Okay, I don't mean to dwell on the economy and Wall Street. Sometimes I just can't help but be fascinated by it though.
As I've read the news coming out on the government bailout for toxic sub-prime mortgage backed securities, I've thought about the effects of this government intervention and the possible alternatives. Neither are very good.
First off, the bailout. To me, it was absolutely necessary. I trust Henry Paulson's judgment when he, along with many renown economists, says that we would likely experience a catastrophic meltdown of credit - the lifeblood of our economy - if the government didn't intervene. That meltdown would come because money in the financial system would dry up. It would dry up because financial institutions bought all these mortgage-backed securities that are now nearly worthless because the people with the mortgages can't pay their house payment and are defaulting. So in order to fix the problem, the government buys up all these bad mortgage-backed securities (a fancy way of saying that the government would print more money) thereby injecting cash into the financial system and taking the toxic securities off the books of financial institutions.
Another reason the bailout is necessary is because it prevents widespread panic. People won't feel like they have to run to the bank and take out all their money - millions of people running on banks is a quick way to dry up credit and bring the economy to a screeching halt. That this has already worked is evident in the rebound in the market to around the same levels as what we had last week before this whole mess started.
So that's the good about the bailout. Here's the bad: the government is taking a much larger, more centralized role in our "free market" economy. The more government intervention and bailout, the more our economy starts down the dreary path of socialism - the antithetical structure of economic prosperity. Another problem is the message this sends to companies - they can do stupid things (such as bet big time on sub-prime mortgage-backed securities) and not have to deal with the consequences. This precedent could have serious long-term effects to our economy. Fortunately, at least one company, Lehman Brothers, didn't get off the hook and felt the full brunt of the consequences.
Now, having said this, it is important for us to consider carefully who to vote for. I will vote for John McCain because, when it comes to the economy, he is much less socialist than Obama. With Obama as our next president, he could capitalize on the recent panic against free markets and bring our country further into socialism than ever before imagined. That to me is unacceptable.
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7 comments:
So are you the hypocrite? You don't want socialism, nor government's regulation, yet think that government help is necessary. Is this the same argument that is is too big to fail again? Before you start called me liberal, you need to take a history lesson of the Great Depression and why there is government's regulation. Learn and analyze the real facts (on both sides) by yourself. Don't just listen to the well paid corporate whores, such as Limbaugh or even your own corporate slaves parents. I don't tried to insult people, but people in the US in the present seems to think in term of black and white and is full of hypocrisy (some people call b*ll sh*t), especially the extremists and the so called "conservative". There is no such a thing is a free market here in the US. The so called Capitalism is not really Capitalism in its truth form either (so was the Communism of of USSR). I got to admit that some (or most) businessmen are crooks. They tried their best to pay little or no taxes, and manipulated the government for tax cut, tax incentives...etc... for their companies. They're not here to provide jobs for American people. They will be very happy to have the slaves back if it is possible. Don't forget that just a couple of years ago those crooks tried to tell our incoherently spoke President to hand over the Social Security to them because they're very smart people and knowing what to do (Yeah right). It is funny that conservative Republican always chants the mantra "taking responsibility", yet it is always someone else takes the responsibility for them. This fiasco is just another example.
Welcome to the fray!
Well, I don't share your thought that most businessmen are crooks. The fact is that "most businessmen" are providing jobs and if we stifle them and their companies under socialist rule, we could all be out of work in a hurry.
How can we socialize the losses and privatize the earnings? That makes zero sense. Socialism is bad, but this type of Republican socialism is way worse. All the cost with no social benefits. This is corporate welfare and corporate socialism. Socialism is bad, corporate socialism is worse.
$700 billion blank check to the same people that created the mess? Count me out. I am all for fiscal conservancy but this is not the Republican party that I have known and loved.
I cannot in my right mind let these people keep running things. These republicans have no clue what is going on! They say they do, but they act a different way.
Obama/Biden 08, thank you.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0
This is an article on this very topic. Note the relationship between Obama and McCane to Freddie and Fanny.
Anonymous, You don't have your facts straight.
Wow! That was a really interesting article. It's Definitely worth reading.
That's a great article, Lulu. I didn't know that the Republicans (John McCain being a cosponsor) had a bill that would have regulated Fannie and Freddie's sub-prime mortgage backed securities back in 2005.
Incredible that the do-nothing Democrats shot it down. Incredible, but I guess not surprising given the other bills the Democrats have shot down or manipulated into useless oblivion (e.g. offshore drilling, immigration reform, etc.).
thanks for the post, I found some new information about all this crisis
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