Bailout Reality

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irvine_home_owner_IHB

irvine_home_owner_IHB

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Okay... so I'm not as well-versed in the details of politics as many of your are... but do any of you actually think the bailouts will work?



This has nothing to do with partisan politics or Obama... just logic and common sense.



For the record, I'm glad Obama is our president. I'm independent, socially liberal and fiscally conservative.



But I can't see how anyone on either side of the spectrum can believe spending all this money does more good than harm.



Just let nature take its course... banks will close... automakers will die (apologies to anyone employed in those sectors). But in the end... won't it be better to cut the fat, let housing find its true value and weed out the waste to let companies that are efficient prosper?



Can we talk about this without all the poli-speak because it just doesn't seem right to me?
 
I do not think the bailouts will work. Recovery cannot start until we hit bottom. The bailouts are slowing down the rate of descent to the bottom. The longer it takes us to bottom out the longer it is until we can start recovery.
 
None of these bailouts are going to work, but im sure the govt will spend away and keep trying. Lucky for me and many of you, we get to foot the bill for it down the road. If i start to payer higher taxes do i get any benefit from that? Im thinking that if I pay higher taxes i should be able to maybe get something in return. Maybe in return i can get a carpool sticker, that would ease the sting a bit.
 
NPR had a story on this morning (from TAL, i think) where the got ahold of a bank (JPM?) memo, and called the author.



The memo said: either bail out the banks, or have 20% UE.



Personally, I favor 20% UE. paying the UE insurance will be cheaper than the bailout.
 
[quote author="freedomCM" date=1235805851]The memo said: either bail out the banks, or have 20% UE.



Personally, I favor 20% UE. paying the UE insurance will be cheaper than the bailout.</blockquote>
Especially if it's those bank/auto bigwigs who are making tons of money and saying that without the bailout... they will have to layoff the blue collar workforce. Just cut your own salaries and your bonus packages... you'll probably find millions there!
 
[quote author="irvine_home_owner" date=1235801841]Okay... so I'm not as well-versed in the details of politics as many of your are... but do any of you actually think the bailouts will work?



This has nothing to do with partisan politics or Obama... just logic and common sense.



For the record, I'm glad Obama is our president. I'm independent, socially liberal and fiscally conservative.



But I can't see how anyone on either side of the spectrum can believe spending all this money does more good than harm.



Just let nature take its course... banks will close... automakers will die (apologies to anyone employed in those sectors). But in the end... won't it be better to cut the fat, let housing find its true value and weed out the waste to let companies that are efficient prosper?



Can we talk about this without all the poli-speak because it just doesn't seem right to me?</blockquote>


Bailouts don't work, never have. What bailouts do is offer a cushion for your crash landing.

Economy has to work itself out. Giving people more money only offers temporary help, it doesn't keep the economy going.



For example, you get a 1K check - you spend it - economy gets a boost - now what? It's like a drug...the government has to keep dishing out checks in order to keep the spending up...

Same goes with job creation. If governments can truly create jobs, how come all governments just don't print money and "create" jobs. Let's say that 4M jobs get created as a result of this spending...well what happens when the bridges are built and roads paved? Do we kick 4M people to the street and say, sorry we have no more work? This is extreme, but you get the point. If governments can truly create jobs, then how come other parts of the world have such high unemployment...how come Zimbabwe doesn't have a 0% unemployment rate? It doesn't work like that. That's wishful thinking.



Our economy for the past 8 years or so grew on debt; "fake" spending. For example, people borrowed against their home equity in order to buy goods. Companies profited as a result, but that spending has quickly evaporated with the collapse of the housing market. Which was going to happen regardless how you look at it. Value of homes went up through borrowing and debt...not because incomes grew. If you look at the past 8 years, average household income in the US actualy declined during the housing boom, not increased. That's right, the average American grew poorer, not richer. So how can the economy grow as a result? Easy...DEBT!



The tech crash in 2K should have crashed further, and we should have never had a DOW of 14K to begin with. All we did was release some air out of a ballon, patch it up, and blew it back up to a size bigger than before. The last 8 years is a bubble within a bubble.



People are scared about the current economic crisis. But I assure you it's necessary, healthy, and something that needed to happen. Things have to restructure.

I mean what did people really want? To have average US income of 40K, but homes valued at 1M? Did people really thing that their homes would forever be ATM machines with endless cash supply?



Now the economy is facing just the opposite effect, spending contraction. So Obama and Bush prior to him wants YOU to spend in order to get the economy going. My question is...spend what? Borrow more so I can spend? Thats exactly it, and our government is doing the same. Which is the problem, not the solution.
 
Just let the global economy tank - Only then can we rise from the ashes.



We can't prop up the current smoke-and-mirror monopoly-money economy any longer. Game over, Man !!!!



There is no escape for average hard working Peasants like us. We're going to feel pain no matter what happens.
 
[quote author="qwerty" date=1235804590]None of these bailouts are going to work, but im sure the govt will spend away and keep trying. Lucky for me and many of you, we get to foot the bill for it down the road. If i start to payer higher taxes do i get any benefit from that? Im thinking that if I pay higher taxes i should be able to maybe get something in return. Maybe in return i can get a carpool sticker, that would ease the sting a bit.</blockquote>


Joe Biden said that it's patriotic to pay higher taxes. Are you "dissing" the "opportunity" to feel more patriotic?
 
If it seems obvious to many that bailouts aren't going to work... why isn't there anyone telling our leadership that?



Or are AIG, banks and pork-barrel that crucial to our economy?
 
I have to believe that the goverment must believe the bailouts are like a parachute.



With or without the parachute(bailout) we are going to be hitting the ground. The parachute will slow the descent and make the landing survivable.



What they may not know is sometimes people jump out of planes and the parachute fails and the people still survive.
 
[quote author="trrenter" date=1236131672]I have to believe that the goverment must believe the bailouts are like a parachute.



With or without the parachute(bailout) we are going to be hitting the ground. The parachute will slow the descent and make the landing survivable.



What they may not know is sometimes people jump out of planes and the parachute fails and the people still survive.</blockquote>
To continue this analogy... bailouts to me are more like parachutes with big holes.



Sure... it will take longer to hit the ground... but you're gonna get hurt regardless... would you rather extend that wait or just hit the ground and start the healing process sooner than later?
 
The problem with AIG is the CDS. Credit Default Swaps that the Financial Services Division

issued. We are looking at 10`s of Trillions of exposure if all of the CDS instruments

and the Associated Bonds are allowed to lose value when the "CDS Coverage" is lost

in the event of AIG "Being allowed to go under". It will have a cascade effect and could possible lead to the Bond market going into freefall. This could involve treasuries as well. Thats why you see the fear and anger in "Helicopter Ben". Beware if you get what others are wishing for. It could make the loses in the Equity Markets look like just a bad day at the track if the bond market implodes.
 
[quote author="bltserv" date=1236137232]The problem with AIG is the CDS. Credit Default Swaps that the Financial Services Division

issued. We are looking at 10`s of Trillions of exposure if all of the CDS instruments

and the Associated Bonds are allowed to lose value when the "CDS Coverage" is lost

in the event of AIG "Being allowed to go under". It will have a cascade effect and could possible lead to the Bond market going into freefall. This could involve treasuries as well. Thats why you see the fear and anger in "Helicopter Ben". Beware if you get what others are wishing for. It could make the loses in the Equity Markets look like just a bad day at the track if the bond market implodes.</blockquote>
So what do you do?



Continue to pour money into the sieve until the system collapses from the other end?



I agree that either extreme is harsh... so is there no answer? Is this the end of the world?
 
It is not the end of the world. It is a financial transition, experienced many times in many different forms in the world.
 
I ask because whenever I want to know what's going to happen if there is no bailout, people smarter than me throw out all this financial jargon and it sounds like the world will blow up without the bailout.



What is this "financial transition" you speak of?
 
[quote author="irvine_home_owner" date=1236139013]I ask because whenever I want to know what's going to happen if there is no bailout, people smarter than me throw out all this financial jargon and it sounds like the world will blow up without the bailout.



What is this "financial transition" you speak of?</blockquote>


Well, that would take a couple of hours and a few hundred pages. Are you going to buy me lunch?



Bottom line. I do not know.

But, many financial instituions will go under or be taken over. I have said for a few years that the only two big US financial institutions left standing will be JPM and GS.

The USD will end up being hugely devalued.

Huge amounts of private wealth will disappear and will continue to disappear.

Less folks will be able to "afford" homes than can afford them now.

Staples, (no, not the biz supply store), will take a much larger chunk of incomes.

The world will stop lending the USA money that the USA can not possibly pay back.

Most other fiat currencies will continue to become highly devalued.

Less folks will be able to retire.

Less folks employed in the financial services industry.

People will spend less money they do not have and people will save more.

There will be less credit and debt.

The end of a consumer credit driven economy and either the resumption of a production based economy or ...







Either more socialism or a revolution, (hopefully peaceful and done through the vote).







<em>1. "an onslaught of inflation" (page 5): "In poker terms, the Treasury and the Fed have gone ?all in.? Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone?s guess, though one likely consequence is an onslaught of inflation."



2. An extraordinary Treasury bond bubble (page 18): "When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary. "

</em>



- Warren Buffett in the latest Berkshire Hathaway annual report.
 
I enjoyed this <a href="http://www.businessweek.com/magazine/content/09_10/b4122017811535.htm">interview</a> with Jim Rogers in Business Week. He makes a good point IMO about how the bailout of LTCM led to the demise of Bear Stearns and Lehman Bros. Lots of other good stuff too...
 
[quote author="awgee" date=1236139784][quote author="irvine_home_owner" date=1236139013]I ask because whenever I want to know what's going to happen if there is no bailout, people smarter than me throw out all this financial jargon and it sounds like the world will blow up without the bailout.



What is this "financial transition" you speak of?</blockquote>


Well, that would take a couple of hours and a few hundred pages. Are you going to buy me lunch?



Bottom line. I do not know.

But, many financial instituions will go under or be taken over. I have said for a few years that the only two big US financial institutions left standing will be JPM and GS.

The USD will end up being hugely devalued.

Huge amounts of private wealth will disappear and will continue to disappear.

Less folks will be able to "afford" homes than can afford them now.

Staples, (no, not the biz supply store), will take a much larger chunk of incomes.

The world will stop lending the USA money that the USA can not possibly pay back.

Most other fiat currencies will continue to become highly devalued.

Less folks will be able to retire.

Less folks employed in the financial services industry.

People will spend less money they do not have and people will save more.

There will be less credit and debt.







Either more socialism or a revolution, (hopefully peaceful and done through the vote).







<em>1. "an onslaught of inflation" (page 5): "In poker terms, the Treasury and the Fed have gone ?all in.? Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone?s guess, though one likely consequence is an onslaught of inflation."



2. An extraordinary Treasury bond bubble (page 18): "When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary. "

</em>



- Warren Buffett in the latest Berkshire Hathaway annual report.</blockquote>


To add to what awgee said...



People will want answers, so there will be social unrest, leading to riots, then people will overthrow the government, and America as you know it will cease to exist.



...a bit extreme, though I wouldn't rule it out.
 
I am hoping people can find their answers without riots or violence. Call me a bleary eyed optimist, but maybe there is enough information on the internet that people can learn what the Constituion is, what it says, the intention behind it's formation, and an understanding of it's principles.
 
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