Government Plays Robinhood for Bondholders, Forcing Taxpayers to Play Role of Sherriff of Nottingham
John Hussman sums it up when he says:
“We simply cannot make these bad investments whole unless we are willing to hand the next 10-20 years of U.S. private savings over to the bondholders who financed reckless lending. Those bondholders should, and ultimately must, take a portion of these losses, and debt obligations will have to be restructured. Wall Street has become a bunch of Tooter Turtles crying ‘Help, Mr. Wizard!’ because it got so used to Greenspan bailing everybody out. But that constant attempt to avoid inevitable private market losses is what allowed this problem to become so noxious. It will continue to do so until we collectively scream loud enough for Congress to say on our behalf, ‘Enough.’””
This article explains the basic dynamic of the federal government using the taxpayer to give total protection to bondholders and banks.
Essentially we’re rewarding people who have made poor financial decisions to fund their continued poor decision-making process; the dog is chasing its tail so to speak—and its owner is tossing it snippets of the other dogs’ tails to encourage it!
Henry Blodget explains, “Now, thanks to bailout nation, taxpayers are on the hook for trillions. Bondholders, meanwhile–the folks who loaned the banks the trillions they have since vaporized–have lost next to nothing.”
This information could be useful to those of us that need to make critical decisions such as create a mortgage pay off plan.