Tuesday, October 14, 2008

Preserving the market with the "Uncle Sam Hedge Fund"

President Bush announced sweeping plans, that in his words are "not intended to take over the free market but to preserve it."

I am astonished that the idea that the government taking an ownership in banks, buying up what we are supposed to believe are undervalued CDOs, and otherwise acting like a hedge fund, is in the interest of saving the free market. Really, this seems like something along the lines of what the Chinese do with their businesses; or despite the bad cliche', being sort of pregnant. Which should really disturb everyone, especially since, due to the explanation provided by the iron triangle, the government will most likely never give up the power that it gained at the desperation of the people.

It seems that the desperation came from people that are quite short sited-after all, these are the same people that as of right now have sent the DJIA up over 1,000 points since it's low on Friday. A low that was reached without any regard for true value of many of it's components. A perfect example being the price fall of DRAM, SNS and SHLD. These, especially the last 2 have very known, vocal, and above all-effective management teams-I would be willing to bet that Eddie Lampert is buying back shares of SHLD as we speak-after all, it wouldn't be the first time that he has done so with a price drop. Actually, with him at the helm of such a great cash flow machine, he'd be pretty stupid to not do so.

Back to the short and sweet point of the article. Are we as a society really ready to deal with the inflation that will occur from massive government spending? Why do we want the people that created most of the problems that we currently have to fix it? How can the same people that have given us over 53 TRILLION dollars in unfunded liabilities (put another way, everyone currently in the US can work for free for the next 4 years to fund them) fix the problem that we have? And above all, do we really want the government to function as a hedge fund?

I shouldn't be complaining though... Inflation will be great for me. The debt that I have against my rental properties will look like nothing when compared to the rents that I will get.

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