase, he’s hoping that real estate prices will stay flat instead of tanking, and that’s how he’s going to engender “a soft landing for the real estate market”.

Looking at the dollar index over the past few days, the dollar has started showing signs of weakness. Now that the interest rates in the US are even lower than in Japan, maybe people will start using the US Dollar as the new currency of choice for the carry-trade!

You could sell the US Dollar and buy the Australian Dollar or the New Zealand Dollar, both of which have a much higher yield than the US Dollar. (Note: this is not a recommendation, just an example of how to execute the new carry-trade). I bought some Australian Dollar ETF (FXA) yesterday morning in anticipation of a rate cut for my retirement account. The yield on FXA is currently 8%! It’s up nearly 5% since then and I’m happy to say my retirement account is down only 4% for the year – if only all my investments had fared so well this year!

Anyway, with interest rates close to zero I’m reminded of an 80’s song called “Turning Japanese“! Enjoy.

Happy Thanksgiving!

Happy Thanksgiving! Here’s an interesting cartoon on the topic.

[Thanksgiving In Washington]


There’s certainly one group of people who have a lot to be thankful for this Thanksgiving: The white-collar criminals in Washington who are looting the U.S. Treasury and stealing trillions of dollars from taxpayers.

That’s what this financial bailout really is, of course: A grand, desperate swindle that seeks to wring every last cent out of the U.S. dollar before the coming currency collapse. A collapse of the value of the U.S. dollar is coming soon. Just do the math: The end result is obvious. It will either be runaway inflation that leaves dollars virtually worthless or the abandonment of the dollar by the U.S. government and the adoption of a new currency (the Amero?) at confiscatory exchange rates that will wipe out the savings of most Americans.

You are witnessing the downfall of the American empire, and the Federal Reserve — a private bank that was stupidly handed the power over our nation’s money supply — is heaping new debt onto old debt, sending the U.S. into a tailspin of bad money from which it will never emerge. Consider this: It took the United States over 230 years to accumulate $5 trillion in debt. That national debt has now roughly tripled in the last 60 days. Officially, the national debt is now about $10 trillion, but with the Fed just announcing another $7 trillion in bailout money, we’re talking about a $17 trillion national debt that nobody even has a clue how to pay back.

The very idea that we can pay off bad debt with more bad debt is so utterly stupid in the first place, it could have only been dreamed up by politicians. It makes as much sense as paying off one credit card by taking out a cash advance on another credit card. That’s not a financial bailout; it’s more like a financial tar pit. But it’s exactly what the United States of America has decided to do.

Read the rest of the article here.