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Monday, April 24, 2017

The Big Bailout

Posted by Tim Stobbs on September 25, 2008

Alright the US is looking at the mother of all bailouts to the tune of $700 billion dollars.  They have even hinted at 1929 style crash and depression to follow if they don’t offer this bailout package and stiff the US taxpayer with the bill for the next 50 years or so.

Is it me or is this all strangely sounding like the famous ‘weapons of mass destruction’ wild goose chase?  We take something bad and pump it up to something ‘terrible’ and then get the public support to do something stupid and leave people paying for it for decades to come.  The trick is to get it passed fast so people can’t read the fine print and realize what is going on.

They keep saying it will wipe out lots of investors.  The really good question is which ones?  How much money will the average people lose?  After all in the lovely capitalist society isn’t most of the wealth concentrated at the top.  Who is really going to get hurt badly?  Perhaps a couple 100,000 people out of millions?

If the US is really all about free market, they should let it correct itself.  Afterall the market has been trying since 9/11 to correct itself downwards.  Will it hurt going down?  Yes, but think of it this way.  All they are really going to do is take a large hit now and spread it out over a number of years with interest.  So what do you want to pay $5000 now or $100/month for the next five years?  Either way someone has to pay to clean up this mess.

So what’s your thoughts on the big bailout?  Needed or hot air?

Comments

7 Responses to “The Big Bailout”
  1. Pragmatic says:

    American tax payers are getting royally screwed right now and most of them don’t even know it or know why.

    Why is this plan the best? There are so many other avenues that have not been explored (private equity coming in, doing loans instead of buying up this crap)

    Heck, many of these financial institutions deserve to go under. what happens later when GM or Ford are close to going under? will it be another ‘we must bailout or the economy will tank?’ scenario?

    this bailout does nothing to go to the root of the problem and that’s the economy. you *may* fix the financial markets, but the economy will just be weaker because at the end of all of this the US will be in more debt and taxpayers’ great great great…great grandkids will be paying.

    Welcome to the USSA.

  2. Sarlock says:

    This is just one in a long sequence of debt monetizations that is occuring. This will have a direct effect on the US dollar and inflation and serve to devalue every US citizen’s hard earned savings.

    Given the alternative, however, (financial meltdown affecting every person from coast to coast), this may be the lesser of two evils unfortunately. The impact of letting the market sort this out on its own would have disasterous effects. This bailout, and many others that have happened and will happen, serve to spread the pain out amongst everyone in the US and perhaps soften the landing as the economy decays.

    The US economy is way too leveraged and it is now going to feel the pain of deleveraging itself. Leveraging is great on the way up, very painful on the way down. And let us not think that Canada is somehow different. We’re just as leveraged (privately and corporately) and just as prone to being dragged down in to the gutter with the US. In fact, we’re already beginning to see the signs and this may turn out to be just as painful for us north of the border as it is for our neighbours to the south.

  3. Cash Canuck says:

    I may not understand the issue to the extent of some others, but I think a reduction of available credit may be a good thing for Americans long term.

    In recent years, the savings rate of Joe Q. American has dipped into negative territory. Perhaps because of readily available consumer credit. It’s time for people to start actually saving up for that big screen TV or kitchen reno, as opposed to dipping into yet another line of credit.

    That’s my rant. Tear it apart if you like.

  4. Canadian Dream says:

    Cash Canuck,

    Actually if you take your statement and apply it to companies and government as well you more or less summarized the entire US problem.

    Sarlock,

    I agree a massive meltdown would be bad, but do they really need $700 billion? Could they get a softer landing for less? Oh well, it should be interesting with the election coming so soon.

    Tim

  5. David Moore says:

    Well would you expect anything less from a country already $9,854,086,801,518.31 in debt!?

    Just think though, if stupid wars weren’t being fought that bail out money would have been sat there, along with better healthcare and schooling…..

    one day…. one day….

  6. Unfortunatly the credit crunch is real and will, if left unattended, have a very negative effect on the economy, and don’t think Canada will be imune if everything goes south states side (pardon the pun)

    The issue is that it is almost impossible to get credit, while a good thing for you and I it can quickly hamstring a business. Think Northern Rock in the UK, they lent long (mortgages) and borrowed short ( call it Buesiness Stupidity 101) when the lending window suddenly shut they went under, all in the matter of a few days they were nationised by the goverment after a bank run but the issue is still the same, accessing credit.

    Same issue here in Spain, bank have all but ended mortgage lending and the housing market has taken a huge hit.

    Secondly America is a country that runs on credit, remove the credit and the ecomony shrinks dramiticly, while good in the long term it’s very painful in the short term, think high unemployment and falling real wages.

    Couple of good short articles

    Sweden went throught the exact same thing back in the early 90’s and took the exact same approach, except they didn’t expect tax payers to take a bath

    Sweden Bailed out it’s Banks

    and

    a good thread from GRS

    The End of Easy Credit

    ps my applogies if the html didn’t work, not at my computer.

  7. I should add that his take is slightly different, my “knowledgable” commentators are saying that America will run it’s printing presses to inflate it’s way out of this mess, and I tend to agree with that point more than his, still worth reading

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