The CEO's are falling

Last week it was the CEO of Merril Lynch, this week it is CitiGroup,
America's largest financial institutions are being rocked by the losses in housing.
On average home values have fallen 10% across the country, obviously this is much much worse in some places, while other real estate has not fallen as much as that.
In Florida, as in some other states, it is considered a crisis.
Millions will lose their homes, and many billions of dollars will be wiped from the value of real estate across the country.
This represents bad debt, a goldmine for the wealthy that they will mine for the nuggets at bargain basement prices, the rest of it, the hot potato, well they are all wondering who will be left with that. In the end though it will be the public, the taxpayer who foots the bill.

Some in congress are proposing schemes that would bail out the financial institutions (again sic) some are proposing plans to help the homeowner and mortgage lenders, depends who's lobbist is paying for lunch I guess. None of them are proposing to actually do something to save the millions of Americans who will lose their home. No lobby for the poor and lower middle class.

Because these mortgages are bundled into ever more sophisticated investment vehicles, with Wall street doing what it does, creating new and more complicated ways of moving paper around and generating wealth, while creating no value, no one knows exactly where the 'bad paper' is. CEO's have ordered a strict accounting, and ordered their minions to dig deep into these packages and determine exposure to risk, but the complexity of the paper is actually a hindrance to understanding it's true worth. Some large mortgage companies have already gone under or soon will, combined with the large banks that are trying to understand what their losses might be, creates enormous uncertainty. Investors don't like uncertainty, especially international investors who don't expect that they are taking such risks.

The worry is that overseas investment and particularly those investors buying American debt. will get skiddish and bolt. That's why the EU put billions of dollars into circulation last month, to gird EU markets for this tsunami of bad American debt, and why the Fed just put 40 billion plus into our economy, while lowering the interest rate on borrowing it, to ease institutional concerns over the availability of future credit.

The fact that these companies themselves don't know what their exposure to risk is, or at least they are not telling the public, combined with inflationary forces, associated mostly with the cost of food and energy is putting pressure on the dollar which is falling precipitously against other foreign currencies.

In short, a massacre is already underway, and who will gorge on the bones of the dead, why the wealthy of course. They will swoop in like vultures and gobble up all the juicy bits, leaving the barest scraps of inedible carcass for the maggots and bugs.

It will be the largest transfer of wealth in our nations history. A true gilded age trifecta.

America's power stems largely from the fact that we are the worlds cash cow. Americans spend more for everything, not to get more mid you it just costs more here. From food and energy to toothpicks, even US companies that manufacture things here, sell their products at higher prices in the US markets than they do abroad. You would be shocked to learn that many of the things you buy here are for sale much cheaper, in other countries. Cheaper in US dollars, we're talkin apples for apples here. The exact same products! Why? Because Americans will pay more, from cosmetics to drugs, from services to food they will pay more, and they do.

If we cripple this cash cow, well ce la vie, the money doesn't care, it will go where it is best served. That is more and more to the EU and other emerging markets where the pickens are better and the returns, well just a safe and guaranteed.