The Senate on Wednesday night passed a sweeping and controversial financial bailout similar in key ways to one rejected by the House just two days earlier.
The measure was passed by a vote of 74 to 25 after more than three hours of floor debate in the Senate. Presidential candidates Sens. Barack Obama, D-Illinois, and John McCain, R-Arizona, voted in favor.
Like the bill the House rejected, the core of the Senate bill is the Bush administration's plan to buy up to $700 billion of troubled assets from financial institutions.
Courtesy of Hot Air... It appears that Europe is taking their first steps to their own version of a bailout.
France heaped pressure on Gordon Brown last night by floating an ambitious plan for a €300 billion (£237 billion) bailout fund to rescue crippled banks across Europe.
As the world held its breath on the fate of America’s $700 billion bank bailout plan, President Sarkozy was seeking the backing of European leaders for his own lifeboat.
Mr Brown also faced demands for action from British banks, furious that the Irish Republic’s unilateral guarantee of all bank savings on Tuesday was robbing them of precious deposits. The British Bankers’ Association, which represents high street banks, said that the move was anti-competitive and that it was raising the issue with Dublin. Some banks would like to see the UK respond with its own explicit guarantee.
So, Ireland is now guaranteeing all deposits in all financial institutions while France is floating an idea for a $300 billion European bailout. Let's take a look at what we have. The United States is about to borrow an added $700 billion to bailout their domestic banks and financial institutions. The Europeans will likely do something similar on their own scale.
It's unclear just how many financial institutions world wide are holding onto many of these so called "toxic" assets, but soon almost all of them will need a bailout. Once the U.S. bails out its own it will be that much harder for European governments not to do the same. Once both Europe and the U.S. bailout their own, it will be next to impossible for someone like the Chinese, Japanese, and Austrailians not to follow suit. As such, we are headed toward a near world wide global lending spree.
This will mean two things. First, we will have the haves and have nots as far as currency. Those countries that will have to borrow to bailout their financial institutions will see their currency deeply de valued compared to those countries that didn't have to do the same thing. Second, we are almost certain to see global explosions in inflation. First, both oil and commodites are priced using Dollars. As such, both food and gasoline will likely face extreme upward pressure. People are most certainly driving less so that pressure maybe counteracted by weakening global demand for gasoline. Food, on the other hand, is not something that we can moderate quite so easily. We will likely soon face a global explosion in crop prices. Second, ballooning deficits world wide will lead to upward world wide pressure on inflation. As such, we will most certainly see the price of goods increase worldwide. That is step one in the march to global stagflation.
Of course, as food prices along with prices in general begin to increase while the world's economies slow down it is only a small step before we see a global recession. Of course, a global recession at the same time there is global inflation is known as global stagflation, a situation never faced before. Let's all pray my analysis is wrong.
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