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John Mauldin's Outside the Box

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  • The Death of Capital

    Was it only last week I was expressing outrage that US taxpayers would have to pick up the check for Greek profligacy in the form of IMF guarantees? This morning we wake to up the sound of $250 BILLION in IMF guarantees for a European rescue fund, most of which will go to countries that are eventually (in my opinion) going to default. That is $50 billion in US taxpayer guarantees. Not sure what that translates into for Britain or Canada or Australia.

    I can swallow the Fed dollar swaps to the ECB. Don't really like it, but I can deal with it, as I don't think it will ultimately put US tax-payers at risk, as long as the swaps are in dollar terms. But the IMF bailout is just wrong.

    Interestingly, the euro shot up on the announcement in what was now clearly short covering. As I write this, it is almost back down to where it started. That seems to me to be a vote of 'I don't believe you.' We will see. But if the ECB actually goes ahead and floods the market with liquidity, that will be very good for all types of risk assets....
  • Setting the Bull Trap

    Yesterday I sent you an Outside the Box from Paul McCulley who supports the government and Fed activity (in general) in the current economic crisis. Today we look at an opposing view from Bennet Sedacca of Atlantic Advisors. He asks some very interesting questions like: Shouldn't the consumer, after decades of over-consumption, be allowed to digest the over-indebtedness and save, rather than be encouraged to take risk? Shouldn't companies, no matter what of view, if run poorly, be allowed to fail or forced to restructure? Should taxpayer money be used to make up for the mishaps at financial institutions or should we allow them to wallow in their own mistakes? I think you will find this a very thought-provoking Outside the Box....