4 ms·

Pumping in a huge amount of government debt and credit is hitting the accelerator, not hitting the brakes. Cheap credit is the fuel that produced the mess.

run4yourlives 18y ago
I disagree. The bailout gives us more time to find out where the brake pedal is, so that we can press it. We're already speeding towards the wall whether we like it or not.
- kingkongrevenge 18y ago
  I think it's more like putting on a gorilla mask and hanging our ass out the passenger window while screaming like tarzan, so we can find the choke cable. The car analogy is stupid. There is no brake and there is no gas pedal. There is a natural balance between savings, loan interest rates, and consumer demand. What's happening now is that demand and savings rates are trying to return to their natural balancing levels after having been knocked out of whack by fake interest rates. The powers that be don't like that rebalancing, but it will happen one way or the other. Government can only exacerbate the process (and make certain insiders rich at public expense). The simple fact is that thousands of businesses NEED to go under and lots of people NEED to lose their jobs. Many of the businesses and jobs were created to service demand that doesn't really exist. The demand was an illusion created by fake cheap credit. The faster this process is run through the better the ultimate outcome.
  - run4yourlives 18y ago
    In that case, will you be declaring bankruptcy and putting everyone that much closer to recovery then? No? Then I don't see how it's seen to be acceptable to demand that action of others. The effects of the crunch will go much further than fat cats on wall street.
    - kingkongrevenge 18y ago
      You don't seem to understand that this is not a matter of choice. Many, many bankruptcies will be happening one way or the other as the macroeconomic fundamentals of saving and interest rates return to balance. The government is powerless to affect this. Thousands of nail salons and restaurants were built because cheap credit made them temporarily profitable as future consumption was taken today while debt loads rose. Well, the future arrived. And now consumption must be forgone. The nail salons and restaurants will go bankrupt and the workers will go unemployed. The faster we get it over with the better. The question becomes: would you rather have $700 billion to ensure unemployed people don't starve? Or would you rather use it to temporarily prop up nominal asset prices owned by rich people? > In that case, will you be declaring bankruptcy I have no debt at all, so that's kind of impossible. However, my savings are part of the solution. The problem is we need more savings. The solution to that is dramatically lower consumption, which is what a recession is all about.
      - run4yourlives 18y ago
        My point is that for better or ill, every American is in this together. The nail salons and restaurants will go bankrupt and the workers will go unemployed. The faster we get it over with the better. Those nail salons and restaurants are real people with real money. It may in fact be that many of them are destined to fail, and that many of them shouldn't have been in business in the first place, but the people that allowed them to get in over their heads - that would be the collective American republic - have a duty to make sure they fall as gently as possible. By temporarily putting trust back into the credit markets, this bill would have bought the time to explore the options. To simply pull the rug out from under the little guy is a violation of the contract that the government has with its people.
        kingkongrevenge 18y ago
        Absolutely none of that $700 billion will wind up spent a nail salon that is doomed to close, or otherwise enable someone to get a manicure. It will only serve to devalue the dollar and drive up import costs, drive up interest rates (as the credit worthiness of the US is questioned), and feather the nests of certain elites. You seem to favor emotional appeals over a discussion of the macroeconomic reality.
davidw 18y ago
This is precisely the sort of "I know exactly what's going on" comment that I'm suspicious of. Perhaps you do, but I am in a "don't trust anyone" sort of mood, I suppose.
- kingkongrevenge 18y ago
  If feelings of mistrust are your guide then it should be obvious that the bailout is an evil racket. Cui bono? Outstanding consumer and business debt is something like $40 trillion. Way more than $700 billion of it is at risk. The bailout bill is so small relative to the real credit markets that it can ONLY possibly be a political act for certain well connected individuals. It cannot drive the macroeconomic conditions related to the whole credit market.
  - davidw 18y ago
    "certain well connected individuals" Sounds like conspiracy theory territory to me, but maybe I'm misconstruing what you're saying. On the surface, your argument regarding 700 billion vs 40 trillion sounds plausible, but then again, it doesn't seem to be convincing guys like Larry Summers, Mark Thoma, or The Economist ( http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=12326538 http://www.economist.com/world/unitedstates/displayStory.cfm... ), and I don't think they're all in on the plot, yet are pretty smart. On the other hand, if things don't go to hell without the bailout, it will show that Paulson et al. were indeed quite wrong.
    - kingkongrevenge 18y ago
      There is a simple, good test for smartness in the current climate: Who identified and coherently described the housing bubble in 2005 or before? I think everyone on your list fails the test.
      - davidw 18y ago
        After a quick search in The Economist's archives: http://www.economist.com/finance/displaystory.cfm?story_id=E1_QPRVNJP http://www.economist.com/finance/displaystory.cfm?story_id=E... > The technology bubble in the late 1990s at least left behind a modern capital stock, which continues to yield productivity gains; a property boom, in contrast, does nothing to boost long-term growth. Instead, it diverts resources away from more productive sectors and by fuelling consumer spending it exacerbates America's economic imbalances. Eventually, there will be a price to pay. Also, I'm not sure that predictions of problems equate to knowing what to do to best wind down the current mess. You're right (elsewhere) that some things need to go under. However, I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it. Of course I guess we'll really never know for certain in any case, as it's impossible to know what would have happened otherwise. We could have no bailout and massive failures just as we could have a bailout and still have massive failures. Or no massive failures in either case.

run4yourlives 18y ago

I disagree. The bailout gives us more time to find out where the brake pedal is, so that we can press it. We're already speeding towards the wall whether we like it or not.

kingkongrevenge 18y ago
I think it's more like putting on a gorilla mask and hanging our ass out the passenger window while screaming like tarzan, so we can find the choke cable. The car analogy is stupid. There is no brake and there is no gas pedal. There is a natural balance between savings, loan interest rates, and consumer demand. What's happening now is that demand and savings rates are trying to return to their natural balancing levels after having been knocked out of whack by fake interest rates. The powers that be don't like that rebalancing, but it will happen one way or the other. Government can only exacerbate the process (and make certain insiders rich at public expense). The simple fact is that thousands of businesses NEED to go under and lots of people NEED to lose their jobs. Many of the businesses and jobs were created to service demand that doesn't really exist. The demand was an illusion created by fake cheap credit. The faster this process is run through the better the ultimate outcome.
- run4yourlives 18y ago
  In that case, will you be declaring bankruptcy and putting everyone that much closer to recovery then? No? Then I don't see how it's seen to be acceptable to demand that action of others. The effects of the crunch will go much further than fat cats on wall street.
  - kingkongrevenge 18y ago
    You don't seem to understand that this is not a matter of choice. Many, many bankruptcies will be happening one way or the other as the macroeconomic fundamentals of saving and interest rates return to balance. The government is powerless to affect this. Thousands of nail salons and restaurants were built because cheap credit made them temporarily profitable as future consumption was taken today while debt loads rose. Well, the future arrived. And now consumption must be forgone. The nail salons and restaurants will go bankrupt and the workers will go unemployed. The faster we get it over with the better. The question becomes: would you rather have $700 billion to ensure unemployed people don't starve? Or would you rather use it to temporarily prop up nominal asset prices owned by rich people? > In that case, will you be declaring bankruptcy I have no debt at all, so that's kind of impossible. However, my savings are part of the solution. The problem is we need more savings. The solution to that is dramatically lower consumption, which is what a recession is all about.
    - run4yourlives 18y ago
      My point is that for better or ill, every American is in this together. The nail salons and restaurants will go bankrupt and the workers will go unemployed. The faster we get it over with the better. Those nail salons and restaurants are real people with real money. It may in fact be that many of them are destined to fail, and that many of them shouldn't have been in business in the first place, but the people that allowed them to get in over their heads - that would be the collective American republic - have a duty to make sure they fall as gently as possible. By temporarily putting trust back into the credit markets, this bill would have bought the time to explore the options. To simply pull the rug out from under the little guy is a violation of the contract that the government has with its people.
      - kingkongrevenge 18y ago
        Absolutely none of that $700 billion will wind up spent a nail salon that is doomed to close, or otherwise enable someone to get a manicure. It will only serve to devalue the dollar and drive up import costs, drive up interest rates (as the credit worthiness of the US is questioned), and feather the nests of certain elites. You seem to favor emotional appeals over a discussion of the macroeconomic reality.

davidw 18y ago

This is precisely the sort of "I know exactly what's going on" comment that I'm suspicious of. Perhaps you do, but I am in a "don't trust anyone" sort of mood, I suppose.

kingkongrevenge 18y ago
If feelings of mistrust are your guide then it should be obvious that the bailout is an evil racket. Cui bono? Outstanding consumer and business debt is something like $40 trillion. Way more than $700 billion of it is at risk. The bailout bill is so small relative to the real credit markets that it can ONLY possibly be a political act for certain well connected individuals. It cannot drive the macroeconomic conditions related to the whole credit market.
- davidw 18y ago
  "certain well connected individuals" Sounds like conspiracy theory territory to me, but maybe I'm misconstruing what you're saying. On the surface, your argument regarding 700 billion vs 40 trillion sounds plausible, but then again, it doesn't seem to be convincing guys like Larry Summers, Mark Thoma, or The Economist ( http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=12326538 http://www.economist.com/world/unitedstates/displayStory.cfm... ), and I don't think they're all in on the plot, yet are pretty smart. On the other hand, if things don't go to hell without the bailout, it will show that Paulson et al. were indeed quite wrong.
  - kingkongrevenge 18y ago
    There is a simple, good test for smartness in the current climate: Who identified and coherently described the housing bubble in 2005 or before? I think everyone on your list fails the test.
    - davidw 18y ago
      After a quick search in The Economist's archives: http://www.economist.com/finance/displaystory.cfm?story_id=E1_QPRVNJP http://www.economist.com/finance/displaystory.cfm?story_id=E... > The technology bubble in the late 1990s at least left behind a modern capital stock, which continues to yield productivity gains; a property boom, in contrast, does nothing to boost long-term growth. Instead, it diverts resources away from more productive sectors and by fuelling consumer spending it exacerbates America's economic imbalances. Eventually, there will be a price to pay. Also, I'm not sure that predictions of problems equate to knowing what to do to best wind down the current mess. You're right (elsewhere) that some things need to go under. However, I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it. Of course I guess we'll really never know for certain in any case, as it's impossible to know what would have happened otherwise. We could have no bailout and massive failures just as we could have a bailout and still have massive failures. Or no massive failures in either case.