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What if we did not bail out the banks?
- Thread starter cubical
- Start date
You can print all the money in the world but if people are not productively employed it will all be for naught. Goods and services people. Goods and services.
Giving money to the people directly is not a permanent solution. The problem is the financial system is broken. The water pump is broken. Have you ever tried going through a day without running water? Try and you'll soon realize you cannot be very productive without it. The government can ship a whole lot of bottled water to the people but when it runs out you still have a broken pump and no water coming through.
Giving money to the people directly is not a permanent solution. The problem is the financial system is broken. The water pump is broken. Have you ever tried going through a day without running water? Try and you'll soon realize you cannot be very productive without it. The government can ship a whole lot of bottled water to the people but when it runs out you still have a broken pump and no water coming through.
Quote from mokwit:
I could have gotten so bad that all those people at Goldman (who work so much harder than people working 3 jobs) might not have got their bonus entitlement.
Excellent analysis, and the mail reason why banks got the bailout money and the second lot and the third lot......
Insolvent companies should be allowed to go out of business. The people who run them are not capable of doing so and will ruin them again and again.
10 trillion dollars would have created plenty of banks with enough capital.
The bailout money is being poured down a black hole of debt which is feeding off it.
This is not 1929. The world has changed completely with the advance of technology. This crisis would have lasted a few months at the most if it had been tackled properly. Now it could lead to a new dark age.
Quote from poborsky:
Insolvent companies should be allowed to go out of business. The people who run them are not capable of doing so and will ruin them again and again.
10 trillion dollars would have created plenty of banks with enough capital.
The bailout money is being poured down a black hole of debt which is feeding off it.
This crisis would have lasted a few months at the most if it had been tackled properly. Now it could lead to a new dark age.
The declaration of Independence
IN CONGRESS, JULY 4, 1776
The unanimous Declaration of the thirteen united States of America
That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.
But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
http://www.ushistory.org/declaration/document/index.htm
'If USA government gives $10 Trillion to 300 million USA citizens. Each citizen will get $33,334.'
This money is already in the US economy with the consumers. Banks lent out this money to items like sub-prime mortgage etc. which turned out as 'sour or bad debt'.
Now with this bad debt on the balance sheets, banks are basically insolvent i.e. negative net worth. If banks go out of business then there is no credit and money mechanism in the economy.
someone mentioned in this thread....'water pipe is broken'. Good analogy, no money in the system means barter tricks can only go so far before there is chaos and criminality all around in the society.
What government is doing, is to temporarily buy the bad debt from the banks. When real estate market rebounds, then bad debt turns into normal debt and then government can get its money back from the consumers who took loans but were not in position to pay currently.
No easy solutions out there. Also wonder why Air Canada is never allowed to go bankrupt by the canadian government? Because aviation in Canada will come to standstill and hurt the rest of the economy. Some companies are too crucial.......at least to some extent.
This money is already in the US economy with the consumers. Banks lent out this money to items like sub-prime mortgage etc. which turned out as 'sour or bad debt'.
Now with this bad debt on the balance sheets, banks are basically insolvent i.e. negative net worth. If banks go out of business then there is no credit and money mechanism in the economy.
someone mentioned in this thread....'water pipe is broken'. Good analogy, no money in the system means barter tricks can only go so far before there is chaos and criminality all around in the society.
What government is doing, is to temporarily buy the bad debt from the banks. When real estate market rebounds, then bad debt turns into normal debt and then government can get its money back from the consumers who took loans but were not in position to pay currently.
No easy solutions out there. Also wonder why Air Canada is never allowed to go bankrupt by the canadian government? Because aviation in Canada will come to standstill and hurt the rest of the economy. Some companies are too crucial.......at least to some extent.
Quote from glennku:
I am refering to $10 Trillion bail-out & stimulus package gifted by USA government to bankrupt companies and banks. Instead the same $10 Trillion could have been given to 300 million USA citizens.
Let's say the money was given to the people directly. Then they spend it or save it in which case it just goes back into the broken system. That will tide people over for a while but then what? The financial system is still broken. Bottled water deliveries are not an adequate replacement for running water.
Quote from glennku:
The declaration of Independence
IN CONGRESS, JULY 4, 1776
The unanimous Declaration of the thirteen united States of America
That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.
But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
http://www.ushistory.org/declaration/document/index.htm
The abuse has been going on since 1913. Do you think a change may be due?
Jim Rogers in Business Week, interviewed by Maria B.
http://www.businessweek.com/magazine/content/09_10/b4122017811535.htm
You have said Bear Stearns and Lehman (LEHMQ) would still be around if Greenspan hadn't bailed out Long-Term Capital Management in 1998. Can you explain?
Well, if Long-Term Capital Management had been allowed to fail, Lehman and the rest of them would've lost a huge amount of money, their capital would've been impaired, and it would've put a terrible crimp on Wall Street. It would've slowed them down for years. Instead of losing capital, losing assets, and losing incompetent people, they hired more incompetent people.
Should AIG (AIG) have been allowed to fail, too?
First of all, banks and investment banks and insurance companies have been failing for hundreds of years. Yes, we would've had a terrible two years. But you're dragging out the pain. We had 10 years of the worst credit excesses in world history. You don't wipe out something like that in six months or a year by saying: "Oh, now let's wake up and start over again."
What about Citigroup (C)? What about the car companies?
They should be allowed to go bankrupt. Why should American taxpayers put up billions to save a few car companies? They made the mistakes! We didn't make the mistakes! I'm sure they'll give them the money, but I'm telling you, it's a mistake. It's a horrible mistake.
http://www.businessweek.com/magazine/content/09_10/b4122017811535.htm
You have said Bear Stearns and Lehman (LEHMQ) would still be around if Greenspan hadn't bailed out Long-Term Capital Management in 1998. Can you explain?
Well, if Long-Term Capital Management had been allowed to fail, Lehman and the rest of them would've lost a huge amount of money, their capital would've been impaired, and it would've put a terrible crimp on Wall Street. It would've slowed them down for years. Instead of losing capital, losing assets, and losing incompetent people, they hired more incompetent people.
Should AIG (AIG) have been allowed to fail, too?
First of all, banks and investment banks and insurance companies have been failing for hundreds of years. Yes, we would've had a terrible two years. But you're dragging out the pain. We had 10 years of the worst credit excesses in world history. You don't wipe out something like that in six months or a year by saying: "Oh, now let's wake up and start over again."
What about Citigroup (C)? What about the car companies?
They should be allowed to go bankrupt. Why should American taxpayers put up billions to save a few car companies? They made the mistakes! We didn't make the mistakes! I'm sure they'll give them the money, but I'm telling you, it's a mistake. It's a horrible mistake.