A bill crafted to artificially prop up major financial institutions comes down from a republican administration and gets unwavering support from . . . democrats? Then a competing bill comes in "in defense of the little guy" from the republicans? Am I standing on my head? Which is the party of big business again? Who is in the white house?
Most economists seem to agree that the bailout is the lesser of two evils, and those that don't say that really, we're pretty screwed here. Years of loose credit is catching up with us, and we're hosed regardless of what the government does. I tend to agree with the latter.
I haven't any idea how everything will play out, nor all that much insight on what's happened thus far, but it's turning out to be a crucial time in American history and so we should all pay attention! I have a few thoughts:
- I think the house republicans who are blocking the bill right now are playing politics: Their opposition has nothing to do with economic fundamentals and everything to do with the wave of calls flooding into legislators officies opposing the bill. This is upsetting to me. I am particularly upset about a quote attributed to the leader of the House revolt, John Boehner: "If they thought they were going to roll me, they were wrong." That's great, you're a huge badass, but your competing idea is getting no love from from anyone who can fix anything, so now what?
- As I said before, most economists think government action of some type is necessary to prevent a doubling of the unemployment rate and a massive shrinkage of GDP in the short term. The government action itself will probably cause a precipitous drop in the value of the dollar (i.e., serious inflation), among other things. The logic goes something like "Doing nothing will be a total disaster. Doing something will probably be mostly a disaster, but you never know." Among ordinary citizens, however, the opposition is massive. Most of these objections sound something like, "No way should my tax dollars go to fund some massive corporation." This view, like the crisis itself, is based on poor and short-sighted economics. It is understandable that a politician might try to ride the wave of opposition. This is where an educated electorate might have come in handy.
5 comments:
I agree that most of the general public is opposed to any kind of bailout on the assumption that all it does is save the people who put us into this mess in the first place.
From what I've heard, that sentiment was also very strong back in 1929, when the little guy thought it was great to see the Big Guys lose their cash. Of course, a year later all the little guys were out of their jobs as well.
Banks don't want to lend anyone anything, and so all of the small businesses who rely on short-term borrowing as a regular business practice to cover payroll, cyclical inventory, and other expenses are now screwed. They had nothing to do with the sub-prime lending fiasco, but they're the ones who'll bear the brunt of it in real terms. Communities built on a couple big businesses will rot from the inside out, and all the supporting fringe businesses suffer as a result.
It's scary stuff, but what's scarier is the fact that Charlie mentioned: politicians (almost all of whom will be fine no matter what) are using it as an opportunity to do some posturing and not taking it as seriously as they should.
All this stuff was one big, snowballing gamble that had to go bust at some time, and whatever happens, those who are chiefly responsible ought to face some consequences and there has got to be some serious reflection on how we got in this mess in the first place.
In personal terms, I'm glad Anna's working for a guy who saw all this coming in advance, and as a result Chase is now buying up all the pieces of those companies who'd been far more aggressive in their lending.
So I see that Brian and I are of the same mind here. Especially about Chase. Man, Dimon has been getting some amazing deals. As I told Anna, if we don't all get screwed in this thing, the man is a genius.
Meanwhile, Kodak is not quite as strong as a company and, although no layoffs have been announced yet, much less ones involving me, I've got my resume ready.
I understand the economic situation the same. Don't pass the bailout certain disaster, pass the bailout some disaster. If you listen to some of the "smart guys" they say we have to do this. There is a lot of politics going on with the elephants and the asses. But what did we expect? Television is very had to watch these days! Vote Pro Life!!!
As usual, I'm a contrarian. The government intervention into the functioning of the economy is unwise and unworkable. As Alan Greenspan (who, surprisingly, was in favor of the bailout) repeatedly pointed out in his book, a centrally directed economy has been tried repeatedly and has never worked. This action to "save" us from ourselves will also not be effective.
We will need to take our medicine, endure the hard times and wait for the inevitable return of real capitalism...which always happens. It's human nature...it can't be helped, rescued, saved...or stopped.
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