Explain where I'm wrong... why are a lot of people against the bail-out?

I've been trying to learn about this and read how a credit-crash effects the average joe. I've got little invested in the market and no need to take out loans anytime soon, so I wondered how this "credit crisis" really effects me and my family. As I've read more and more, what I've learned is how much credit is pervasive in the world and seems to keep things running much more regularly than I ever even thought or considered.

Correct me if I'm wrong...

If I want to get money from an ATM at the grocery store... well I won't be able to if the credit market freezes up. Bank A basically "loans" Bank B or the ATM-company the money to spit out at me. It's a short-term loan. Short-term loans seem to be VERY important in a lot of ways...

I like getting my paycheck... but apparently lots of companies rely on short-term loans (known as commercial paper) to pay for things like payroll, utilities, inventory. You want a paycheck, the company you work for likely needs access to credit. I want them to be able to keep affording to have all the employees, including myself, to keep working there... well that means they need rates on short-term loans not to skyrocket (like they already are starting to).

The value of the dollar continues to goes down... which means inflation. High inflation. Gas goes up, food prices go up, EVERYTHING goes up... so our money is worth a lot less. That loaf of bread will cost double what it does now, but if I can still get my paycheck, it certainly won't include a cost-of-living increase. You and I will be able to afford even less than we can now. The companies we work for will have to spend more money on basics (everything from office supplies to utilities) which means less profit... and less to pay employees. Refer to those short-term loans again above. Even making payroll costs more.

The companies we work for need to restock inventory... they likely do that with credit and short-term loans also. In a "collapse" It'll all cost more because shipping costs will go up and the raw material costs will have increased. Not only can the company not afford to restock with as much inventory, but it takes longer. What happens when restocking inventory gets too expensive, too difficult or takes too much time?

Consumers then spend less money, so if we're in ANY industry effected by consumers cutting back the companies we work for will be bringing less of that devalued money in. Even the most basic things are effected. Electricity costs more because oil and overhead costs go up... so they pass the increases on to us, making it even less affordable just for the basic necessities. We'll all be cutting way back and spending less at the very same companies we work for.

It all turns into a cycle of no credit, increasing prices, decreased business, layoffs and lower consumer-confidence and participation... rinse and repeat.

I feel like we shouldn't be fooled into thinking that just because we don't have money in the bank or good credit we aren't effected. This could effect EVERYONE quickly and painfully. A lot of people don't understand how credit runs the world. Without it, things will come to screeching halt.

...


I think this bill needs to pass... I just think it needs to have the proper protections in place for tax-payers and the little guys. It cannot be a blank check. I don't pretend to know or even believe it's going to solve all our financial problems, but maybe it will make the fall less hard, or painful, or gives us all more time to prepare for it... I don't know...

Please tell me where my thinking is flawed and why I should be against the bail-out?

...

I think Obama was right on in his press conference today. Let's do this short term 'fix' and focus on the long term after we get out of this initial mess.

On edit: Apparenty Arianna Huffington thinks Obama needs to lead on this, and not "cave in" to a bailout, but in my view, I see where he is right in this. We need to focus on short term solutions before this shit gets out of hand, yet we need to set room aside to make long term decisions that will help strengthen our economic system. I guess I'm completely out of touch here.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4089209&mesg_id=4089209

I wrote it this AM.

and some of it was over my head, so I couldn't argue it either way. I just seem to be getting a grasp on how a collapse would effect us average people, without direct investments.

But I do understand your overwhelming point -- we're screwed either way. I'm just not sure which is better.

I read it this morning but didn't have time to reply. i just did but basically I'm just confused. It's like the economists say one thing, the politicians say another - there are a lot of opinions here and I just feel so stupid. I am tending to say "no" because I don't trust the Bushies, their buds and the way they've handled this. Really horrible of them.

The request for 700 Billion Dollars comes from private institutions that have duped the American Public and Foreign Investors. The scam has been discovered, now they want your money to help them bail themselves out while leaving you nothing to help yourself in the coming hard times ahead. The have lied about the value and rating on the paper they have sold and are in hot water with foreign investors. They are really scared that no one will lend them any more money if they are unable to pay their bills. Sound familiar? If there was a credit rating for these jokers it would be at the bottom. If your credit rating was at the bottom would you expect someone to loan you any money? They do. They expect you to loan them money. This isn't about home loans gone bad. This is about fictitious numbers on paper that is worthless that they need to cover. This is about derivatives that are worthless. We need to tell these people no way and use Fannie Mae and Freddie Mac to deal out loans for businesses and home loans so this country can keep going. Plus there are many smaller banks poised to take these crooks place. We need to start immediately doing accounting and reviewing on these companies and seize them and their assets if they committed fraud. Put people in jail. Anyone that has bought their lies and looses money will have to take their punches. There are many smaller banks that are poised to move up the ranks that can take place of these crooks. Do you really want to help these crooks out so they can do it again?

Now if the business I work for and everyone's business they work for can get money, won't you get a paycheck so you can buy something and keep the wheel turning? Isn't that what this money is for? How about helping the people who are having problems with their homes so they can get caught up and pay the banks wouldn't that help?

come from a whole conglomeration of investments and banks? We are talking trillions of dollar daily that pass hands in the form of credit.... as I understand it. The company you work for doesn't get it's short-term loan JUST from little local Bank X and it's money vault. Bank X relies on the flow of money and credit from many other sources. If money all over the world is suddenly not there or not available, available only at increased interest rates or worth a lot less, it effect the little banks too.

Right?

did it just vanish in thin air?

Letter of credit

It goes back oh to the middle ages

It MIGHT help you understand where the money went

As is MOST of what flows in ones and zeros has no counterpart in the real world

It didn't in the 12th century either...even though they didn't have computers

Very easy to understand really... it's BEEN vanishing as the housing prices have dropped and all the mortgages turned into defaults.

Put another way... lets say you bought a house 3 years ago for top dollar... lets just say you paid $300K. Last year it was worth $400K so you had $100K in equity. Today it's worth $200K. Now you're in the hole by $100K. Did the money/equity just vanish? It was money/equity you never really had and it just turned into a loss for you.

The way I understand this whole crisis is just like my example above, but on a much much much larger scale.

what someone thought you would get paid for it if you sold it then. Things, houses, baseball cards, are worth only what someone will pay you for them. However, you can borrow money using them as collateral since the lender thinks "hmmm, I bet someone would pay $X if I were to sell them now, and I bet someone would pay $Y next yr". So they loan you $X. Now, next yr, guess what? You can only sell it for 1/2$X.

So, you owe $X, sell your house for 1/2$X, and STILL have to pay the other 1/2$X to get rid of your loan. Or, you walk away and the loaning place sells it for 1/2$X, and takes the other 1/2 at a loss.

Been dealing with a sib in this situation. Bought a house to live in, now can sell for less than owes. Does sib bail and lose all equity paid for the last 25 yrs? Does sib stay and continue to pay? Rent? ????

So, about the OP. It seems like only a quick fix, bandaid, treat the immediate symptoms not the cause. I agree with this part "I just think it needs to have the proper protections in place for tax-payers and the little guys. It cannot be a blank check." I disagree with those who say it has to be done NOW RIGHT NOW OMG NOW!!! I'd rather have it done right than wrong and fast.

To be for the bailout you have to believe four things:

1. Unless there is an intervening solution, the problems you mention will occur.
2. There is no possible intervening solution other than a taxpayer bailout.
3. A taxpayer bailout will keep those things you mention from occurring.
4. The bailout wont cause other problems equal to or worse than the problems you mentioned.

1. Unless there is an intervening solution, the problems you mention will occur.

I don't know about your own personal experience, but I see a LOT of bad things happening daily where I work, at my husband's job, in my friend's lives. There is something very obviously wrong with the economy. It isn't hard for me to believe we have a legitimate financial crisis on our hands. To what extent, well that is something I don't know because I certainly don't belong to the economic geniuses club - LOL

2. There is no possible intervening solution other than a taxpayer bailout.

True enough... I'd like to hear other proposed solutions. Then again, I'd like to hear them ALL and I'd like someone to explain them to me so I can understand them.

3. A taxpayer bailout will keep those things you mention from occurring.

I admit I don't know if the bailout will work - I think "the officials" have even said it. But if you are in the club that believing the system will collapse otherwise, what is the alternative?

4. The bailout wont cause other problems equal to or worse than the problems you mentioned.

True enough, but if the powers-that-be do nothing we'll never know if it would have been worse otherwise... and vice versa.

convinced that this is a plan to rip off the taxpayers one last time before riding off to Paraguay or something.

Our counterparts in Freeperland think this is a ripoff as well, socializing the banking industry, etc, etc. Let the markets function and if things fall apart, well that's because of too MUCH regulation, blah blah blah.

And there is a lot to be said that this is, in fact, the Shock Doctrine in action.

However, your analysis of the implications of the deal are spot on.

They got us over a barrel. and the repukes are going to hang this very unpopular deal around the necks of the Democrats and Obama (that happened today).

If we don't do a deal, then the whole thing comes crashing down, and the "do nothing" congress gets the blame.

If we do the Bush/Paulsen deal, then the bailout is a Democratic socialist big government thing and should never have been done.

If we do the House Repuke deal (which will be the McCain bill tomorrow) then McCain will have showed real leadership, we taxpayers are off the hook... and the calculation is that enough liquidity will enter the financial institutions to delay the major effects of the collapse until after Nov 4. After that, it will collapse and McCain gets to carry out the rest of the Shock Doctrine. Palin takes over from a too ill McCain and fulfills biblical prophecy.

We need to do the modified Paulsen deal AND we need to have joe six-pack NOT by cynical about it and vote for Obama.

I think we might just have been outplayed on the chess board.

google Dodd Plan

It feels like being backed into a corner with no escape.

like 9/11, it never should have happened in the first place.

I'm tired of worrying myself sick over this.

That is all.

I just want to take my chess board and go home.

I'm more of a checkers person, I suppose...

K&R for the whole thread, but I wish I could rec your post specifically. At the moment it's damned it you do, damned if you don't for the Dems. There were http://www.commondreams.org/headline/2008/09/26-0">protests in 190 cities and towns yesterday against the bailout. Will these people vote for Obama if the bailout goes through?

why people don't want it

Lack of dot connecting

Poor understanding of economics

A President who's destroyed the office

Basic libertarian mistrust of the guv'ment

I got mine, so screw you

Ignorance, and they are proud of it

Choose from above... one, two... all of the above

and the list is far from comprehensive I fear

have a good life

Seriously... not meant to be glib...

but I'm not angry. Just disagree, or do you think that everyone that disagrees with you is angry? I just said I'm on a list that you don't comprehend.


Money was invented to replace the bartering system.
The bartering system was goods for goods.
These jokers have made money worthless.
You are the only one giving money it's value.
It's paper and ink.

It use to be backed by gold and if it still was none of this would have gone on. It was backed by gold until
1933 the US abandoned the Gold standard along with many other nations, such as Italy in '34, Belgium in '35 and others during the 1930s. Switzerland was one of the last countries to drop the gold standard and this was done in 1999 by the approval of a new constitution that eliminated the traditional requirement for the country's currency to be backed by gold.

Read this
http://www.proliberty.com/observer/20030602.htm

Now what you have is Fiat money.
Class had ended.

so it seemed like you were pissed off.

I'll read the link you provided but I don't think arguing the value of money vs. gold is going to solve this crisis much either. :)

I type in caps for the header that's all. If I type in caps in the message it is only certain words to emphasize that is all.

and proud of it

so you read peoples posts before responding?

that already lost our homes to crooks and sure as fuck doesn't want the same people rewarded with my kids future tax dollars. Fuck the rich. I can barely feed my family and I should worry about people who own homes and have 401ks and CEOs and investors? Fuck them all.

I almost wish I didn't "get it" though!
Sometimes it's more comforting to just be in the dark...

on the plus side the original plan died a while ago

Many of us understand the economics of this perfectly well and yet oppose the bailout. This particular bailout anyway (Dodd or Bush, same shit). Yes, it would help the situation a little bit to inject this 700B into the system, but it won't help all that much if you believe the estimates that the derivatives bubble is upwards of 25 Trillion.

But if you want to throw good money after bad, at least don't use the same banks that got us into this mess as the intermediaries. Goldman Sachs is not the only institution capable of moving this money into the system. We could let a great many of these top tier institutions fail and instead shore up THEIR creditors on the back side... the ones more directly connected to Joe six-pack.. Wait for this to hit the pension funds and the local government investment funds, etc... and use the 700B to bail THEM out. Let the first round of failures take place and step in at round two. For the most part the American people live in the world of paper money or M2 electronic deposits etc... Let the M3 market collapse. Really. The big foreign players are going to stop buying Treasury Bonds anyway. I really don't think this bailout will do squat for that.

This just saves Goldman and Citigroup. We are all being had. No bailout. No way!

It is NOT three pages long

THere is more... the plan has moved AWAY form 700 or 900 B, but to installments

But I am sure you KNEW this... or perhaps not

:banghead:

By the way... the plan that Dodd is proposing is based on the Sweedish plan which in turn is based on what was done during the depression

Double

:banghead: :banghead:

took a CONTROLLING interest in the bailed out banks. I'd be all for that. But the Dodd plan doesn't do that. It provides for some equity, but leaves the same idiots in control, under the same failed rules.

And sorry but, calling people who don't agree with you "ignorant" here on DU is really insulting given we are all on this god damn sinking ship together.

Hell, I supported many of your posts over the last couple of years and yet you think it's cool to insult me and others like me who are sick of being ripped off?


:wtf: Seriously.




FYI, most of us can SMELL that this as yet another rethuglican scam created to cause fear and confusion so those fuckers can get what they want-OUR MONEY.


Also FYI, I do NOT feel like screw you, I got mine about people here on DU.

NO.

I feel that about the greedy fucking rich bastards who don't give a flying fuck about what they consider the peons of this country-like me and the majority of us who post here on DU.



So tell me something. Are you stinking rich? Is that why you take offense to people saying "Fuck the Rich Bastards on Wall Street"?



p.s. The "ignorant" label could easily be thrown at you too, you know. But I'm not going to go there because I know it's rude.

there is MORE

This fear mantra is getting old as many of us, who DO HAVE A FUCKING CLUE have been warning this was coming for two years or more

If anything it is the REPUBLICANS who still have a head in hole, as well as the many LIBERTARIANS in this site

And yes... many folks ARE IGNORANT on how this will affect them

And if the shoe fits

Well you know

:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:banghead: :banghead:

Not only that but they are resisting any kind of oversight. Which is suspicious at best.

We're not talking a small loan between friends here. We're talking an enormous sum and that shouldn't be taken or given lightly.

Even banks demand collateral on their loans.

Here we're getting jack shit but the word of bastards who have already stabbed us and this country in the back numerous times.


FYI, I've known this shit was coming down the pike for longer than 2 years, hell I've known for years.

It doesn't take an "economist or expert" to understand what a ripoff looks and feels like. Most of us have felt it in our wallets ever since Reagan.

Which is why you simply can not call people ignorant because they are watching their backs and protecting their own interests and future.



But all that said, all this arguing is for nothing because those bastards will get what they want with or without the peoples permission, just like they have done before :grr:

which I'll never understand...

I got into some hot water a few months back (on a different discussion board) for saying basically the same thing you have, which is fuck the dirty Wall Street bastards straight to hell where I hope they burn forever.

Well...you might think I had just condemned a group of people to Hell based on their skin color or their race or something.

The arguments some of my antagonists chose for accusing me of "prejudice" were so lame it wasn't funny. Or maybe it was, in a pathetic sort of way.

Oh...poor little rich people...yeah, we should feel sooooo sorry for them!

I despise rich bastards. I especially despise rich bastards who spend more money on one goddamned pair of shoes than I can afford to spend on groceries for a month. Purses...scarves....boats....cars....watches....how much healthcare could the prices of those things buy for needy kids? It's vile...it's vulgar...it makes me puke.


But we should feel sorry for the rich, who, without the blood and sweat of ordinary people like us, wouldn't have their stinking seven homes and twelve vintage cars.


I just don't understand people sometimes, you know?

The Chinese already build most of our cheap consumer shit; they can run the banks in America, too.

and that he would raise taxes, the same people often derided on these pages as incapable of complex thinking. The people who voted for Nader in 2000. People who cannot or will not think about things but instead would support the demise of our society.

Yes, most employers rely on borrowed money to pay salaries and to keep operations going. If they cannot do it they will have to lay off people and perhaps drastically curtail operations.

People without jobs will not have health insurance. People without jobs and access to health care will need more help from government agencies. People will lose their homes, more empty houses in neighborhoods, prone to vandalism and drug use.

People who will see the value of their retirement funds going down will need more help from the government. And loss of personal income and business income will result in lower revenues to government bodies.

Insurance companies invest our premiums. If they value of their reserves go down, they will not be able to pay claims.

In short, as I posted in another thread: unless one lives in a cabin in Montana and is self sufficient, we are all in it together. Our system is based on credit.

I didn't even think of some of your points, and they are good ones. I've been trying to explain it to my close family and friends too who are worried about their retirement accounts (and most are long-off from retiring) but not much else. So many people just don't realize how this really can effect us in a wide variety of ways.

The fact that the Republicans in Congress hate it should tell us something. After all, these are the people who do not believe in the role of government in helping the citizens (except when they are the cronies). These are people who are so certain that they will never lose their jobs, or businesses, or be hit with major medical costs that they smugly tell the rest of us to pick ourselves by our "bootstraps" assuming, as Al Franken says, that we even have boots.

I agree with what Obama and the Clintons have detailed, see Hillary's here

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x387610

First, include homeowners who were duped by unscrupulous brokers, second, make us, the tax payers, the investors, so that we benefit from the profit and, three, cut the golden parachutes and the obscene bonuses.

"In short, as I posted in another thread: unless one lives in a cabin in Montana and is self sufficient, we are all in it together. Our system is based on credit."

From that it is not a big leap to understanding that (unlike self sufficient cabin dweller) no system based on credit can be sustainable, in fact all attempts to prolong the system instead of letting it crumble under it's own impossibility will only multiply the devastation produced by that system.

This understood, the only question remaining is: how to get out of the system before it totally falls apart?

the Templars Letters of Credit...going back to the 12 century...and perfected in Italy in the 14th... I will not lay any bets on it going away any time soon

The paper by Club of Rome, predicted growth based civilization hitting the wall these years, beginning of this century - and frankly there is hardly any chance that the system will survive to the next centure. So you are allready betting your life, lives of those who depend on you on debt.

anytime soon


You are confusoing limits to growth with letters of credit.

Now if you think we are going back to barter,or worst hunting gathering...then we truly part company

they are fundamentally tied.

All I can offer is good advice, so if it pleases you to part company with good advice and stay with the doomed system I can't help you.

when?

You leading?

Last national strike went nowhere

nor glorious anything. Just a humble student of permaculture gardening.

But should something similar as what happened in Argentina be what is next to come, experience teaches that all people can rely on is each other and the creativity of the bottom. Top-to-bottom solutions are what got us here.

It is based on sweeden,wich in turn is based on depression era

I have experience of that depression era and banking crisis living in Finland (that's next to Sweden). We not only got fucked, we got crushed. It was a coup by the neoliberal (=robber capitalist) globalization, all political parties are today neoliberals (same as neocons). No we got people queing for food parcels from the Salvation Army, failing medicare system, chronic mental depression, constantly tightening police state and school killings a lá America.

the elites, any of the fuckers of the political and economic elite class. Trust your guts - if you have any left.

1. No, go to a bank or ATM and you can withdrawal your money. Banks are FDIC insured to $100,000...

2. No, companies pay payroll from their 'checking account'. Nothing there - they are bankrupt for other reasons...

3. Yes, because America makes nothing and borrows everything - our dollar is declining... GIVE AMERICANS JOBS.

4. Business Loans - implement my 'use the $700B for people and businesses'...

5. Consumers ARE spending less because WE HAVE NO INCOME... WE NEED JOBS,,,

Your thinking is flawed. Don;t give out BILLIONS to the rich, funnel the money to AMERICANS.

1. If I go to my OWN bank ATM yes, not if I go to another bank's ATM or the one at the grocery store. Those work of credit that my bank extend them. Maybe I'll still be able to get the money, but wanna bet the fee goes up from $1.50 to $7.00 or more?

2. Yes, companies make payroll through short-term loans. Research it. Maybe the mom-and-pop shop on the corner doesn't, but a LOT of companies do. Their bank accounts don't look like yours and mine.

3. I don't disagree with you there... but there has to be jobs to give them. That isn't going to happen overnight under any plan.

4. Isn't that part of what got us into this mess? Giving too many people loans that couldn't pay them back? Economy sucks... starting a business right now doesn't seem so appealing to a lot of people.

5. See #3.

My thinking may be flawed in some ways, but I seem to be getting a handle on the basics. We are screwed, there is no denying it. But if credit freezes, like it's already doing, we will all be effecting in a variety of ways. I don't think there is an easy answer here.

1. No, go to a bank or ATM and you can withdrawal your money. Banks are FDIC insured to $100,000...

FDIC has nothing at all to do with interbank lending, which is behind the ATM system and networks. If the bank goes bust you'll get the money, eventually but you are confusing apples and oranges

2. No, companies pay payroll from their 'checking account'. Nothing there - they are bankrupt for other reasons...

They pay from lines of credit. If a bank does not give credit they loose liquidity

3. Yes, because America makes nothing and borrows everything - our dollar is declining... GIVE AMERICANS JOBS.

No argument there, we need to reindustrialize the country

4. Business Loans - implement my 'use the $700B for people and businesses'...

Part of the plan, as it stands now, protects consumers

5. Consumers ARE spending less because WE HAVE NO INCOME... WE NEED JOBS,,,

No credit more jobs will go away for the same reasons they went ago in the Depression

Your thinking is flawed. Don;t give out BILLIONS to the rich, funnel the money to AMERICANS.

No... his thinking is spot on and I highly suggest an intro course in economics

Heheehehe, just kidding...

No... his thinking is spot on and I highly suggest an intro course in economics

I'm a she :)

"A lot of people don't understand how credit runs the world. Without it, things will come to screeching halt."

Yup, money = debt. And the global system is slavery to unchecked power of central banks.

Even MORE importantly, the growth based consumerist system runs by "borrowing" from future generations basics like energy, food and water that will be never paid back. "Fuck the children, as longs as ME ME ME..."

I think without this bailout we're all fucked.

you are fucked. So what's the point?

time to prepare?
an attempt so it's not as bad as it could otherwise be?

I don't come from the school of thought that says we shouldn't even TRY...

instead of coming down with an awfull crush? I'm certainly not opposed to trying and wish the best of luck to any and all such attempts.

That said, it's easies said than done. It would require massive WAKE-UP especially in USA, which is still the hub of global attention. Wall Street self-destroying and the current political system together with it could function as a good wake-up call for the whole globalized world (there will be pain involved, it cannot be avoided, only alleviated). That is the reason and the only reason I still bother to participate in these discussions.

(and unfortunately, that is the level on which many, many people make very important decisions.)

It is *infuriating* that, even with a plan that throws some oversight and bennies to us taxpayers, the irresponsible bastards that caused this whole mess are going to get rewarded with a giant pile of money. And to traditional conservatives, this is about the polar opposite of conservative governance, so they are pissed too.

And it's not as if the bailout on this scale doesn't have some scary consequences in itself. It will almost certainly cause some inflation - whether it it at the painful but somewhat-manageable level we have today, or Weimar-like hyperinflation, or somewhere in between seems to be up in the air.

But yeah, you're right - the arson analogies that have been floating around are pretty close. The collateral damage from letting the entire economy seize up is just not worth the emotional satisfaction of hoisting Wall Street on its own petard.

... and I also agree with you here...

"But yeah, you're right - the arson analogies that have been floating around are pretty close. The collateral damage from letting the entire economy seize up is just not worth the emotional satisfaction of hoisting Wall Street on its own petard."

I don't know about you, but I'm scared to death of losing my job. The company I work for, a big company, has already been doing poorly over the last year and we've had at least five rounds of layoffs already. We're down to skeleton crews. Even without the crisis I'm fearful they're on borrowed time... if it all collapses I'll be out of job in weeks instead of months.

1.) It's not a solution it's a handout and a bandaid. It fixes nothing.

2.) The situation has not been looked at comprehensively. You have one side that just wants to put money in the hands of the banks (Pubs) and the other side which wants to put money in the hands of banks with a few changes (dems). I like some of the changes but they still do not go far enough. I'd rather start with a small bailout, enough per month to carry us into the next congress, and meanwhile the creation of a bipartisan commitee which thoroughly analzyzes the situation. This commitee needs to be a group that actually desires to find a long term solution. The solution should burden both shareholders and taxpayers, provide a reasonable return on our investment, provide strict oversight of the banking industry, disclose the real value of the investment currently and in the future.

The credit conveyor belt cannot stop unless we want to face complete and total ruin.

of the credit conveyor belt cannot be avoided. The question is, do you want to share it's fate or look for other possibilities, other way of life?

Ya think?

The financial markets have been in utter turmoil for more than a year now. It has been in spurts here and there starting with the failure of the Bear Stearns hedge funds in July of 2007, then spreading to a total seizure of the banking system in August of 2007 as fears over values of mortgage backed securities spread like wild fire. The Fed and ECB acted quickly with huge infusions into the banks. Thank God for that or else this would have been disasterous much earlier. Then came a massive series of write-offs and defaults that destroyed the equity of many many banks. They had to seek foreign capital in huge amounts and the Fed had to cut rates to keep the system liquid and borrowing costs for banks low. Then came the collapse of Bear Stearns and the seizure of the financial derivatives market in March of this year. Once again, markets seized up and lending continued to contract. Make no mistake, the spike in unemployment so far has not been just outsourcing despite all of the faux populism that Lou Dobbs and morons on this board spew. This is because of the complete collapse of credit and the financial services industry which employs millions of Americans and effects everybody.

The rest of the chronology has been recent enough I'm sure you can remember it. Without all of these measures, we would have seen an economic contraction by now of monumental proportions. If the Federal Reserve and Treasury had just sat on their hands until now, you would not be able to be sitting there so comfortably saying "This is a scam." You would be writing, "Why the fuck didn't they stop this?!!!! WAhhhhhh!!!"

because that's all they show you on CNN. The cause is utterly depraved predatory capitalism (it used to be called usury) of such extraordinary greed that these shysters can't even keep their own companies capitalized. Tough shit. I'm not buying their crappy "instruments" and I don't give a shit if they go under. I also don't brainwash myself by soaking in MSM propaganda.

How can they not?

These guys are nothing but predators who prey on the poor and weak. Let them rot in hell.

Just to make sure that the wall street execs also rot in hell.

You are batshit crazy.

Why the heck are you?

Many senators voted for the IWR solely because they believed Bush. They didn't do their own research; they just ate what was fed to them without question.

Now, you are for not acting solely because Bush is the one talking. You aren't doing your own research; you just take what is fed to you and spit it out, reflexively, without question. (Because if you did 5 minutes of objective research, you would see that a major government intervention is absolutely necessary.)

That kind of thinking doesn't sound very smart to me.

Do you give it to him? Fool me once, ya know?

I never said that we should give the government 700B, with no strings attached. I simply said that doing nothing (and in fact, not having a massive government intervention, at probable cost to the taxpayer) is economic suicide to main street. If you ever read about Dodd's proposal, there would be independent oversight with cease and desist authority. There are plenty of alternatives to Bush's exact proposal.

Guess some people never learn.

The company I work for relies on credit like any other business, but more importantly, the product we sell is a luxury, credit-only type item (for the most part). Kinda like cars, but not quite as necessary. Sales have been drying up as people can't get credit as easily and are just cutting back in general on purchases. Five rounds of layoffs already. We're all working mandatory 50-hours weeks now, and no, not for additional pay. We're closing for the holidays, for 2 weeks, WITHOUT pay. We can't buy even the smallest office supplies without prior approval.

Everything is more expensive... gas, food, you name it. My husband and I make what used to be called "good money" but I find we're struggling... and that's with hardly any credit card debt, only one car loan (the other is paid off) and a smaller mortgage than a lot of people in this state (NY). We're cutting back bigtime on eating out, going anywhere, traveling. For the first time in my life I've started cutting coupons and buying things on sale. I've even taken a small part-time job for a while to try to save money.

The idea of things getting worse scares the crap out of me... and I don't for one second even think I have it hard!

Or any of the other economists who can explain this better than folks on DU?

The credit markets are not going to freeze up. Bad companies will fail, as they should. It will cost the stock markets 20% of their value, but they will survive. Good companies will pick up the valuable parts of liquidated losers, and life will go on.

and the LIBOR rates are insanely high

It IS freezing... so you are right it will not... since it is

In fact... the plan as is stands now ain't the paulson plan... but I'm positive you knew that

You probably weren't paying much attention in the late 80s and early 90s, because if you were, you wouldn't be running around in a panic. This is a BUST. They happen every 20 years or so.

Your faith in the Bush administration's version of things is bizarre.

Just explain it to us then. Some of us, at least me, were too young in the 80's to be paying attention.

My original thoughts on this have zero to do with faith in Bush... tell me your solution and how it will effect us all?

Do you honestly think that if the credit markets were truly threatened, the DOW JONES would be above 9000?

The British Bankers' Association's London Interbank Offered Rate for three-month sterling rose from 6.2% on Wednesday to 6.27625% yesterday. It is now more than one-and-a-quarter points above the UK base rate of 5%. Libor for overnight sterling jumped from 5% to 5.08125%.

http://www.theherald.co.uk/business/news/display.var.2452934.0.Lending_rates_soar.php

Now your turn to start behaving like a mature person

Or go to the corner

As to trust in the bush admin version of events...I guess Krugman and others are also worried for nothing and are just not paying attention either

free market fanatics?

You are nasty. Now that is the LIBOR rate...care to connect dots on how that translates to credit in main street?

rejected

wise one?

It is either the glorious revolution (for which I have YET to see a good definition of) or the free market (at least those guys are organized in their prayers to Mamom)

What can I say? This place reminds me more and more of the screw you, I got mine mentality of the radical right

I'm against it.

Bush.


I trust his judgment and his word as far as I can see with my eyes closed.


If he said the sun was shining, I would have to check for myself.

Everything about that man is suspect...and he and his administration have cried "Wolf!" too many times for me to take him seriously on anything now.

What is debt, at most basic?

A tribe hunts or fishes too much, so next year there is less to eat. An acrigultural community by overuse and unhealthy farming methods impoverishes the land and face famine if they don't acquire new healthy farming land. Etc.

How not to fall in debt circle (imperial need to constantly grow, untill absolute limits of growth come against)? A tribe hunt's and fishes and gathers at one location modestly, then moves to another location to give enougn time for the natural processes - power of Earth and Sun - to regain the natural balance. A gardening community adopts healthy methods, returns all that it takes from the land back to the land.

These are not difficult consepts to understand, they can be extremely difficult principles to accept for people conditioned by the system based on debt. And of course the practical applications of the principle of balance vary from location to location, from livelihood to livelihood.

what problem specifically does *this* solution fix?

who benefits--and how--from this scheme?

We are all on "the same side" here - all die-hard dems - and we're at each other's throats on this.

I don't know whether to laugh or cry!

:banghead:

:-)

and explain it in terms everyone can understand, maybe people would realize how this effect them directly. I think too many people are thinking of their 401Ks and the Wall Street Richies and now how it effects EVERYTHING.

I hear the argument that we're screwed either way... I'm NOT for the Bush-Way or the Highway plan and I think congress and senate are (or at least were) moving away from that anyway... but I'm not in the camp that says do nothing.

My father always taught me to try, at least make an effort. Doing nothing seems like it shouldn't be an option.

You should laugh. Demo. Rejoice, in fact. We are debating some real questions and concerns here. Everyone senses something is really off, and hopefully through this 'scrapping' we can find a viable solution. I'm amazed at how quickly people are starting to finally ask the right questions when it comes to our government and finances, instead of just simply passively accepting what really is a turd deal.

As with anything ask yourself, who does this benefit? Who does it hurt? If people keep following the money, they'll find their answer.

you've been watching waaaay too much teevee.

Instead of just chucking out. The grocery storm ATM works because they extend credit to my bank. I said in a previous reply that maybe it'll still work, but wanna bet fees will jump from $1.50 per transaction to $7.00 per transaction if short-term loan rates (which isn't the right name, I'm sure) skyrocket?

Mind you, I didn't hear it on TV. I've been reading lots of examples of how credit infects nearly every part of our society. Until a few days ago I had NO IDEA that lots of companies made payroll through commercial paper, ie., short-term loans. I absolutely guarantee you that a LOT of American's don't know that simple fact... not to even mention all the others ways credit is a part of our lives even if we don't own a credit card or hold a mortgage.

especially when it comes to anything having to do with big business, banking, or GOP concerns.

I didn't say I got my information from one source... so there isn't "someone" who explained it all... I've been reading about this stuff for days and trying to get a grasp on it.

that I can't help but laugh out loud. I don't know anymore. Great work by the way OP. You have put it plainly and simply as can be.

I'm off to go to bed. I have a meeting in the morning at a job I might not have soon!

:) :(

...Write a check for your groceries.

Go to the ATM at your bank before you go to the grocery store.

He didn't want to fix the lax rules that made credit untrustworthy, he simply wanted to give it more money.

We are not looking at "Mad Max" (that comes after all the gas is gone), things will change, but if a bank is foolish enough to raise it's ATM fees that much, people will go back to taking out cash when depositing their checks and more merchants will accept them too.

Things will get worse and then they will get better, and if we handle this well, they will get much better than they've been in a log time.

The financial industry would be the worst hit and they are the single largest source of income for politicians, so be wary of what they say. This has happened before and there are better models for handling it than are being publicly discussed.

They already failed, the bailout is just going to be a bandaid that costs us more money in the long run. That is the argument against in a sentence and I suspect they are right.

A tightening of credit practices is needed, and already ongoing. Bailing out wall street and these derivatives trading houses is not necessarily in our best interests as taxpayers. In the short term our home prices will suffer, and credit will be scarce, but the economy will recover.

The Depression was widened by attempted bailouts, we should learn from history. If we do anything it should be to step in and help home owners who are able to make payments to get into better loan products at closer to current real estate market rates.

We are going to borrow $700 Billion form China... and GIVE it to the banks.. who will lend us our money back at 22% interest. Now.. not only do we have to pay China back....but they are going to charge us 22% in the meantime for the "Privledge" of getting screwed over. Then.. when we need money for an emergency to get out of this mess.. we will have no money... because we have used up allour credit with China. Good Idea, huh? I don't know about you.. I would much rather get screwd for 5 or 10% instead of 22%. Better yet, don't give these lying bastards one nickle and refused to be screwed in the first place!

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4103567

From the link in that thread: 'Note that this is an intentional drain of "slosh", or liquidity, from the banking system.'

Coincidence that WaMu went belly up on Thursday?

They're playing games to get what they want.

NO FUCKING BAILOUT.

Having a family member choose death rather than to 'become a burden' is a lesson the financial services
industry needs to think about.


My immediate family would pay (as a starter) $9,000.00 for this bailout-to-nowhere and I have many things
more important to me than some CEOs 8th or 9th home.

that the swindlers and their paid-off politicians and pundits have put out like a smoke screen to cover up their crimes.

You seem to think that the lack of a bailout is the root of the problem. It isn't. The problem is that criminals on wall street created worthless investments and sold them, and the sh*t we're in now is due to this mass fraud. So get the context right.

Now that it's clear how worthless these investments are, banks are "supposedly" panicked and don't want to lend money because they don't know if they'll get it back. "Supposedly" because many economists think that the threat is greatly exaggerated. Banks are motivated to exaggerate and threaten because they stand to get a pile of free $$$ from this handout. They made bad decisions, they made alot of $$$ in the process, and now you're going to pay for the consequences.

If you believe in capitalism and the free market, this is called a correction. It is not only healthy but necessary for a healthy economic system. If you believe in socialism, then it's time to nationalize the banks. Or threaten them with nationalization if they refuse make the loans to keep the wheels of commerce moving.

If you insist on a bailout, there are other ways to pay for it. Why not an increase in capital gains taxes? Corporate taxes? An drastic increase in the income tax rate at the highest brackets? (of course we know the answer: Joe Public forgot to hire the lobbyists to bribe congress. whoops.)

Borrow, tax cuts to the rich, and export the jobs to low-wage countries overseas. A surefire recipe for an impoverished, debt-ridden populace.

I would support spending $700 bil if it went to employing people now, rescinding all of the "race-to-the-bottom" trade agreements, and bringing industries back to the US, as well as raising the minimum wage and the top marginal tax rate on the wealthiest Americans.

This bailout will only make things worse in the long run. It may hold off disaster for another six months, but it will make it that much more severe when it does finally hit.

First, I'm not convinced that the situation will turn as dire as you and all the screamers on television are predicting if we don't pass this bill. I think that we're once again being panicked into taking the worst possible option, just like we were with the Patriot Act and the Iraq War. One would think we would learn, but apparently not.

Second, there are good, sound reasons to oppose this bailout. First, injecting 700 plus billion dollars worth of liquidity into the system is going to raise inflation, in fact we can expect rather high inflation from this as the dollar devalues.

Third, and most disastrous consequence of this bailout is that the ratings for our US Treasury Bonds will get downgraded. When that happens, what will follow will make us wish for a Great Depression. We will have no money to fund our government or our country. Our economy will collapse, with no hope of bouncing back. While you might still be able to operate your ATM, you won't have any money to pull out of it. It will be an economic extinction level event.

I've talked with several economists about this, and they're all scared shitless about the bailout and its consequences for our country. All this bailout is going to do is bailout Wall St. and provide a bridge for Bushco to skate out of office on, leaving the collapse for the incoming president. It isn't designed to save our country, it will break it. We might see our economy perk back up for a few months, but as the government buys more and more toxic paper, confidence in the dollar will fall, inflation will rise, and at some point, when we've reached that tipping point, our Treasury Bonds will be downgraded, and we'll all be on highway to economic hell.

Yes, the consequences of no bailout are dire, but we can recover from a depression. In fact a depression has some redeeming qualities, it punishes the scoundrels, culls the weak out of the corporate herd, regulations are reinstated, and money is spent on the real economy. We can survive a depression, if that is truly what will come to pass if we don't do this bailout(I'm still not convinced, like I said, I think that this is simply another patented Bushco scare tactic). However we can't survive the complete collapse of our government and economy, the economic Armageddon that will come about if we accept this bailout.

The cure is worse than the disease in this case, much, much worse. That's why we shouldn't do this bailout, even in the current form that the Democrats are pushing. It is economically unsound and will destroy our country.

I think it mostly revolves around this originating with Bush, therefore it is bad.

When the dam is crumbling, you don't argue about who to blame for bad design, or wonder if it really will be bad if there's a flood, or argue about the method of repair, you fix it. Then you worry about the design issues.

Why do you think it's "over" after the bail out? It's like taking a loan out on a credit card loan. It doesnt "end". You just get in deeper.

Why dont people get this? The bail out is a scam (it's lipstick on a pig) - there are better ways to control this than throwing money at it.

is at least grudgingly acceptable to the Republican Congressional leadership, the Democratic Congressional leadership, and the Department of Treasury/Bush Administration - financial liquidity will evaporate and the Markets will crash and the American economy and much of the global economy will descend into deep, deep depression. There is no doubt that any deal that would be effective will cost hundreds of billions of dollars, hopefully it will be repaid some day.

The simple fact is - the massive decline in real estate equity values - has created a massive worldwide withdrawal from the credit markets - this created panic among the markets all over the world - thus triggering the failure of multiple banks and other insurance and investment institutions.

This massive withdraw of credit - removes financial liquidity from the markets and will - basically cause the economy to grind to a halt.

Could this happen anyway even with the bailout? Yes it could. But this buys some time and gives the chance for markets to stabilize.

If some people simply don't want to understand the situation. Then nothing can force them to.

I am not supporting the bailout as a supporter of Wall Street. I got rid of my stocks a long, long time ago. I say this as someone who does not want to see a depression. I say this as a lifelong democratic-socialist who believes humanity is more important than ideology.