This Financial Mess Is All Ours

[davidbcoe]

I'll start with a caveat:  I don't know anything about economics.  My understanding of the current mess in the financial markets is rudimentary at best.

Okay.  That said, I've been going back and forth all day with a Republican friend of mine about who's to blame for the failure of the bailout/rescue bill and what Obama should have done and what

Comments

[mikandra]

IMO, those angry phone calls should have been made years ago. The whole trouble has been structural and building up for years.

Even my grandmother knew never to spend more than you earn.

Chickens have come home to roost. Big time.

Meh. I'm writing an SF novel set in a world where the US is no longer a major player. Up until last week, readers were telling me that it was a ludicrous concept.

[davidbcoe]

I think you're absolutely right. This problem has been building for a long time and we've all ignored it. Now we have a crisis and every solution seems rushed and too big. It really is quite a freakin' mess.

[elisel]

I think this may be the fairest assessment of the bailout plan (and its assorted can of worms) that I've read. Thank you! I have a conservative family and a lot of liberal friends (I fall out somewhere uncomfortably in the middle with apparently irreconcilable opinions that fall in both camps) and I've heard a lot of blame thrown around, and not much responsibility taken.

Bad debt lies at the root of this entire nightmare, and we are the kings and queens of bad debt.We seem to have become a nation of debt. It's our habit to buy, buy, buy, beyond the means we have available to us: Not just on a personal level, but institutionally. The media and the government encourage us to do so, tacitly or openly. I think it's a terrible philosophy

[davidbcoe]

Thank you, Elisel. It's hard for me to separate out the politics from all of this -- this was a difficult post to write -- because I feel so passionately about the upcoming election. But we seem to be on the brink of something truly cataclysmic here, and I for one would like to avoid it if we can.

I Am Also Not An Economist

[jtglover]

...but I think the bailout is wrong. Yes, not passing it will lead to privation and difficulty for all. No, it won't be fun. Yes, we are headed for hard times, and the rich will be insulated either way

Re: I Am Also Not An Economist

[davidbcoe]

You make valid points, JT, and since neither of us has the training I'm certainly not going to argue that you're wrong and I'm right. I really don't know. The thing is, though, this bailout, as I understand it, is necessary to free up credit so that businesses can simply function -- buy materials, make payroll, stay open. It's not that I think that the bailout will change behavior; it's that I think a failure to pass it will lead to massive unemployment and a deep, deep recession, which helps no one.

[scbutler]

The bill wasn't that bad. It could have been better, but like all bills it had to be a compromise. It was a lot better than Paulson's original bill, and it would never have come close to costing $700BN (even if the assets weren't sold at higher prices over the next two or three years, there was a provision to start recouping any losses from the banks).

Pelosi's speech was idiotic, but it ain't the reason this went down. I found it interesting that the Republican caucus was ready to start the finger wagging first, and had their press conference less than an hour after the vote was over.

[scbutler]

It's all a matter of timing. If we can last long enough to improve the bill, so much the better. The problem is, Wall St works on a different timeline from Congress, and they may not wait for the deal to come if it takes too long. The problem isn's the stock market - it's the credit market. Every week of a credit freeze probably cuts another quarter point off next year's GDP. (Wild, uninformed guess on my part there. But it does cost something).

The stock market can come back like a rocket if it wants to, but no credit will have a much more lasting effect.

[davidbcoe]

Thanks for the comment, Sam. I'm going to maintain a silence on the politics of this thing for the purposes of this thread.

[scbutler]

Very understandable, these days.