Monday, November 24, 2008

Too Big To Fail

One by one the CINO's are showing their true colors: Capitalists In Name Only.

The bail outs continue. Now it's Citigroup. The standard line is "I don't like it, but we had to do it." or "Yes it makes me angry that we're in this situation, but we have no choice." What does that mean exactly? That we've gone so far toward the China model that there's no turning back? If these entities are too big to fail now, what happens when we've consolidated power in just a few of them and they begin to fail again? I'll tell you what happens. We exercise the warrants that the "taxpayers" are going to receive in exchange for this round of bailouts. A warrant is an option to buy stock in the future at a fixed price. It's supposed to ensure that if and when these companies become profitable, the government can recoup some of its investment by selling the warrants. What will actually happen is the failing business models will continue to fail and the government will not sell the warrants but exercise them. That is, buy the stock, giving the companies another cash infusion and the government a seat on the board. In the name of negotiating on behalf of the taxpayer, of course they'll negotiate a lower exercise price. (write that down, you heard it here first).

The government will have a major equity stake in banks, insurers, the auto industry, more control over the health care industry and of course, the alternative energy initiatives are not going to be without strings attached.

The collectivists have won the war without firing a shot because most of the capitalists still aren't even aware that there was a war.

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