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RE: Can bailout fix US economy? - 10/4/2008 9:26:52 AM
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bzirk
Posts: 2918
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From: Where the deer and antelope play
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I hear you. I've been hit by the same inflation. It hurts. But I wonder how many of us who have been hit by the cost of gas and healthcare also have bought during that same time: dvds (more than one for many), flat screen tvs, ipods, smart phones, playstations (or some sort of game box), late model cars, and on and on.
Generally we Americans get hacked if we have to give those things up to pay for gas or healthcare.
_____________________________
may the God of hope fill you with all joy and peace in believing, so you will abound in hope by the power of the Holy Spirit. Romans 15:13
Great quote: I just ain't God and don't know it all. -- SonInMe1
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RE: Can bailout fix US economy? - 10/4/2008 9:28:15 AM
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ayani
Posts: 194
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quote:
ORIGINAL: GroupW
I hear your frustration on that point. Unfortunately the "horse trading" that went on in passing this bill is a perfectly legal activity. I don't condone it, and I think it reflects very poorly on the folks that switched their votes like that. In my mind, either they didn't understand the importance of what they were voting for in the first place (very likely - there's a tremendous ignorance of economics in the House), or they allowed principles to get purchased by getting some pet projects passed. Whether you liked the bill or not, the behavior of a number of representatives left much to be desired.
That disturbed me to. That, plus the idea of giving a $150B tax-break at the same time as borrowing $700B to buy bad assets, while we're already running a $400B deficit.
I see a lot of people philosophically opposed to government intervention in the free markets, and I too share some of these concerns. What I've come to understand, which has given me some comfort in this intervention, is that the free markets really aren't working here. As GroupW has explained to us, the markets for debt have completely broken down and aren't working. Because of fear cause by lack of information, there are virtually no buyers whatsoever for some assets. And when you don't have buyers, you don't have a market going on at all. So, this isn't really a case of intervention in free markets, but insuring that we have a market.
As a society we have a great interest in having free markets operate. And, we use the government to make sure that markets remain fair. We use the goverment to prevent monopolies from developing, where one company drives all the others out of business and then is free to charge whatever it feels like. Government steps in makes sure there is more than one seller of a product. This seems like the same case, only on the other end: the government is stepping to make sure there are buyers for these assets.
I myself have to fight against feeling self-righteous like the older brother of the prodigal son. I didn't go into debt to buy a McMansion like many of my friends (believe me, when real estate was going up 15% a year I felt like a financial fool...). But, I remind myself that this is a time to respond with compassion and a desire to help my neighbor who made mistakes, and my other neibhbor whose company will be going bankrupt without being able to renew its working line-of-credit. And, we need to help educate people to correct the serious problem that Bzirk identifies:
quote:
ORIGINAL: Bzirk
Those places are a reflection of us. We are not disciplined, and we need to get that way or at least a significant number of us do. What I mean by not disciplined is that we are not used to waiting unless it's forced on us. How do I know that? We do not save money and we have a lot of non-essential things. Even people who say they're hurting have a lot of non-essential things. I'm not saying we can never have those things just that many of us have OD'ed on those things.
I had read a while back that the average savings rate in 1988 was almost 11% of income and it is 1/2% now. That is horrible.
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RE: Can bailout fix US economy? - 10/4/2008 10:34:30 AM
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rlj
Posts: 2171
Joined: 4/14/2005
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quote:
I hear you. I've been hit by the same inflation. It hurts. But I wonder how many of us who have been hit by the cost of gas and healthcare also have bought during that same time: dvds (more than one for many), flat screen tvs, ipods, smart phones, playstations (or some sort of game box), late model cars, and on and on.
Generally we Americans get hacked if we have to give those things up to pay for gas or healthcare.
That is a good point to. I also recall many economist types and others who have been saying since the late '90s that the economy is being financed on credit and that will eventually catch up to us as people max it out or have to default.
Don't forget the message from the government with that bailout check- go and spend it, by stuff, help the economy! Wal-Mart dealt with more of those checks than anyone and many people bought new tv's with it. There was nothing about taking that and saving it, paying down debt, etc. It was "go have yourself a shopping spree!" was the message I got out of it.
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-Roger
This is who I'm voting for. He is from the same party I voted for last time. This is consistent with my belief in the failure of the two party system and my disgust with it.
http://www.baldwin08.com/#
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RE: Can bailout fix US economy? - 10/4/2008 12:48:21 PM
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bzirk
Posts: 2918
Joined: 4/11/2005
From: Where the deer and antelope play
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I remember, and I was against the stimulus. What a joke, but that's another thread.
_____________________________
may the God of hope fill you with all joy and peace in believing, so you will abound in hope by the power of the Holy Spirit. Romans 15:13
Great quote: I just ain't God and don't know it all. -- SonInMe1
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RE: Can bailout fix US economy? - 10/6/2008 10:47:09 AM
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GregandJenny
Posts: 620
Joined: 2/16/2006
From: Near Seattle Washington
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As I look at the stock market ticker on my computer this morning I can't help but see that the market is not fairing well. It seems as if this 700Billion plus some pork didn't really ease the fears of wall street. So whats does that mean??
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It does not have to be well with my circumstance to be well with my soul!
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RE: Can bailout fix US economy? - 10/6/2008 11:36:26 AM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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Right at the moment it just means that the crisis is spreading into other sectors and geographic regions. As it becomes more than just a US or European phenomemon, you should expect to see the stock market take some hits. It also means the fear effect continues to snowball.
Right at the moment, the Treasury is just now putting together the nuts and bolts of the infrastructure required to actually put the money to work. There remain some items that are uncertain and until we've put some of that uncertainty to bed, I wouldn't expect the bailout package to begin to have much effect.
Chief items of uncertainty:
1) Given the restrictions on executive comp and the government requiring an equity stake in the companies that take bailout funds, it remains uncertain the degree to which the more troubled companies will actually take hold of the lifeline, even when it's thrown. That's part of the balance the bill was trying to strike - you don't want government dollars going to pay stupid amounts of executive compensation, but on the other hand you don't want the terms of the bailout so punitive that a company feels like it shouldn't take advantage of it.
2) How will the government actually use it's power / cash - it can buy assets at today's irrationally low market value prices, which puts some cash into the system but really not very much capital. Or, it can buy at prices that provide the Treasury with an acceptable projected return but that are still above market. That adds some capital to the system and would help start turning things around.
3) What's the size of the problem relative to the $700 billion? If the problem is larger than anybody so far as estimated, then is the $700 enough?
4) To what degree will the Treasury program get all the private equity dollars off the sidelines and into the game? Part of the government's strategy here is to convince private investors that prices won't get all that much worse and that it's now a good time to start putting all that money to work instead of just sitting on it.
I think when those questions start to get answered, you should start seeing some impact. Until then, I'm not sure you really start to see much in the way of benefit.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Can bailout fix US economy? - 10/7/2008 3:50:11 PM
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rhippie
Posts: 628
Joined: 4/13/2005
From: Rich The Hippie
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quote:
ORIGINAL: mapachito13
quote:
ORIGINAL: csl7037
Is there anything in the bailout to tighten up requirements for loaning the money? We can't just keep loaning to risky people, that'll just exacerbate the problem. I think there's got to be a reality check here for consumers. If we're all just equally saddled with this enormous bill down the road, no one is going to learn anything or realize how their irresponsibility and personal greed contributed to this. Will credit continue to be absurdly easy to get or will some common sense return to this system? If people suddenly can't keep upping their limit (like Congress) and they have to face the reality that the things we want do have to be paid for, maybe we'll collectively learn something from this. If the bailout is designed to keep people from feeling any real "pain" from their stupidity, it's just a temporary fix and, I fear, very temporary.
The US government is becoming a fiscally irresponsible loan applicant as well. The ratio of our debt to our GDP stands at 64% roughly two-thirds!
I wonder if the government could get a loan nowadays from those very banks that they are trying to bail out after showing their balance sheet!
I'm thinking that since those same banks were willing to lend people money who had zero assets tha a mere 64% ratio is looking pretty good!!
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