Kevin and Fannie Sitting in a Tree
Bloomberg has a great little commentary about Fannie Mae’s gratuitous bailout of mortgages in the US. In essence, the mortgage giant (bailed out by the US government) generated a loss of $453 million in giving money to troubled mortgage holders to keep them from defaulting. It’s all about buying time.
Kevin Rudd’s stimulus packages have exactly the same goal. Buying time, delaying default, delaying the inveitable.
As the author states:
If that’s the case, any improvement in the housing outlook might be a mirage obscuring even greater pressures building in the financial system.
Kevin & co. are trying their luck by doing the same thing to prevent the mortgage based housing market from collapsing during 2009. It is likely to happen six or twelve months later instead. The result of all of this is, instead of seeing a cascade of financial corrections around the world, one after the other in logical order, we are seeing false signs of recovery in some regions, out of keeping with the global trend.
Why are they doing this? Do they honestly believe that the economy is going to make a miraculous recovery next year, just in time? Based on what? There is not enough intrinsic activity in the US manufacturing sector to generate a turn around, and the rest of the planet is wary of more American credit based consumption.
It’s uncanny that the Rudd’s bank deposit guarantees, the mortgage relief plan, the stimulus packages, the First Home Buyer’s grant, all come to a crunch roughly at the end of 2010. The holes are lining up in a similar fashion in other parts of the world. By then we might well be seeing the final collapse of the US dollar, followed by dissolution of the United States of America and possibly the rise of Mexico as an economic power in the region. We might also be in the middle of an influenza pandemic which threatens to decimate the world population. Who knows, with all this madness, we might find ourselves in the middle of a large war.
All that is speculation, drawing a long bow indeed, but current events are moving quickly and many of them seem to make very little sense in isolation. It is clear, however, that the game is up, financially, for the US, and unprecedented changes will inevitably take place there. The Federal Reserve could be said to be out of ammo, painted into a corner, up the creek without a paddle, or a hundred other bad analogies. Either way, nobody can dilute the US dollar value by four times and expect to have no fallout.
It’s sad that the Australian Government should be taking the same approach as the US with its artificial and very short sighted propping up of the economy. We had the chance, as a civilization, to move to sound economic principles, to accept our mistakes and correct them, but we have been bitterly betrayed by our leaders who seem unable to make the difficult but correct choices.