The Next Bail-Out (Part 1)

http://uk.reuters.com/article/marketsNewsUS/idUKN2738007120090127?pageNumber=1

"An $825 billion economic stimulus bill advanced another step on Tuesday, as the U.S. Senate Appropriations Committee approved a $365.6 billion portion of it as President-elect Barack Obama met with Republican lawmakers in an attempt to broaden support."

So we spend 700B on the first bail out, to fix the financial industry. That doesn't work, and the economy is still shedding jobs. The bottom still hasn't been found. Noone can seem to explain why the economy is in such shambles. "It's the real estate market." "It's the financial speculation market." "It's the auto industry." Whatever the current "reason" is for the economy being in such poor shape, it doesn't seem like pouring money into a broken system has done much to stem the tide.

So let's pour some more.

Now granted, this new bailout (actually being called a stimulus package) is geared more towards actually getting money into the hands of people to do some work. A blogger I know posted a while back about the proposed stimulus. Now this seems to be proceeding and will end up passing. So we just need to build some roads, and all our economic woes will be over? Hardly.

So what should we be pouring?

I think the the economy is in shambles, yes. But the key to moving forward is not to stimulate it artificially. It is not to bail out all the failed actors who are causes or victims of it. People will survive. The smart will have planned ahead, and will be able to weather it. The not so smart will be lean and hungry for a long time, but hopefully will come through. The dumb? That is the real problem, isn't it?

People who have been responsible and didn't over spend, and socked away during the good times, will now suffer and have to expend their savings, and cut back. The ones who didn't will get help from the government. It is still not decided, apparently, what kind of help. But you can't just let people starve to death, can you?

The government has to fix it, don't they?

Nationalizing the US Banks

http://www.nytimes.com/2009/01/26/business/economy/26banks.html?hp

So far, President Obamas top aides have steered clear of the word entirely, and they are still actively discussing other alternatives, including creating a “bad bank” that would nationalize the worst nonperforming loans by taking them off the hands of financial institutions without actually taking ownership of the banks. Others talk of de facto nationalization, in which the government owns a sizeable chunk of the banks but not a majority, with all that connotes.

That has already happened; taxpayers are now the biggest shareholders in Bank of America, with about 6 percent of the stock, and in Citigroup, with 7.8 percent. But the government’s influence is far larger than those numbers suggest, because it has guaranteed to absorb the losses of some of the two banks’ most toxic assets, a figure that could run into the hundreds of billions of dollars.


From what I recall, the Republican president with the help of his Fed chairman Bernanke are the ones that started this ball rolling. Most of the Democrats went along with it, as well as a few Republicans. So what does this say about the party system these days? I constantly see stories about how the Republicans want to push this agenda or that and increase the size of government, and Democrats limiting government or putting power into the hands of the States.

So where does that leave us, Joe and Jane Taxpayer?

Up the creek. Throwing good money after bad, and borrowing from ourselves to do it. One of the biggest lessons I learned in my personal finances was to balance my sheets as much as possible. If I want something, I need to save for it or make sure I have a good portion of the money set aside before purchasing it on credit. The government apparently doesn't have to do the same sort of caution, and instead rushed through a bailout package that effectively transformed us from the USA to the USSA. (United Socialist States of America).

Now what?

Ownership in failing banks, with no guarantee of seeing the money again. Misspent TARP funds. Guarantees on possibly bankrupt companies debts. If there is anyone out there who can do something about all this, then they still haven't shown up. I call it a sham. What is going to happen when those guarantees come due, and we don't have any more money for them? Hyperinflation as we print up billions more dollars to cover the debt?

Who is going to own our country when this is all settled?