Welcome to the end of the beginning. And the Beginning of the second phase.
The press is starting to ask how did we get here, who is to blame, what is to come, what is this new USSRA? It talks about politics and who is to answer for this horrible mess we are all in.
America has been living off of bubbles for a long time. Lately the credit bubble. It grew until it started eating at one of the biggest asset classes (real estate).
Then there was some money lent by foreigners that was lost on the inside. Since these days the lending is done by foreigners, the Government is stepping in to guarantee the bonds market that they will be paid. US of A will make good on its obligations. The Freddie and Mack nationalization was to make sure that payments on it senior debt would not default, it could be considered a matter of national security by some.
Is the inflation going to kick in? Maybe, Maybe not. In a delevering environment monetary pressure could actually help stabilize prices. This lot of $700 represents $7T of liquidity in the system. In a economy that clocks in at 18T/yr this may be a cost that will be socialized if it defaults but will pay off handsomely if the price is right and it does clean the credit systems back to a heartbeat. It is clearly a service of the government for which it should be handsomely rewarded.
Because after-all it has been our own collective greed, the belief that money would come out of trees and houses, just for being there. That, actually is the definition of a rent and with bubble economics gone, we are back to the fundamentals.
And fundamentals, by historical standards, say that there may be another 10-20% on the way down.
The good news is that it is coming fast, the bad news is that it will stink. Positively stink. Assets are unsafe, some (Marc Faber) say not even cash (fiat USD/EU?) is safe, witness Zimbabwe for graphic example. USA == Zimbabwe? I don't buy it personally.
Making good on debts is the basis of trust. The American taxpayer is stepping in saying, very publicly, very sorry, we boo-booed up, "we honor our debts". That is the minimum, if on top of it the government can execute a deal (with guys like Gross offering to manage it for free) it will turn a killing for itself.
I am trying to stay current with what is being said. It is starting to trickle through. Everyone seems to agree that this is a new world... what it exactly means I am not quite sure.
May you live in interesting times.