Originally Posted by
acrylics
http:///forum/post/2767320
Not that kind of capital, and credit for it in this environment would be hard to come by IMO. At this point in time, there is too much uncertainty so it is a falling knife that no one really wants to catch. If the US Treasury starts buying, it serves to remove much of this from the market, thus helping to stabilize it. It also serves to set a value for these securities, thus stabilizing the market value of the securities they do not purchase.
So it sounds like you're stating speculation drove the price up, which I agree with. IMO, oil was driven up somewhat due to the devaluation of the dollar but more by speculation. As an example I seem to remember when IIRC Goldman Sachs released a report the oil would be $150 at end of year and oil jumped like $13 that day, this jump was was not indicative of fundamentals but rather speculation.
To release $700B into circulation would increase M2 by roughly 10% so some devaluation is inherent but not 50% to drive oil back to $150 by this action alone. This assumes all other currencies will remain stable and they will not act similarly, if they do act in kind - they dollar may not fall as much relative to others.
Also remember that the Treasury will be receiving payments on these notes so homeowners with these notes will essentially be writing their payments to the US Treasury.
I would hazard a guess that any purchases would be in stock, not cash. Similar to BofA's purchase of Merrill, essentially a stock swap.
FWIW, nice yackin' with ya on this and thanks for trying to keep it politic-free, at least with me
There is plenty of politics involved, but the mechanics of the market is as interesting as the political reasons for it to happen. (I loved economics in college well hated it but loved it and this is a mix of micro/macro/management/and monetary economics I'm in geek heaven it is better than tv)
Here is where I really do differ from you, we have about 13 trillion dollars of gdp every year, here in the states. Take out the federal budget. You're talking about 9 trillion. There is TONS of money out there if this stuff was worth picking up. It is the principles of the market. If we are going to assume as I think you do that the government is out to turn a buck at this stuff, I'm not against the feds turning an honest buck instead of taking it out of my paycheck.
At the price the feds purchased all this junk debt. No one was willing to buy even a portion of it. I do realize that it would be all but impossible to get someone to loan you the money for buying the bad debt. But why not as the fed let it fall then pick it up at the prices that other firms were willing to pay for the "toxic debt".
We overpaid to rescue some major investment institutions. In an era of giant buyouts, I don't buy that no one was out there willing to make an offer. And imo any offer is better than watching the government (which had to privatize the capital hill cafeteria.) Why I'd prefer congress not get their grubby little hands on it.
To sum it at, there is always a buyer at the right price...
I don't think the a barrel of oil hitting 150 was totally a function of the devaluation of the usd compared to foreign currency. However it did help. Even if they do dump 10% of our gdp in the form of cash, I don't think that will make oil jump back up to $150 a barrel. (especially coupled with the dems folding in congress and not extending the drilling ban) however the value of the dollar and a barrel of oil are inversely correlated. And devaluation of the dollar will give it some upward pressure.
And no I don't think speculation (in the form discussed "evil speculator") drove up the price. Speculators guess both way, up and down, and for a while there was ABSOLUTELY nothing to indicate that prices would come down. So they were betting high. I don't think any one speculator or collusion of speculators is big enough to force the price higher. They as a whole were simply responding to what they saw in the market. Besides, by speculation some people purchased gas cheaper like sw airlines. I don't know of a option where you are forced to buy. Sell maybe, but not buy, and that is what you'd need to have if speculators forced the market up to $140ish. You'd have to have people buying above market price to force stuff higher.
