So you really think that the government is going to fix things and not make them worse?
I honestly don’t know. I have no clue. We are in completely uncharted waters with this liquidity crisis.
On one hand, nobody can be sure any solution will work, form printing $700 billion to bailout the banks, to forcing them to collapse. Nobody knows. All I know is, money is to financial system as blood is the human body. If is not breathing but has a pulse, you have some chance to bring him back to healthy. If he has no pulse, your odds are VERY slim he will not die.
Right now, money is still flowing. It is binding, jamming and slowing down, but still flowing. As long as we can keep it flowing, we stand a chance of fixing the economy. Once a big run on the banks comes from panic by the public and the big institutional investors, everything will come to a screeching halt in the financial system and in the economy.
And like trying to defibrillate a human heart, the financial system is equally difficult to re-start. Once people think they will lose all their money if they pull it out of the mattress, you have total collapse.
So I have no clue if this will work. I’m even concerned that this is some kind of closet payoff to Paulson’s pals before the inevitable depression occurs, so they have a soft landing.
I personally believe politicians don’t want to live through a depression or see one in their lifetimes, even though they would likely ride it out better than most of us. If you keep a job all through a depression, you aren’t really all that bad off. You will have a roof and nutritious meals. The problem is, so many people are unemployed without a roof or an ability to get meals. And the survivors with jobs are just on the edge of surviving.
During a depression, everything deflates so you can be sure wages will plunge as your employer says, “sorry, our profits are slim and this is all I can afford to pay you.”
If you aren’t a hot shot actor or athlete, or living on old money, you suffer. Workers suffer a little, the unemployed suffer catastrophically. THIS CAN STILL HAPPEN IN MODERN SOCIETY.
So I conclude the politicians don’t want this. They are greedy, powerhungry, egotistical bastards, but they aren’t stupid. A Depression helps no one but a few very rich vultures who can buy assets for pennies on the dollar. Politicians are not among those very rich vultures.
Will the bailout work? I have no clue. Can it work? Absolutely. Starting to free lenders from the toxic paper weighing them down could start the process of allowing lenders to trust each other again and stop hoarding the money they are borrowing from the Fed. They are fearful. Doing nothing invites panic. Buying up the toxic paper takes the fear factor down.
It CAN work, I just don’t know if it WILL work. I just don’t know...
My example of a depression is extreme and is not the most likely scenario IMHO. But it is definitely a possibility if we demand a systemic crash by doing nothing.
Even Nouriel Roubini, who is always negative, thinks the bailout will have a positive effect on the US financial system and will avert a deep wide depression like Japans 10 years of deflationary stagnation, and will reduce the pain to an 18-month recession.
http://money.cnn.com/2008/09/24/news/economy/Roubini_on_bailout/index.htm
If a brilliant perma-bear like Roubini thinks a well-targeted plan will limit the economic damage to a short recession of 18 months, then I defer to his knowledge and analysis. So yes, this could work.
My example of “depression” is a worst case scenario that is unlikely but still possible, hence my reason for using it. I am trying to underscore the real though outside possibility if Conservative people continue to try to correct the extreme socialism in our society at this time with this issue.
How about we live to fight another day and then we string the bastards up by the short hairs? Won’t there be enough outrage at this entire episode for voters to get motivated to both throw all the bums out on their arses and to demand Wall Street cleans up its act? Why do we have to do all that now when the financial system is balancing delicately on the edge of systemic meltdown? I don’t get it.
I hate socialism as most do here. I hate it when we don’t punish lack of personal responsibility. I want the evildoers to pay for their sins. But I don’t want my family to pay for the evildoers sins by my relatives losing jobs and having their children suffer and pay the price for it.
Lets fix the financial system first, and then we can start the armed rebellion. But here is the problem... The American electorate is so collectively stupid, there is a good chance that after the problem is fixed, they’ll go back to their American Idol and reality TV.
What time the big game start? We gotnuff beers? Did Britney’s sister have her kid yet?