While media pundits’ cheers resonated the world over and global stock indexes soared on the news that Uncle Sam finally stepped in and nationalized Fannie and Freddie, many sane individuals are left shaking their heads. True we have known for some time that this would happen. It had to. The pain of the purging of decades of overconsumption must be prevented at all costs during this political season. This is now two major bailouts for the US government in the last 6 months and NOBODY Is asking the most important question: Where is the money coming from? Clearly the Federal deficit is going to soar over this. Not to mention the hundreds of billions the Fed has thrown down the rathole to keep the banking system liquid.
This not just a bailout, but a pile-on. At the end of the day, the US taxpayer is on the hook for this bill. The only question is how the bill will be paid – through inflation, taxes, or a combination thereof. Grab your wallets folks, this is only getting started. Next in line – FDIC, SIPC, and PBGC in no particular order.
I covered this issue in depth last night on ‘Beat the Street’. Listen to the broadcast here: