So we have gotten our auto sector bailout. Let’s see how this shakes out. I am already hearing rumblings that this will not be easy as bondholders are not playing nice. See the link to Felix Salmon’s comments below. My own view is that bond holders will need to take a haircut here, if we are to have any measure of success.
Meanwhile, you will have noticed my post on VW demonstrating that any bailout solutions need to be well crafted and comprehensive in order to avoid the more unpalatable of unintended consequences. We shall see soon whether this auto bailout invites a response from the Germans and Japanese.
I still need to address the Treasury Bubble issue as well despite the fact that government bonds have traded off. My worry here is that, if and when the economy responds to stimulus, we will get a large, uncontrollable selloff, the consequences of which are unknown. In my view, we should always fear unintended consequences.Read more ›