Strickly economically speaking, cost of liquid capital would skyrocket.
A few banks that would be left standing would be able to charge anything they want for morgages or loans.
Oil & commodity prices drop, coasing deflation, yes, deflation.
As far as average Joe is concerned, he won’t be able to get a loan or morgage of any kind, period. Let’s see - housing prices drop further, car sales - drop further.
Unemployment skyrockets, as companies can’t borrow.
From previous lessons in economics, it should last about 3 years.
In my opinion, the best way to proceed at this point, is, instead of government purchasing all the “bad dept”, we should basically partially nationalize some of the banks that are failing.
At this point, I see it as a best way to protect taxpayers. With AIG, government got 80% of the company, diluting existing shares 5 to 1.
To avoid this, some banks would raise capital, while other, in the bigger hole, would be partially nationalized, to be resold a few years later.
Cost to the taxpayers would be a fraction of $700 bil., and it would prevent all out recession.
“A few banks that would be left standing would be able to charge anything they want for morgages or loans”
Durring the last depression that wasn’t the case.
My parents built their home durring the last one and the loan they had for a portion of the construction was 4.3%