Let's see if I've got this right:
- Stock prices declined last week due to fears that US banks might take losses on loans to European banks.
- European banks are weak because they have lent a lot of money to certain European governments that are having trouble meeting their payments.
- Those European governments are having trouble meeting their payments because they have too much debt.
- News that the European governments might offer a bailout for some banks sent stocks higher yesterday.
- The bailouts would be funded by more government borrowing.
President Dwight Eisenhower once spoke ominously about a "military-industrial complex" and that phrase has since become a part of our lexicon. Over the last few years our Secretary of the Treasury (formerly of Goldman Sachs) provided bailouts to the major banking firms that helped wreck our economy. Now we see a similar situation occurring (again) in Europe. If anything, this should make us equally wary of the Government-Financial Complex.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).