I am speaking of Washington’s grand plan to repair two decades of asinine economic policies (and the inevitable foolhardy speculations that resulted from those policies).

When Paulson’s cabal first pitched us on the grand bailout, they claimed that it would “only” take $700 billion or so. And they promised to be fair, even-handed and transparent in how they managed this largesse.

Not a Gravy Train?

“This is no gravy train for rich guys who screwed up,” they assured us. “We’re just going to buy up a few of these ‘distressed bonds.’ In the end, it won’t even cost you money. Heck, we might even turn a profit selling them later!”

They even managed to say it with a straight face.

What they didn’t tell you was that the Fed had already lent the banks some $2 trillion dollars. And you know what? They still would rather not admit this mind-boggling giveaway. They don’t want to talk about who got the money. Nor do they wish to discuss what kind of crappy assets were put up as collateral.

When queried as to just where the trillions went, neither the lame-duck Bush administration nor the incoming Obama administration offered more than a stern “no comment.” Bloomberg has filed a Freedom of Information lawsuit that may someday bear fruit.

But don’t hold your breath.

Distressed Assets Are Just So, Well, Distressing

In the meantime, the Grand Cabal has become bored with mere “distressed assets.” Within hours of receiving permission to buy those icky bonds, it confessed that they were unpriceable after all. Instead, Washington would simply buy stakes in all the banks.

And what if you didn’t screw up and put your particular bank over the barrel with worthless subprime bonds and mutant debt swaps? What if you acted like a respectable grownup banker, instead of some kind of cocaine-maddened 24-year old derivatives trader, and kept your depositors’ and investors’ needs front and center?

In that case: Tough luck, Chuck!

The Cabal is in charge now, pal, and everyone has to toe the line… or get left out in the cold forever more.

It’s a Recession After All — Who Knew?

As if that weren’t enough, there’s more: After being warned for over a year that the real economy was suffering as much as (if not more than) their friends on Wall Street, Bernanke, Paulson, et al, finally noticed that we might just be in a real recession.

Real people were having a hell of time buying groceries. And real businesses were firing workers willy-nilly. What’s more, they didn’t stop when Washington bought up the banks!

What an outrage!

Just Buy It All!

So now it seems we’re going to have to find a way to bail just about everyone out. GMAC Financial Services (GJM: NYSE) – once General Motors’ sole profit center – wants to be redefined as a bank so that it can qualify for a piece of the pie.

Not to be outdone, American Express (AXP: NYSE) is begging for a modest $3.5 billion too, lest it come undone from the stress of failing sales and skyrocketing defaults.

(I must confess that I have participated in pushing this doddering gray lady of the credit world to the curb. I tore up my card when they transferred their service bureau to Bangalore.)

Furthermore, insurance outfits like MetLife (MET: NYSE) and Allstate (ALL: NYSE) are drooling over American International Group’s (AIG: NYSE) new terms. Remember that $80 billion we “loaned” them? Well furgedaboudit, because we will in all probability never get a penny back – and more is going down the hatch.

GM Puts Six Million Workers On the Line

Oh, and speaking of GM, they have very publicly announced that if they don’t get a very large piece of the action, they will simply shut their doors – throwing an additional 266,000 workers onto the breadlines.

(That is roughly the number of full time workers at GM. Some analysts claim that after adding in all the folks who cling to GM’s mighty sides, the real figure is somewhere between 3 and 6 million!)

No doubt Ford and Chrysler are watching closely, prepared to scream, “Me too!” at the drop of a hat. If Washington does bail out the automakers (and I believe that they will), there is every likelihood that they will shaft both shareholders and bondholders in the process.

(For those who are interested in capitalizing on this particularly horrid storyline, Bryan Bottarelli and I have offered WaveStrength Options Weekly readers an option straddle that ought to capture some 15%-40% gains regardless of what Washington does for the automakers.)

Heck, even the National Marine Manufacturers Association has dispatched a delegation to Washington, to find out if its members qualify for a place in the “grand gravy train” that this wasn’t supposed to turn into.

A Bill No One Could Possibly Manage

So why not just bail them all out? Why not just cut a billion-dollar check right now for each and every deadbeat and sad sack who was not prepared for “the sudden downturn” that has been clearly coming for over a decade?

Try this on for size: our current annual GDP is estimated at some $14 trillion and falling. Over the past six months we have already given away some $2.5 trillion. And with the cost of running the rest of government, not to mention a couple of grueling wars, we are out another $10 trillion or so.

When the rest of the world sees spending like this (i.e. the folks who buy our bonds and fund it all), they shrink back in horror. Word is already circulating around the global finance community that the danger of default may even cause the U.S. to lose its triple-A credit rating.

If this happens, we would have to double or triple (at least) the bribes we pay out to entice bond sales. Our already skyrocketing deficit (currently somewhere in the vicinity of $10 trillion) would further expand geometrically.

Simply put: There ain’t enough dough in world to save every deadbeat. The charitable impulse is nice enough. But it simply cannot be done.

Adam Lass, Senior Editor, WaveStrength Options Weekly

Source: All Aboard the Grand Gravy Train

Whenever Chavez gets a chance, he gives speeches in which he pretends to support the people that socially need it the most.Paradoxically, their policies have negatively affected the general population rather than helping them, hitting the bread basket (canasta basica) harder in the same lower social classes that he claims to protect.

A mother saying to her child: “Son; would you go to the store and buy a pack of noodles and a bottle of corn oil so I can fix lunch for us today?” to which she adds: “here, take more money with you just in case the prices went up again today” is, without a doubt, a common household conversation in Venezuela (as a matter of fact, it is a common household conversation in most of the countries with this new food inflation context, but is apparently much more serious in Venezuela).

The worldwide increase in food prices is an issue that concerns us all. To relieve the effect that this has in weaker countries, the IMF is revising a special loan to bring financial aid to the countries that have been affected the most by this increase, as soon as possible.

The seriousness and extent of the situation differs from country to country. Venezuela’s case is one to be concerned about not only because of the foreign pressures on the market prices, but also Chavez’s orders to the government to put even more pressure, a dangerous cocktail and time bomb.

What was Chavez’s idea given the increase on food prices? The answer is simple, price controls, a practice not very different from other neighboring countries. This is the method he used to control prices of a wide variety of other products such as rice and milk, thinking that fixed prices would not affect farm production whatsoever. Does this sound logical to you? What would you have done in farmers’ shoes when the local government decides to fix a price cap on crops as the worldwide prices continue to increase?

The result is written in every basic economy manual; the production has fallen and shortage has taken over the market… Which is something the Chavist’s theory of economics did not contemplate. But that’s not all; this theory also stipulates (most importantly of all) that if producers take back their supply and the market’s demand remains the same, the prices will increase even more.

Local people commonly believe that “Chavez imposes price control to protect the poorer part of the population” However, this situation in price control is what has made the situation worse and has generated greater inflation.

Didn’t Chavez intend to use socialist economical theories to make the distribution of income equal for his people? The answer is yes, but he seems to have forgotten that the greatest threat to the poor is inflation, they are the ones being affected the most by these measures and when the engine hits full speed, their salaries will just not be enough to survive.

Growing inflation is regressive…what does this mean? This can be understood if you compare it to taxes that are used more on those who less have. According to the Central Bank, 45% of the average Venezuelan lower class family’s salary is spent on the purchase of food. So, since the inflationary acceleration is more severe on food products, it is only logical that the poorer families are the most affected.

If inflation in different trades were homogeneous, the lower class would still be the most affected part of the population because they have less coverage capacity compared to higher social classes.

In what situation does Venezuela find itself today? Food prices in the last 12 months have increased in …(take a deep breath)… 41.5% (there is even speculation that this will increase!!). Private estimates show that 15% of Venezuelan families (roughly 4 million people) have an income lower than the basic food basket, and 38% cannot cover the expense of the basic basket.

As inflation soars in Venezuela, Chavez’s popularity is in steep decline, and the situation in this country is unstable day by day. Very few think that Chavez will react in time to turn things around and change his economical policies.

For some it is already too late.

We will meet again tomorrow,

Horacio Pozzo

Please send your comments to paola@latinforme.com

He said that fault for the US’s economic morass belongs to opposition party Democrats.

Apparently, President Bush feels they’ve undone in 16 months the stirring economic policies his Republican brethren crafted while they controlled congress during his term’s first six years.

And, yes, there is plenty of blame to go around. After all, both parties totally whiffed on the benefits of the economic stimulus plan that was to be the war in Iraq. All that’s done so far is run up a tab that has easily eclipsed a half-trillion dollars, as well as inflict catastrophic costs on the lives of US military and Iraqi families.

As far as the economic stimulus part goes, I suppose a case can be made that the war has been very good for the corporations that supply the 30,000 well-armed mercenaries, whoops, I mean private security forces that now work in Iraq. Their war-zone salaries alone cost the US about $6 billion a year.

Still, as the President tries to convince us that, in less than a year and a half, those crazy tax-and-spend Democrats have wrecked a thriving US economy, it should be noted that during the GOP’s six-year run as the majority on the Hill, Bush vetoed just one (sort of) spending bill.

It was a bill that would have lifted the federal ban on funding embryonic stem cell research. But, that was it… one veto in six years.

But, since the Democrats gained their destructive congressional majority, Bush has tripled his veto output.

Last October he vetoed a bipartisan bill that would have expanded children’s health insurance. He said that the $30 billion extra (spread out over five years) that Congress added to the plan was too expensive. He only wanted to bump the plan’s budget by $5 billion.

Under the Democrat’s venal economic watch, Bush also vetoed a bill that would have limited the CIA’s use of “harsh” interrogation techniques.

And, he nixed a $124 billion war-funding bill… but not because it was too expensive. He killed that bill because it would have set target dates for troop withdrawals from Iraq.

That’s it.

Pash Da Boddle

Other than that, be it six years of GOP spending or 16 months of Democrats signing checks, President Bush’s attitude can only really be described as “whatever.”

By the way, I stole that “whatever” from Eugene Robinson, who writes for The Washington Post.

While I’m at it, I am going to purloin a great Robinson line. Back in October he wrote, “To say that George W. Bush spends money like a drunken sailor is to insult every gin-soaked patron of every dockside dive in every dubious port of call.”

So, the president is trying to defend and deflect. That is a very “presidential” thing to do. Maybe he’s finally growing into the job.

But, to accept no blame for the US economy’s current state is also a very Karl Rovian thing, as well.

If Elected I’ll Serve

Now, I am not so arrogant to think that I could have done an overall better job as president during the past seven years and four months.

But, I think I might have done a better job understanding the issues… or at least being more up front with Americans about the effect my stances would have on them. For, my biggest disagreement with the current president is about his weak dollar policy.

It’s a policy that has honked me off for years.

In fact, as your president I would have promised not to engage in monetary policy before I had at least consulted the experts at the Federal Reserve Bank.

Between naps, golf and visits to the White House wine cellar (okay, and long lunches with Scarlett Johansson and Sheryl Crow) I would have begun my monetary research online, say at a Fed website.