One of the common claims is that no one is going to starve if the bailout doesn't happen. That's probably true, but picture the following situation
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"And how long/how bad is that period of time when "people are out of luck," when the vast mountain of debt the US financial system is floating on (and which these measures are rapidly increasing) actually comes unbearable, whether in inflation at the store, or in direct taxes?"
I'll correct this above also, but I had a typo. My gut picture was something around 20% unemployment, not 80% as I implied. It's only that high because of spillover effects, not just the finance industry, of course. When you look at it, it's not an impossible price to pay, though.
It would almost certainly result in most people ignoring investing for the next 20 years, at the very least. Anyone with any amount of leverage that will not allow them to have a >50% haircut (that's only 2x!) will be wiped out.
"The Great Depression lasted 16 years. Food for thought that sound money and making business responsible for itself is cheaper in the long run."
This was my biggest worry--if done the way some people want, that is, paying very inflated values to the sellers, we enter in a Japan situation where we stagnate for years and years. That would be unfortunate.
"The only sensible way to limit the damage is not to BUY the damaged, it is: liquidate the junk investments. NOT to pay more for it than any private company will!"
I cannot, in any way, support the original form of the plan, which is of coudrse a blank check. I've seen several references to proposed pricing mechanism to determine the price paid for these bonds. The most interesting was referred to by Buffett--that is, sell a small portion of any particular type of bond in the market. The market at large cannot absorb the quantities we're talking about here, mainly because the people that can evaluate these investments, cannot take on the risk of another temporary decrease in the market value, thus destroying their own balance sheets with mark-to-market accounting.
Once you've sold that piece, the government buys the rest of that particular security type at that price. The selling companies take a HUGE loss, and the government makes a sizeable profit. Now, that that last part would trouble me a bit, except that we're so far in hock that the profit would only go down to paying the other debts we have. This could be a way for us to start digging our way out of the hole.
I suspect that most companies wouldn't want to go along with these terms--that's OK, we can buy them out of bankruptcy. But you see, then it limits spillover effects.
I'll correct this above also, but I had a typo. My gut picture was something around 20% unemployment, not 80% as I implied. It's only that high because of spillover effects, not just the finance industry, of course. When you look at it, it's not an impossible price to pay, though.
It would almost certainly result in most people ignoring investing for the next 20 years, at the very least. Anyone with any amount of leverage that will not allow them to have a >50% haircut (that's only 2x!) will be wiped out.
"The Great Depression lasted 16 years. Food for thought that sound money and making business responsible for itself is cheaper in the long run."
This was my biggest worry--if done the way some people want, that is, paying very inflated values to the sellers, we enter in a Japan situation where we stagnate for years and years. That would be unfortunate.
"The only sensible way to limit the damage is not to BUY the damaged, it is: liquidate the junk investments. NOT to pay more for it than any private company will!"
I cannot, in any way, support the original form of the plan, which is of coudrse a blank check. I've seen several references to proposed pricing mechanism to determine the price paid for these bonds. The most interesting was referred to by Buffett--that is, sell a small portion of any particular type of bond in the market. The market at large cannot absorb the quantities we're talking about here, mainly because the people that can evaluate these investments, cannot take on the risk of another temporary decrease in the market value, thus destroying their own balance sheets with mark-to-market accounting.
Once you've sold that piece, the government buys the rest of that particular security type at that price. The selling companies take a HUGE loss, and the government makes a sizeable profit. Now, that that last part would trouble me a bit, except that we're so far in hock that the profit would only go down to paying the other debts we have. This could be a way for us to start digging our way out of the hole.
I suspect that most companies wouldn't want to go along with these terms--that's OK, we can buy them out of bankruptcy. But you see, then it limits spillover effects.
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