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Even More Bailouts Are Coming
What is going on in the US financial system? You guessed it - More bailouts are coming.
FINANCIAL MARKETS SUMMARY for the WEEK ENDED 09/19/2008
What a historic week this was with global stock markets experiencing the largest moves ever in a week!
US financial markets approached the abyss this week. Symptomatic of this was the fact that several "ultra-safe" money market funds "broke the buck" this week with their net asset value falling below $1 per share.
This, along with the plunging stock market, drove the federal government into several actions including:
1) The federal government will now insure more than $3 trillion in money market funds (similar to FDIC for banks)"temporarily" for at least one year.
2) The federal government will now purchase the bad debts that are sitting on the books of US financial institutions. This will cost US taxpayers anywhere from several hundred billion dollars to possibly over a trillion dollars!
3) The government has "temporarily" banned short-selling in order to stabilize the stock market (at least until after the November election).
With the huge end-of-week rally brought on by the government intervention, both the stock and bond markets finished the week roughly where they started.
One interesting note - this intervention has caused the US dollar to resume its long-term decline and commodities to resume their long-term rise.
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Tony Daltorio, Investing Editor
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