Bailouts - Medicine or Poison?

[JimZ]

I've found it difficult to "process" the impact of all these bailouts. But deep down inside I have a sense of dread - believing that we are selling our national soul to the devil in the hopes of relief. One day we will wake up and realize the financial mass suicide we have committed and it will be too late to do anything but watch the train wreck unfold before our eyes.

Here is an excerpt of a Reuters article titled "Jim Rogers calls most U.S. banks bankrupt". I think it it one of the most lucid and clear comments to describe the impact of these bailouts.

What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

Here is the url: http://www.reuters.com/article/Investme ... CO20081211

[richard5za]

You ask an excellent question

And I can't tell you answer. Perhaps it helps; perhaps not. What I do know is that a set of circumstances is in place that will seriously reduce the high standard of living enjoyed in the United States, probably over a period of 8 to 20 years. The future will be very different to what we have experienced 1980 to the current date. I have no doubt that people don't like this idea, and for this reason it will be rejected.
Richard

[freddyv]

I've found it difficult to "process" the impact of all these bailouts. But deep down inside I have a sense of dread - believing that we are selling our national soul to the devil in the hopes of relief. One day we will wake up and realize the financial mass suicide we have committed and it will be too late to do anything but watch the train wreck unfold before our eyes.

Here is an excerpt of a Reuters article titled "Jim Rogers calls most U.S. banks bankrupt". I think it it one of the most lucid and clear comments to describe the impact of these bailouts.

What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

Here is the url: http://www.reuters.com/article/Investme ... CO20081211

When I first read the novel, Atlas Shrugged, I found it very, very interesting but a bit preachy and I certainly didn't think our society could ever become anything like the one in the novel...apparently I was wrong.

--Fred

[Higgenbotham]

This is my guess about bailouts.

Bailouts allow money losing enterprises to keep losing money, while bailouts prevent money making enterprises from being established. The net result is that everyone gets poorer on average.

Take the car business. GM's car manufacturing has been a money losing business for a long time. The only part of GM that has made money for the company has been the financing arm, GMAC, which kept the company profitable for many years. And now, as I understand it, GM also makes money in some foreign countries like China. Or maybe they did until this year. Meanwhile, as I understand it from reading Natural Capitalism and other publications, the technology exists today to build a safe, lightweight, recyclable, 100 mpg+ car profitably right here in America. But that can't happen as easily while GM is still sputtering along producing small profits or even losing money. Meanwhile, as bailout money is lost by GM, no new car company is producing profits, or capital, which could then be used to start other profit making businesses right here in America.

[protagonist]

Don't worry, the Bailout Bubble will burst pretty soon, too.