Making Sense of a Nonsensical Time

>> Tuesday, September 30, 2008

This makes sense to me, because flash back to the stimulus check, done via tax bracket. Its never made sense, and it never will make sense to pay people more government funding if they make more. This makes way too much common sense, so they must circumvent, reword and reward negligent friends who are in the higher bracket.
The article best explaining in layman’s turn what is going on is:
I was linked to it from my friend Natalie’s blog. Here are some highlights I liked best.

By Dean Baker
“At this point I cannot identify a single good reason to do the bailout.
The basic argument for the bailout is that the banks are filled with so much bad debt that the banks can't trust each other to repay loans. This creates a situation in which the system of payments breaks down. That would mean that we cannot use our ATMs or credit cards or cash checks.
That is a very frightening scenario, but this is not where things end. The Federal Reserve Board would surely step in and take over the major money center banks so that the system of payments would begin functioning again. The Fed was prepared to take over the major banks back in the 80s when bad debt to developing countries threatened to make them insolvent. It is inconceivable that it has not made similar preparations in the current crisis.
In other words, the worst case scenario is that we have an extremely scary day in which the markets freeze for a few hours. Then the Fed steps in and takes over the major banks. The system of payments continues to operate exactly as before, but the bank executives are out of their jobs and the bank shareholders have likely lost most of their money. In other words, the banks have a gun pointed to their heads and are threatening to pull the trigger unless we hand them $700 billion.
If we are not worried about this worst case scenario (to be clear, I wouldn't want to see it), then why should we do the bailout?
There has been a mountain of scare stories and misinformation circulated to push the bailout. Yes, banks have tightened credit. Yes, we are in a recession. But the problem is not a freeze up of the banking system. The problem is the collapse of an $8 trillion housing bubble. (It was remarkable how many so-called experts somehow could not see the housing bubble as it grew to ever more dangerous levels. It is even more remarkable that many of these experts still don't recognize the bubble even as its collapse sinks the economy and the financial system.) The decline in housing prices to date has already cost the economy $4 trillion to $5 trillion in housing equity. This would be expected to lead to a decline in annual consumption on the order of $160 billion to $300 billion.
Given the loss of housing equity, I have actually been surprised that the downturn has not been sharper. Homeowners had been consuming based on their home equity. Much of that equity has now disappeared with the collapse of the bubble. We would expect that their consumption would fall. We also would expect that banks would be reluctant to lend to people who no longer have any collateral.
This is the story of the downturn and of course the bailout does almost nothing to counter this drop in demand. At best, it will make capital available to some marginal lenders who would not otherwise receive loans. We should demand more for $700 billion.
For the record, the restrictions on executive pay and the commitment to give the taxpayers equity in banks in exchange for buying bad assets are jokes. These provisions are sops to provide cover. They are not written in ways to be binding. (And Congress knows how to write binding rules.)
Finally, the bailout absolutely can make things worse. We are going to be in a serious recession because of the collapse of the housing bubble. We will need effective stimulus measures to boost the economy and keep the recession from getting worse.
However, the $700 billion outlay on the bailout is likely to be used as an argument against effective stimulus. We have already seen voices like the Washington Post and the Wall Street funded Peterson Foundation arguing that the government will have to make serious cutbacks because of the bailout.
While their argument is wrong, these are powerful voices in national debates. If the bailout proves to be an obstacle to effective stimulus in future months and years, then the bailout could lead to exactly the sort of prolonged economic downturn that its proponents claim it is intended to prevent.
In short, the bailout rewards some of the richest people in the country for their incompetence. It provides little obvious economic benefit and could lead to long-term harm. That looks like a pretty bad deal.”

So in reality the bailout only rewards people who are spending more than the average person. Probably the same people who haven’t dropped prices in food. So looking at the Presidential tickets, some things the layman should know.
McCain/Palin-will likely be a continuing of the Bush regime. Rewarding friends with tax breaks and so forth, just like most all other Republicans minus Ron Paul.
Obama/Biden-since he isn’t backed by huge corporate businesses, it’s a lot more likely he won’t reward them with tax breaks.
Who would you choose? Who would reward the more middle class Americans?
Also, for people who market and use the internet for business, McCain wants to charge you a type of electronic property fee. While I have to admit the market is there, why should people have to pay for their online advertising, aside from what they probably already pay.
Last Spring when the markets were teetering it seemed worse for the gov to step in and save companies. What happened to capitalism? And the only way capitalism works is if the government isn’t attached. The more banks going under now is the banks own fault. But no one is worried about their neglectful actions because if its bad enough and they think they affect the economy so heavily, they now the government will come in and save them.


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