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Thursday, September 25, 2008

Airelon's Thoughts on the Bailout? It is the Ultimate Catch 22

"Shrewd is the one that has seen the calamity and proceeds to conceal himself, but the inexperienced have passed along and must suffer the penalty" - Proverbs 22:3

Yesterday, I openly discussed my thoughts on the current economic environment we find ourselves in.

What truly surprises me? Is again, and again and again, and again ... I hear statements like:

"It's a bailout for the Bankers"

"It's a bailout for Wall Street"

"Bernake and Paulson are trying to bail out their friends"

"We're bailing out the rich and their excesses"

"They're helping out the rich, and stealing from the poor"

Do people truly have that little understanding of what this economy is facing? Do they have that little understanding of what caused this mess? It's not that difficult to grasp. I mean, I know they don't teach economics in schools today, but look throughout history. I'm assuming they still teach history. What follows any period of fantastically easy credit? An initial wave of inflation, followed by a period of marked economic depression that accompanies marked deflation. That inflated value has to go somewhere.

How many of us, for how many years ... received those flyers in the mail. It began in the 1990's, and continued through to 2007. "Zero down for this Television set". "Free Credit!" "You're pre-approved! Move into the house of your dreams!". And people didn't want to understand the history of easy credit, and what comes afterward. They didn't want to know what was being done with the agreements they signed. They didn't want to know about leverage that those agreements were packaged into. Because they had immediate gratification.

I was hopeful for a time. Why? I fought folks that said this was going to happen. Why? Because of the marked increase in the value of the US Dollar, with lower interest rates. That led me to some hope. Maybe common sense would prevail. I hoped there would be enough time. If it would just continue ...

Will paying higher taxes suck? Absolutely. But it's sort of sweet poetic justice. The taxes will be visited upon the people of the economy that caused the problem. What do I mean? What is this "Catch 22" that I speak of?

I discuss that in the following video ... (Video Included)

I'm reminded of the act from the movie "Independence Day". Jeff Goldblum's character discovers the aliens are using a 'countdown clock'. The clock is running down towards zero. I said it in the video. When more and more companies start saying things like: "Oh, sorry, we didn't get you your paycheck? Yeah, payroll must have had a problem processing the paperwork". The moment of "Checkmate" is approaching.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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