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From my understanding this brilliant bill provides a tax break for wooden arrow manufactures. Everyone knows that wooden arrow companies form the cornerstone of any major economy, thus the recovery of the wooden arrow market will lead to the reversal of this bear market!
Honestly, I thought the plan was rushed and littered with pork barrels, yet I whole heartedly supported it. However, I’m slightly biased because of my long position in Regions Financial (RF) and would have been destroyed if this bailout had failed to pass the 2nd time around. Surely there is a better solution, but perhaps the best solution is less government intervention and tighter regulation of our financial institutions (enforce lending standards and leverage limitations). That won't bump our markets in the short term though so I'm rooting for a rate cut from the Fed.
Folks, the money is not going to pay off the bad debts. It's going to make the company solvent again so that it doesn't slide into bankruptcy. It is going to pay the ceo and upper management and shareholders of the company. It should have gone toward paying down the debt, but it did not.
Banks create money as debt. Once money goes into the system it stays in, but takes different forms (like junk securities). The problem is that as more debt goes into the system, the debt starts creating interest and the interest grows and grows to a point where it starts to take money out of the economy. Everyone is working to pay off the interest on debt, so they can no longer buy things like cars, TV sets, microwave ovens. As a result, the economy starts to slow down, and we've seen the result of that.
Eventually the debt grows to a point where people can no long pay it, so they are forced to walk away, foreclose on the house, stop making auto payments, whatever. Normally, in this situation, the debt is wiped off the books or brought down the point where the debtor can pay. But that is not what happened in the case of the bailout. In our case, the debt is still in the system, but the government has pumped more money into the banks in order to keep the fiction alive, to keep the housing market going, so the economy staggers along a little longer.
But it is important to remember that the debts can not be paid. And in fact, since they have not been written down, they are continuing to grow and double due to the miracle of compound interest.
Last edited by Woof Woof Woof!; 10-04-2008 at 07:50 PM..
what it does is create a financial dictator with 100% immunity out of the treasury secretary, with 'pork barrel' things like funding for research on wooden arrows thrown in to distract from what a a fraud and unconstitutional 'bailout' this is.
back to the OP, it's supposed to help stop a depression plain and simple.
What caused the Great Depression, the worst economic depression in US history? It was not just one factor, but instead a combination of domestic and worldwide conditions that led to the Great Depression. As such, there is no agreed upon list of all the causes of the Great Depression. Here instead is a list of the top reasons that historians and economists have cited as causing the Great Depression.
The effects of the Great Depression was huge across the world. Not only did it lead to the New Deal in America but more significantly, it was a direct cause of the rise of extremism in Germany leading to World War II.
1. Stock Market Crash of 1929
Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.
2. Bank Failures
Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This exasperated the situation leading to less and less expenditures.
3. Reduction in Purchasing Across the Board
With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation.
4. American Economic Policy with Europe
As businesses began failing, the government created the Hawley-Smoot Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation.
5. Drought Conditions
While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath.
Folks, the money is not going to pay off the bad debts. It's going to make the company solvent again so that it doesn't slide into bankruptcy. It is going to pay the ceo and upper management and shareholders of the company. It should have gone toward paying down the debt, but it did not.
Banks create money as debt. Once money goes into the system it stays in, but takes different forms (like junk securities). The problem is that as more debt goes into the system, the debt starts creating interest and the interest grows and grows to a point where it starts to take money out of the economy. Everyone is working to pay off the interest on debt, so they can no longer buy things like cars, TV sets, microwave ovens. As a result, the economy starts to slow down, and we've seen the result of that.
Eventually the debt grows to a point where people can no long pay it, so they are forced to walk away, foreclose on the house, stop making auto payments, whatever. Normally, in this situation, the debt is wiped off the books or brought down the point where the debtor can pay. But that is not what happened in the case of the bailout. In our case, the debt is still in the system, but the government has pumped more money into the banks in order to keep the fiction alive, to keep the housing market going, so the economy staggers along a little longer.
But it is important to remember that the debts can not be paid. And in fact, since they have not been written down, they are continuing to grow and double due to the miracle of compound interest.
Let me ad to my previous post. What the bailout is doing is the government is purchasing the bad mortgage securities as a way to try and stabilize the market. The credit default swaps (CDS) that were supposed to insure these junk securities were like insurance, but they were not regulated or backed with any capital. The government says that it will resell the junk once the market stabilizes and get the money back. But since the junk is based on debts that cannot be paid, I seriously doubt the junk securities will ever be worth anything. What's more, plenty more foreclosures are expected as many ARMs are still set to reset.
Why didn’t the government bail out individuals instead of Wall Street? Why not pay off mortgages for people who are jobless and struggling. That would have helped the homeowners and the lenders. The homeowner would have had his/her mortgage paid in full and the lender would have had the debt satisfied. Why didn’t the government do this?
It would have also stimulated the economy because with a mortgage paid, the homeowner would have been free to make major purchases, thus stimulating the economy.
Why didn’t the government offer to assist people in major debt, whether it is loans or credit card debt? Again, the lenders would have been paid and the person with their debt load illuminated or decreased would have been free to make further purchases or even put some money away for retirement.
Could it be the government wants us in debt and struggling?
There is one good outcome of the bail out for me. It vindicates my walking away from my credit card debt. I realize now that no matter how difficult it gets for individuals, the government will always look out for the corporate interests. They will always work for Wall Street, not Main Street. So the lenders have the security of knowing that the government will always be there for them. I don’t have that comfort and neither do you. We are expected to pay our debts regardless of hardships and changing circumstances. Well guess what? I reject that and I have walked away. I could give a rat’s ass about my credit score because I never intend to use credit again. I will pay cash for everything and I’ll have the cash now since I’m no longer paying on debt. And I have the comfort of knowing too that perhaps I am taking one small whack at one nail in a very large coffin. And in that coffin lies this entire disgusting economic system.
Why didn’t the government bail out individuals instead of Wall Street? Why not pay off mortgages for people who are jobless and struggling. That would have helped the homeowners and the lenders. The homeowner would have had his/her mortgage paid in full and the lender would have had the debt satisfied. Why didn’t the government do this?
Because the bailout doesn't mean free money. Wall Street will have to pay it back with interest and even give pieces of themselves as collateral. The government is essentially the only entity that can take a risk to save the banks to avoid a wholesale collapse of the financial system. It is not good but is the lesser of all evils. FYI, some companies are already paying back the bailout money with interest and profit for the government.
Giving money to individuals is pointless as that is essentially throwing money away with no guarantee that people will spend it back to the economy.
Because the bailout doesn't mean free money. Wall Street will have to pay it back with interest and even give pieces of themselves as collateral. The government is essentially the only entity that can take a risk to save the banks to avoid a wholesale collapse of the financial system. It is not good but is the lesser of all evils. FYI, some companies are already paying back the bailout money with interest and profit for the government.
Giving money to individuals is pointless as that is essentially throwing money away with no guarantee that people will spend it back to the economy.
note recent headline: Stocks And Oil Soar, Treasuries And Dollar Tank
there are people who would have you believe that a tanking dollar is a good thing because it would help our "export" industry, even though we are an "import" economy!
i would like an answer how this BORROWED "bailout" money stimulated the economy! i don't see much stimulation but i do see rising unemployment, falling retail, and increasing foreclosure rates. flight from the dollar and treasuries is not a good thing for america. this is a very risky game that our federal reserve is playing with our country.
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