From all I hear and read, there is a tremendous amount of outrage pouring into Washington (I've heard from various members of Congress that their calls from voters are running anywhere from 9-1 against to 100-1 against, even more than the amnesty bill last year). The vote is supposed to take place in the House around lunchtime today (Senate in a day or two), so send your e-mails and make your calls before that. From what I've heard, the public opposition to this bailout is just about unanimous, so the success of the vote is not necessarily a lock.
Here's how I think about it: when the ship is sinking, you don't set fire to it to dry out the water coming in through the leaks. This bailout is doing the equivalent of torching a bonfire across the entire deck of the ship.
Here's another good analogy I heard: we're being told we need major surgery, but no one is telling us the chances of surviving the surgery - the surgeon has never done this surgery before, but he thinks it'll work. We're also not being told how much of the disease the surgeon caused, and we're not being told what will happen if we don't have the surgery.
Politically correct politicians caused this. The big-spending Republicans and the corrupt Democrats are the ones who have caused this. There is no reason to think they will fix it. They're talking about how the crisis will explode if this bailout doesn't pass, but what happens if it passes and doesn't work? What then? No one is saying they know this will work, so isn't it a logical question to ask? How bad is it going to be if this bailout fails, and how will that compare to if the bailout doesn't pass in the first place?
No one has those answers. No one is even asking the questions.
Another part of the problem is the ignorance of basic economics and history that we have in this country. For example, a USA Today/Gallup poll shows that 33% of Americans think the country is in a depression already. WHAT?! This is the result of poor education and constant irresponsible negativism from the media. Here's some perspective from Investor's Business Daily:
WHAT?!?! Not only are they going to spend almost a trillion dollars of taxpayer money to bail out the poor decisions of rich, corrupt hacks in Washington and on Wall Street, but the number they're using was just made up out of thin air!!! Possibly even worse, Paulson is leaving office in four months, to be replaced with an as-yet-unknown person who will be appointed by the next President. Who knows what that person is going to do with taxpayer money?
So what will actually work? From the Heritage Foundation:
The value of the dollar is continuing to drop because nations around the world don't have faith that the U.S. will be able to pay its debts. If we were to balance the budget and bring spending under control, that faith will go up and the value of the dollar will go up.
Here's the bottom line. This crisis is big, and very bad. We are likely to experience some pain, possibly a lot, before it is over. This is not a failure of capitalism, and this is not a failure of the free market. This bailout is the icing on the cake of years (or decades) of bad policies from Congress. It won't fix anything, and it will only make things worse. Our Congress has set aside the Constitution and free market principles in favor of socialism. This is the key problem, and this is why the status quo politicians pushing this bill will not fix this problem. They are bringing potential economic disaster down upon our heads, and we could very well see another Great Depression if this goes through.
Here's the thing. Most people may not understand everything that's going on, but people are starting to realize that both parties in Congress are full of crap about this. Congress has been feeding us lies and deceptions for so long that we are in a true crisis, and if they continue to screw over the American taxpayers, we will all get hammered in the checkbook and thus our very lives. Even if they get sent home (which needs to happen) at the next election, we will still have to deal with the results of their actions now.
Unfortunately, the righteous anger and fury from the American people is the only thing that will generate the real change that we need. Get involved, NOW.
There's my two cents.
Here's how I think about it: when the ship is sinking, you don't set fire to it to dry out the water coming in through the leaks. This bailout is doing the equivalent of torching a bonfire across the entire deck of the ship.
Here's another good analogy I heard: we're being told we need major surgery, but no one is telling us the chances of surviving the surgery - the surgeon has never done this surgery before, but he thinks it'll work. We're also not being told how much of the disease the surgeon caused, and we're not being told what will happen if we don't have the surgery.
Politically correct politicians caused this. The big-spending Republicans and the corrupt Democrats are the ones who have caused this. There is no reason to think they will fix it. They're talking about how the crisis will explode if this bailout doesn't pass, but what happens if it passes and doesn't work? What then? No one is saying they know this will work, so isn't it a logical question to ask? How bad is it going to be if this bailout fails, and how will that compare to if the bailout doesn't pass in the first place?
No one has those answers. No one is even asking the questions.
Another part of the problem is the ignorance of basic economics and history that we have in this country. For example, a USA Today/Gallup poll shows that 33% of Americans think the country is in a depression already. WHAT?! This is the result of poor education and constant irresponsible negativism from the media. Here's some perspective from Investor's Business Daily:
The specter of depression stalks America. You hear the word repeatedly. Are we in a depression? If not, are we headed for one? The answer to the first is "no"; and the answer to the second is "almost certainly not."
The use of "depression" to describe the economy is a case of rhetorical overkill that speaks volumes about today's widespread pessimism and anxiety.
The Great Depression of the '30s — the last time the term rightly applied — was industrial capitalism's worst calamity. Unemployment peaked at 25% in 1933; it averaged 18% for the decade. From 1929 to 1933, 40% of U.S. banks failed. People lost deposits; businesses and consumers lost access to credit.
Over the same period, wholesale prices fell a third, driving farmers and firms into bankruptcy. Farm foreclosures, bread lines and shantytowns followed. This was a social, as well as an economic, breakdown.
The situation today bears no resemblance to this. In June, unemployment was 5.5%, slightly below the average since 1960 of 5.8%. It's true, banks and investment banks — Citigroup, Merrill Lynch, Wachovia — have suffered large losses.
But on the whole, the banking system seems fairly strong. Although profits in the first quarter of 2008 were down 46% from 2007, they totaled $19 billion even after $37 billion set aside for loan loss reserves. Overall corporate profits are still running at a near-record annual rate of $1.5 trillion.
If your blood pressure hasn't gone up enough to get you to make some calls or send some e-mails, this should put you over the edge from Forbes:In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.
"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."
So what will actually work? From the Heritage Foundation:
- Do not prop up failed or failing institutions. The goal should not be to keep troubled enterprises in business but to ensure that they are restructured or wound down in a way that does not cause undue disruption in the financial system as a whole. Thus, for instance, policymakers did not try to keep Bear Stearns in business even though its sudden collapse would have disrupted U.S. financial markets. Instead the government assured its orderly acquisition.
- Do not try to support prices. Policymakers should not attempt to keep stocks or housing prices from falling to their proper market-determined levels. The role of the federal government is not to ensure that prices do not drop. Market practices such as "short selling" that tend to lower prices generally should not be discouraged—they are part of the process by which the marketplace determines value. Limits on such practices, however, may be appropriate as very short-term, emergency measures to "cool off" spiraling markets. Thus, the Securities and Exchange Commission's actions to suspend all short selling on shares of specified financial services firms for up to 40 days will serve as a breather, but it should be lifted as soon as is prudent.
- Do not allow the government to become the permanent "owner of last resort." Any assets acquired should be disposed of as expeditiously as possible. The Resolution Trust Corporation, which in the early 1990s acquired assets from failed thrift institutions, is one such model. Those assets were held by equity partnerships with private investors, facilitating sales. Any approach instituted to deal with this crisis should not allow the government to take ownership stakes in the institutions themselves but simply acquire assets.
- Strictly limit legislation to the immediate need to stabilize the financial situation. Within hours of the Bush Administration's announcement of a financial rescue plan, there were media reports that congressional leaders were considering adding in provisions on a host of other issues, including unemployment benefits, food stamps, and infrastructure and Medicaid funding. Lawmakers should oppose any and all attempts to expand the legislation being proposed.
- Avoid "moral hazard." Policymakers must ensure that all concerned have financial "skin in the game," thereby providing incentives for them and others to act responsibly and discouraging others from seeking similar support. If a private firm is so integral to the financial operations of the economy that it requires assistance, the taxpayers' financial exposure should be minimized and the managers and stockholders should suffer consequences for their miscalculations. In the Administration's plan, moral hazard is not fully avoided. But if this plan or something like it is adopted, Congress must at least require financial institutions to receive a deeply discounted price for their assets, or pay a significant fee for assistance in liquidating their portfolio.
- Carefully define the Fed's role. The Federal Reserve should exercise its "lender of last resort" responsibilities to ensure liquidity but avoid the unwarranted mission creep of those responsibilities to new fields. The Fed's loan to provide funding for AIG, for example, was a measured extension of the classic "lender of last resort" function, which provided a way to get cash to illiquid but otherwise solvent enterprises. The action represented the first time, however, that such funding was provided by the Fed other than to a bank. Since AIG's activities were so intertwined with that of the banking system, however, that expansion may have been justified. But that authority should not be expanded to other industries, such as manufacturers or airlines.
- Limit taxpayer exposure and keep actions temporary. Any new mechanism or authority to halt the deterioration in the market should ensure that affected firms pay a cost and be strictly limited in time and scope to minimize taxpayer exposure.
- Assure liquidity in markets but require full pricing of government insurance. Money market funds, a critical element in the flow of capital, have almost completely seized up in recent weeks. The Treasury's actions to offer insurance are intended to restore confidence and allow capital to flow smoothly again. However, the Treasury must ensure that the price of any insurance fully reflects the market risk.
The value of the dollar is continuing to drop because nations around the world don't have faith that the U.S. will be able to pay its debts. If we were to balance the budget and bring spending under control, that faith will go up and the value of the dollar will go up.
Here's the bottom line. This crisis is big, and very bad. We are likely to experience some pain, possibly a lot, before it is over. This is not a failure of capitalism, and this is not a failure of the free market. This bailout is the icing on the cake of years (or decades) of bad policies from Congress. It won't fix anything, and it will only make things worse. Our Congress has set aside the Constitution and free market principles in favor of socialism. This is the key problem, and this is why the status quo politicians pushing this bill will not fix this problem. They are bringing potential economic disaster down upon our heads, and we could very well see another Great Depression if this goes through.
Here's the thing. Most people may not understand everything that's going on, but people are starting to realize that both parties in Congress are full of crap about this. Congress has been feeding us lies and deceptions for so long that we are in a true crisis, and if they continue to screw over the American taxpayers, we will all get hammered in the checkbook and thus our very lives. Even if they get sent home (which needs to happen) at the next election, we will still have to deal with the results of their actions now.
Unfortunately, the righteous anger and fury from the American people is the only thing that will generate the real change that we need. Get involved, NOW.
There's my two cents.
No comments:
Post a Comment