Asia Times: Paulson plan throws oil on fire

Paulson plan throws oil on fire
By Hossein Askari and Noureddine Krichene



With the creation of the so called Mortgage and Financial Institutions Trust (MFI), the unfolding financial crisis, considered by many to be the worst in over 60 years, has become ever-more dangerous.

While such an institution has not existed in any country, the MFI could prove to be disastrous for US public finance, economic growth, the dollar, relations with major foreign holders of dollars, the global financial system, and could ignite the worst inflation in the economic history of the United States and reverse globalization to levels not seen since the Great Depression.

The initial cost of the MFI, put at US$700 billion, could easily escalate to trillions of dollars. At the same time, the Congressional Budget Office had previously projected a record fiscal deficit of US$500 billion for 2009. The MFI will further blow up the deficit to an unprecedented level, exceeding US$1.4 trillion. US debt, jumping with the takeover of Fannie Mae and Freddie Mac to 86% of GDP, has moved to an unsustainable level.

The financing of previous large fiscal deficits under the George W Bush Administration has already caused external deficits (current account) to widen to 5-7% of GDP, turned national savings negative, sent the dollar plummeting, and ignited rapid inflation, particularly in food, energy, and housing prices. Further financing of extraordinary large fiscal deficits, as required by the MFI, can only disrupt economic stability both in the US and world-wide. It will only further undermine the dollar, exacerbate widening external deficits, soaring energy and food prices, and rising unemployment. .......(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/JI24Dj03.html

because there is no money, and if we create money out of thin air, or borrow it, we make the situation worse, not better.

This is the hard truth of the matter, and the part which no one seems willing to accept.

Once again the little guy takes the beating while those increases will not affect the rich one bit.

massive unemployment, food and job riots, homeless tent cities for who knows how long. This will happen no matter what is done. Get ready.

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Mega-beauty house in a fancy neighborhood, fancy cars and all.

I was visiting his house with my brother who was dating his daughter.

Paperboy came to the door to collect.

He couldn't pay him.

So I did.

I was 17.

Ever since then, the "rich" fail to impress me.

Many, if not most of the rich are phonies.

and spending one dime of my money to bail one of them out would REALLY piss me off

But what the hey! - only 700 Billion PLUS?

That's just the cost of another war invading a defenseless country.

Maybe it'll save some OTHER country?

I doubt it . .

(sigh)