More thoughts on the bailout.

posted by The Vidiot @ 4:00 PM Permalink

With this caveat: I don’t know squat about the economy, but I have a gut that I trust.

Of COURSE they’re going to bail them out. There was never any doubt in my mind that they would eventually figure out a way to do it. The system needs to be fed and by god, they’re going to feed it!

But what does it mean to us regular folks? Well, for the most part, the money is going to be fed into the system and then that will free up money for those that are lower on the food chain. For example, those businesses that need to borrow to make payroll while waiting for the payables to come in, or for those folks who just have to make a purchase to keep their businesses going, theoretically, the bailout will free up money to do that. Will it make it easier for the rest of us to buy a house or a car? Probably not. Maybe, but probably not. And if it does, the interest rates may be pretty high. And even if we are able to borrow, what are we actually doing? We’re borrowing OUR OWN money, so, and wrap your head around this if you can, we will be paying it back twice: once with our income taxes and another with our loan payments. How’s that for a ‘gotcha’?

And here’s the kicker, (as if that paying it back twice thing wasn’t bad enough) there’s no guarantee that this particular band aid will heal the wound. There’s no guaranteeing that the bankers won’t clutch that bailout money close to their greedy little hearts and there’s no reason to think that they will dole it out as it was intended. What made the market unstable is still there. A lot of that bad debt and bad players will probably remain bad and who will own that bad debt after this bailout? The American taxpayer, that’s who. I don’t want to be all negative but I don’t see the economy turning around fast enough to make that bad paper good again any time soon anyway. And there’s probably going to be more bad debt coming down the pike. Is the government going to buy that crap too? The precedent will have already been set so they might as well, right?

You see, it’s all bad. I’m not saying I have any solutions, but throwing money at the problem, with little or no strings attached, which is still what the bill that was passed has, is not the right idea.

What would happen if there were no bailout? Well, credit would dry up, payrolls wouldn’t be met, cars wouldn’t be purchased, appliances wouldn’t be purchased, people would lose their jobs, there would be more defaults, and so on and on in a pretty bad dominos falling sort of way. Obviously, that’s not good either. Picture the great depression, only with a government more willing to control people with ‘non-lethal weapons’.

As I see it, one thing that could help would be instant renegotiation of any and all mortgages for anybody struggling to pay. Seems to me this is a huge part of the problem. I don’t think people should be rewarded for being stupid, but c’mon. There’s just too many of them and at some point, you have to steer the lemmings away from the cliff side. I would venture to guess that most folks would continue to pay their mortgages if they could afford the payments, negative equity or not. Also, let the market take care of the bad companies. If they made bad investments, let somebody buy them out or declare bankruptcy or whatever it takes to make them go away. And finally, the big corporate behemoths, what will probably be JP Morgan Chase City WaMu BOA, should be broken up. I don’t know how it would work or how it could happen, but my gut tells me that if you insisted that each state have it’s own bank, or restrict the size of the banks, make them look at people in the eye on a daily basis, that there would be less fraud, and more trust, in the long run.

Yeah, like any of THAT will happen. Jeebus. We’re doomed. What hell hath capitalism wrought.

Labels: Economy