Tolerance and Economics

NEW YORK (AP) - Wall Street rebounded Tuesday after the Abu Dhabi Investment Authority said it will invest $7.5 billion in Citigroup Inc.

We tolerate all kinds of crap because we can afford to.

Between our trade deficit, entitlement programs, foreign policy la la land, and the real estate crisis, we are rapidly running out of money.

Analyze Drudge’s headlines. The UAE bought $7.5 billion of equity in Citi. Real estate prices dropped 4.5% this quarter. A 4.5% drop equates to around $1 trillion in lost real estate wealth. $7.5 billion is less than 1% of the real estate loss this quarter. And it is being heralded as rescuing the bank. It doesn’t make any sense.

Drudge’s ‘economic nightmare’ scenario has an aggregate bank loss of $300 billion. But $300 billion is only 1.5% of the US’s former real estate value. Prices are already down 35% in my market and still dropping. Watch Freddie Mac. Look for the Fed to print money to keep the banks afloat, causing big boy inflation and real pain in the population. The population in 1929 did not expect the government to provide for their needs.

Suffering populations don’t take too kindly to separatist enclaves with 50% unemployment who riot, consume taxes, burn cars, shoot at cops, and tell us how pure they are. No matter what Glen Beck says.