The Economy + The Bailout

Your post just made me realize that there's really nothing we can do to help ourselves in this situation. Seriously, what good can Obama do? He doesn't have any options but try and pay off the debts which will lead to higher taxes and a screwed up economy. We still have to remain calm and do what we can (which is pretty much nothing, so just remain calm ) and not put pressure on our new president. Let's let him do the work, and if he fails he fails, we couldn't have done much better (I didn't see you running for president, so don't bitch about him doing a bad job). Bush should've done a better job with the money, but we have to stop blaming and start taking action.

Exactly clash, I think that's EXAXTLY what's going to happen to Obama, and being the black president he is, he'll probably get owned more than Bush did, and he can't really do anything about that can he? He's a president, he said he's going to do whatever he can do help the country, and if the U.S. citizens are going to blame him for his hard work, maybe they need new U.S. citizens and not a new president. I mean they're the ones that voted for him, so why cry?

To be honest, I feel this is going to take alot of work to sort out and its not something that will happen anytime soon. There isn't alot anyone can do either to help anyone out, everyone is suffering and all this pressure is now going on Obama to get it sorted asap... I just hope everything gets back to normal soon

I too feel that it will take a long time to sort out and nothing will happen that is significant within a couple years. I hope the job situation will get better though as it is getting really bad and harder to maintain a job/ find a job.

I think bail out is just an illusion created by US government to pacify the situation for a little while. It is a not effective to stabilize the economy but just an assurance that government is not overlooking the problems.

The debt itself is nowhere near disaster just yet. We probably have about another 6 trillion to go before countries will stop lending to us. As it stands, we basically would just need to have a balanced budget for awhile, or at least not have more than about $100 billion in debt. Sheer inflation will slowly work off a good bit of the debt and there will come a point when Congress is just forced to stop going over budget.

The bailout isn't a bad idea. The biggest component was something that my economics professors were calling for for awhile. Upping the FDIC coverage made a lot of people feel safer and guaranteed that there wouldn't be shockwaves from a bank crash.

The bailout isn't perfect, but its the best option we have. This was just a hard event to solve and they really had to think outside of the box to come up with a way to carry it over. I will point out that it isn't really a ton of debt. They just bought stock (common and preferred) in a number of banks. The money will be returned in the future as long as the banks don't collapse (even then it might come back through asset collection).

The biggest crisis has probably been averted. The worst fear was that we could fall into a liquidity trap and have severe deflation. That's an economist's worst nightmare, since you basically can't escape it. Pumping all the money in to encourage steady lending helped cancel that out as a possibility.

Things might be a little rough in the future, but the economy will probably just cut the fat and come back stronger. It usually does.

Hey lets print out more money out of thin air and bailout these huge companies and lets make ourselves believe that this wont lead to the falling of the dollar and runaway inflation. I love to be in dreamland lol.

The Parakeet said:

The debt itself is nowhere near disaster just yet. We probably have about another 6 trillion to go before countries will stop lending to us. As it stands, we basically would just need to have a balanced budget for awhile, or at least not have more than about $100 billion in debt. Sheer inflation will slowly work off a good bit of the debt and there will come a point when Congress is just forced to stop going over budget.

The bailout isn't a bad idea. The biggest component was something that my economics professors were calling for for awhile. Upping the FDIC coverage made a lot of people feel safer and guaranteed that there wouldn't be shockwaves from a bank crash.

The bailout isn't perfect, but its the best option we have. This was just a hard event to solve and they really had to think outside of the box to come up with a way to carry it over. I will point out that it isn't really a ton of debt. They just bought stock (common and preferred) in a number of banks. The money will be returned in the future as long as the banks don't collapse (even then it might come back through asset collection).

The biggest crisis has probably been averted. The worst fear was that we could fall into a liquidity trap and have severe deflation. That's an economist's worst nightmare, since you basically can't escape it. Pumping all the money in to encourage steady lending helped cancel that out as a possibility.

Things might be a little rough in the future, but the economy will probably just cut the fat and come back stronger. It usually does.

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With all due respect, I think you are being a little too laid back about this issue. When you say that inflation will slowly work off a bit of the debt, you do realize why right? It is because inflation is the decrease in value of the dollar, meaning that the USD's buying power decreases. This means that with inflation the government is essentially taxing the people and anyone else who holds USD.

As for your professors, please remember that economics is all based on theories and your professors' ideas aren't necessarily truth. You should really read other economic theories before blindly following one (the one you learned about is most likely Keynesian from your descriptions.)

The bailout is not the best option we have because it goes against everything we stand for. Failing businesses is a part of capitalism and by not letting anyone fail you are hurting the capitalist system and in fact, pushing the socialist one. Also, you brought up the point about how the government will get the money back in the companies it invested in if they don't fail. But what if they do fail? Who will lose their money? We, the people will.

myp said:

With all due respect, I think you are being a little too laid back about this issue. When you say that inflation will slowly work off a bit of the debt, you do realize why right? It is because inflation is the decrease in value of the dollar, meaning that the USD's buying power decreases. This means that with inflation the government is essentially taxing the people and anyone else who holds USD.

As for your professors, please remember that economics is all based on theories and your professors' ideas aren't necessarily truth. You should really read other economic theories before blindly following one (the one you learned about is most likely Keynesian from your descriptions.)

The bailout is not the best option we have because it goes against everything we stand for. Failing businesses is a part of capitalism and by not letting anyone fail you are hurting the capitalist system and in fact, pushing the socialist one. Also, you brought up the point about how the government will get the money back in the companies it invested in if they don't fail. But what if they do fail? Who will lose their money? We, the people will.

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Well of course I don't believe that inflation should be driven up to pay off the debt. That would just be crazy. They might as well increase taxes and pay it off the old fashioned way.

As it stands, we will always have a little bit of inflation. Believing that inflation won't exist is truly living in dreamland. There's about 2-3% of inflation that keeps us healthy and ultimately encourages people to keep their money flowing through the system. Deflation has also proven to be truly devastating, because it quickly snowballs out of control and kills the motivation for investment. Why invest the dollar you have if it will be worth $1.10 in a month?

As far as my professors, I'm not exactly following anyone in particular. It's a basis that's been built from three teachers in different areas and private research and discussion in other forums. I'm aware of Keynesian. That model basically guides most of economics. It is wrong when taken to any extreme but right on the whole and as a general guide.

The bailout is the best option we have, because there isn't any other option for a rescue. As you said, the only other option was to let them sink or swim. I agree in principle, but I can't agree practically. It could be argued that the government should have stepped in and stopped their risky behavior. We are forming regulations now to do just that.

It may have been truer to capitalism to have let them fail, but that would have destroyed the economy. We were lucky that it stopped short. A number of businesses would have been utterly ruined if their lines of credit had fallen through. Allowing the banks to fail would have caused untold amounts of damage. It's the same problem with bailing out the auto makers. They are terribly run companies which made bad decisions. Does that mean that we should let 2 million people go out of work by letting them fail?

It was a bad situation and this was probably the best way out. I believe that they bought preferred stocks which puts the government in a good place for recovery in the event that they would still fail. They also have a lot of oversight in the company which makes failure unlikely. I do wish that they would have been a bit tougher on the boards (Britain followed a model I liked a bit better) but that's just a nit pick.

Besides, if the banks still fail, then we're basically doomed anyway.

Yep the bailout is awesome. Lets print money out of thin air and give it away. I mean it makes perfect sense doesnt it. Instead of having a solid currency to base the dollar against which will control our spending and printing of extra money, lets just print away and make our money worthless. Hey , I need more money for a new home. Can i ask my government to print more money out of thin air so I could buy it for free? Dont worry, the money wont be worthless tomorrow if everyone did this. You know why? The tooth fairy and the wizard of oz both told me that if we print more money that money will be woth more tomorrow loooooooooooool.
Hey im with Obama, LET THE PRINTING PRESSES RUNNNNNNNNNNN.

If you think bush loved to get those printing presses in high gear you will really love what Obama has planned in this bailout lol.

Heck lets let the government have majority control over all of our companies by allowing them to buy stocks in it. Lets all do the " nationalize those companies baby" dance. Move to the right own the auto industry, move to the left own the insurance industry, move to the center and lets own all the companies in america. WEEEEEEEEEEEE, I like this dance lol

Alright, from what I could understand of that post...you're wrong. Repeat after me "They are not printing more money." They really aren't even doing that much to grow the money supply. We are just borrowing money. This hasn't done much to even inflate the currency yet. Foreign investors have happily bought into the dollar.

Now...letting the entire economy collapse to teach a few dumb executives a lesson (while they glide away on golden parachutes). That would be ridiculous. It was an unprecedented crisis of confidence and we threw some money around to buy our way out of it. Lots of other countries did it too and the ones that didn't are having major bank crises (ours wasn't that bad in comparison to a few in Europe.

The Parakeet said:

Alright, from what I could understand of that post...you're wrong. Repeat after me "They are not printing more money." They really aren't even doing that much to grow the money supply. We are just borrowing money. This hasn't done much to even inflate the currency yet. Foreign investors have happily bought into the dollar.

Now...letting the entire economy collapse to teach a few dumb executives a lesson (while they glide away on golden parachutes). That would be ridiculous. It was an unprecedented crisis of confidence and we threw some money around to buy our way out of it. Lots of other countries did it too and the ones that didn't are having major bank crises (ours wasn't that bad in comparison to a few in Europe.

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http://blueherald.com/2008/11/wheres-the-bailout-money-coming-from/

I repeat: we are printing money: whoever says we arent doesnt understand our financial system. The federal reserve ultimately prints this money out and doesnt need to tell even congress how it prints it up.

http://www.nowpublic.com/tech-biz/where-bailout-money-coming

I repeat: we are printing more money and inflating the dollar.


Where is the bailout money coming from?
by djangofan | October 3, 2008 at 11:23 am
1857 views | 0 Recommendations | 3 comments
Funding for 700 billion bailout comes from US taxpayers and not from foreign bond purchasers. The proof is in Section 118 of the house bill passed on October 3rd, 2008. The government is actually "appropriating" funds from the government budget for government bond purchases. It does so by raising the public debt value as told in Section 122 and uses the new debt to buy treasuries from itself. This is recircular financing, using money created from debt to finance more debt-base. Once the new credit is deposited into Federal Reserve bank accounts, the 700 billion of new deposits will quickly become 7 trillion new US dollars into the economy. Raising our money supply by 10%+ via the passing one bill by congress is a tax that every American taxpayer is paying in order to bail out bankers who made mistakes. Every dollar you own or earn was just inflated by over 10% and so what are you going to do about it?

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Exactly. I was just pointing out that we aren't firing up printing presses and physically making more money. That's a common mistake that really annoys me. Your quoted section agrees with that. Besides it would be the treasury and the US mint that actually prints new money. The Fed is only interested in managing monetary policy.

As your quote says though, we are raising the public debt by moving some money around in the budget. We will then buy securities from ourselves and dump the money into the bank's reserves. They will then lend the money, it will lended again in the aforementioned cycle, and it will end up being magnified by about ten times (if I remember correctly...it's a little late here).

The money won't inflate by 10%. It doesn't work like that. The money is all loaned out and owed to people. This is actually standard economic policy, we usually just don't do it on this level. It should get the banks to restart lending. This would encourage more mortgages, housing starts, car loans, and new businesses. This should increase spending. This might cause some inflation (not 10%) through increased demand, but we were already seeing decreased demand, so that should help the economy stabilize as a whole.

Inflation itself is calculated by how much prices rise. How many apples will $10 buy in a year. We haven't been on the gold standard for years. Just increasing the money supply won't inflate the actual value (beauty and sometimes the curse of the fiat system).

*Sidenote - Please let him fly into anti-Fed or Gold Standard memes. I'm only one away from Ron Paul fanatic BINGO.

Someones living in dreamland. Obviously you have no idea what austrian economics means. This is one reason why our gas prices are up. The government of the usa should be managing our own fiscal policy not some guys from another country lol.
Im only one number away from fascist neocon lotto.
Hey I hit the number . It says the rich win and all of us lose lololol.

The money is being printed out and backed up by nothinggggggggg. Whats so hard to understand about that?
Economic bubbles happen because of this crap.

The Parakeet said:

Exactly. I was just pointing out that we aren't firing up printing presses and physically making more money. That's a common mistake that really annoys me. Your quoted section agrees with that. Besides it would be the treasury and the US mint that actually prints new money. The Fed is only interested in managing monetary policy.

As your quote says though, we are raising the public debt by moving some money around in the budget. We will then buy securities from ourselves and dump the money into the bank's reserves. They will then lend the money, it will lended again in the aforementioned cycle, and it will end up being magnified by about ten times (if I remember correctly...it's a little late here).

The money won't inflate by 10%. It doesn't work like that. The money is all loaned out and owed to people. This is actually standard economic policy, we usually just don't do it on this level. It should get the banks to restart lending. This would encourage more mortgages, housing starts, car loans, and new businesses. This should increase spending. This might cause some inflation (not 10%) through increased demand, but we were already seeing decreased demand, so that should help the economy stabilize as a whole.

Inflation itself is calculated by how much prices rise. How many apples will $10 buy in a year. We haven't been on the gold standard for years. Just increasing the money supply won't inflate the actual value (beauty and sometimes the curse of the fiat system).

*Sidenote - Please let him fly into anti-Fed or Gold Standard memes. I'm only one away from Ron Paul fanatic BINGO.

Click to expand...

Well, I'm pretty sure that they're going to invalidate that ticket when they find out I support gay marriage, am pleasantly surprised by Barack's first days, and generally reject Republican economic policy (they've strayed from the true meaning of the Keynesian theory). Also atheist and a little "l" libertarian (believe in the theory but not the party).

I'm well aware of Austrian economics. I just don't personally think it's that useful beyond political theory. There should obviously be minimal playing with the markets, the government usually just screws things up with price controls and other hard handed measures. That's why most economists encourage that government action take advantage of existing frameworks inside the economy.

You are still missing the point too. No real money is being created. We are growing the money supply by encouraging more loans and spending. This is standard stuff we've been doing for a long time. We are not on the Gold Standard. Having more money in the money supply doesn't inherently decrease it's value in the same way that pulling money in doesn't necessarily increase the value. Inflation is measured by price. This is just the truth...I don't know how else to put it.

Also boom and busts usually happen do to good old fashioned game theory. People rush to a profitable market and go full speed as long as they can keep making money. The whole market then collapses when it gets so large that it can no longer sustain itself. That's basically the short version of the dot com bust and the housing bust.

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