I am watching Bush’s press conference. He is saying that we will get most of the money used for the bailout back when the economy improves. This sounds like “liberating Iraq will pay for itself”.
It also seems that easy money, in the form of low interest loans, creates consumption which may be good for the economy in the short term, is not sustainable for a long period of time.
It might be better to end the nations credit addiction now rather than a few years from now.
Makes a lot of sense. Step one is admitting you have a problem.
The banks are like drug dealers they offer you easy money but the hangover can be pretty bad. Of course drug dealers don’t claim they are making the economy run.
The bailout seems like an attempt to band-aid over the real problem and keep investment bankers employed. I hope the bailout if it passes helps homeowners and leaves everyone to suffer the consequences of their bad decisions.
I agree that keeping bankers employed is a key factor of the problem. The old sales and trading operation didn’t make enough money, so the banks had to act like hedge funds and take leveraged risks to cover their money losing operations.
But also complicit in the mess were the rating agencies, who equated junk with riskless treasuries. And guess who chartered and regulated the rating agencies? Yes, the government. So regulation and government oversight, which is the “solution” proffered by many in government (isn’t that a conflict of interest) is actually what got the greedy bankers the cover they needed to sell securitized mortgages for 130, when they were only worth 100 (and now trading at 40 with credit dried up).
They ramped up, drank way too much of their own kool-aid…they didn’t have billions of tech IPO shares they couldn’t get rid of when the market got smart about what was going on…there were enough suckers out there to make a buck and bolt.
The securitizations that didn’t sell, ended up being owned by the dealers that made them.
They got stuck with inventory…just like the company that manufactured lawn darts…you know that they had a warehouse of those things that ended up in a landfill.
As someone who thinks we need to do something about overpopulation, I think we should encourage people to play lawn darts. Especially after drinking a few beers.
JR: I know that Malthus is your high priest, but maybe a wise man like you would want to allow for the prospect of economic growth. Whether you believe in Darwin’s natural and sexual selection or an omniscient God, it is possible for evolution and innovation to improve lifestyle and life expectancy. I would offer you the last 400 years of history as evidence as to such.
Yes, millions have died, but the greatest concentrations have been in facist regimes of Nazi Germany, Soviet Russia, and Maoist China. Not massive starvation.
Africa is still suffering from starvation, but even more from clean water and malaria issues. If they had our broken government and financial system, they would still be far better off, rather than approximating the morbidity and wealth of our Founding Fathers.
Hey CB:
My endorsement of lawn darts as a population control device may have been somewhat facetious.
I do think that easy credit is creating its own crisis in that encourages people to build houses and shopping centers that we neither need nor want. This increases the inventory of homes and further depresses the prices, which leads to more foreclosures and undermines the mortgage backed securities we are trying to prop-up.
That is the main reason I am against the bailout/rescue. It will just make the problem worse in a few years as people will take the easy credit and use it to build more stuff no one wants.
I agree that easy credit is a horrible thing. I do not want the Fed to cut rates, even though it might save my job. That is the difference between me and the politicians (and a lot of my colleagues, too).
If the bailout seemed like it would keep people employed long-term I would probably be more in favor of it. To me it seems like it will encourage more of the same without fixing the problem, which is essentialy an over-supply of mone and an under-supply of good things to do with it.