Printing another $1.2 Trillion to buy toxic assets?
Krugman said in a New York Times opinion piece today that Geithner’s strategy won’t work - and i agree.
http://krugman.blogs.nytimes.com/2009/03/21/despai...
Despair over financial policy The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.
and this:
And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work. What an awful mess.
This article says nothing about the potentially catastrophic affects of increasing the money supply at this rate - instead focusing on the idea of sinking our national wealth (printed on demand) into collateralizing toxic assets that may or may not ever be worth anything. and if i understand this problem - these assets represent mortgages that went into default - and were leveraged 35 to 1.
35 to 1?
this is what i do not understand. the Obama position that these assets are actually undervalued does not make sense to my amateur economist mind. if they are leveraged as high as 35 to 1 - what will it take to make these investments whole again?
can competative bidding on these over-leveraged assets really solve this problem?
wouldn't this just open the door to another round of speculative over-bidding and another bubble? the banks that bid on these assets will gain the upside of another bubble - while risking NOTHING should the assets flop. isn't this a gross incentive for abuse?
and the tax payers will be guaranteeing these assets?
i just don't get it.
someone please explain this to me.