Monday, September 29, 2008

The Cost Of The Bailout

A telling graphic from the LA Times. As the first bill fails to pass through congress I honestly don't know what to think about this whole thing; as I've said before, I'm no economist and the study of economics has never held any interest for me (this goes a long way to explain why I'm neither rich nor in any danger of becoming so anytime soon). I mean, I grasp the concept of why we can't let the market collapse and what that would mean for the country if we don't do something soon but on the other hand, is this really how a free market should be run? Unchecked spending and lending coupled with unlimited greed until it all falls apart, and then a massive taxpayer financed bailout to save an industry rife with rich fucks who will ultimately not be held accountable for any of their actions?

If the average American becomes convinced that this is how the economy is going to work from now on, I think the popularity of capitalism might take a massive nosedive; the old familiar platitudes about economic theory and Smith's invisible hand ring very hollow to people struggling just to hang on to their homes and feed their children.


Intrepid Californio said...

No doubt JBW. How can a system that rewards the richest of the rich and leaves the other 99% of us out to dry be seen in a positive light by the common person. It used to be industrial based capitalism in this great county of ours. Now it is credit/debt based capitalism or in my opinion a system that keeps us enslaved by forcing us into debt for life. Also, how can building debt be seen as economic growth? It's more like economic declination!

Anonymous said...

I largely agree with your sentiment and mixed emotion, with the exception of this:

"a massive taxpayer financed bailout to save an industry rife with rich fucks who will ultimately not be held accountable for any of their actions"

I don't just point the finger at the banks. I point the finger at everybody. Everyone should have a decent enough idea about their finances to know what kind of home they can or can't afford. You should know that if you've been renting an apartment for $1,000 that your house should cost no more than that. You should also be wise enough to know that balloon payments almost never work out to be a good thing. There's nobody I don't blame for this mess.

Furthermore, while I agree with Patrick's sentiments regarding the large debts (school, homes and cars) that most people take on - and are considered commonplace - I disagree that our system leaves 99% of us out to dry. My wife & I have lived on a very modest income in our first 4 years of marriage. She is a teacher and makes "lowly" teacher-money. Until my recent job change, I have made less than that. Add in that we began our marriage with 75k in student debt and that makes things trickier.

However, with no great financial knowledge of our own, but a simple accounting and careful moderation of our finances, we've been able to use our money wisely and succeed in the system. Neither of us has a car payment because we bought used and within our means. We have enough money in Roth IRA's to pay off about 3/4 of our loan debt. We have an emergency cash reserve to cover an unexpected layoff, or car A/C going out. (Both of which have happened in the past month.) We've also been able to afford a modest home in a neighborhood we love, and that can't be beat.

So I firmly disagree this is a system designed for failure. In my brief experience, people can be successful in any free market as long as they take the time and interest to be good stewards of their resources.

Lastly, I encourage all of you to check out Dave Ramsey's teachings. I am not a disciple of his, but I do think that his methods are solid and that more people in this particular country should try things his way. He advocates a life completely devoid of debt. His ways are not for everyone, but if you don't know much about your own finances then I would argue that his ways should be your ways.

Anonymous said...

One "L": gonna have to disagree. You're obviously educated and paying attention, unfortunately that can't be said for most of the USA. If you think it all comes down to personal responsibility, then I guess that's it. But there will always be mal-intentioned people screwing the unknowing masses. I blame those doing the screwing, not those getting screwed.

You're totally right, people shouldn't get home loans they can't afford, or car loans, or blow their paycheck on an iPod. But I also think Mr. W is saying there should be a way for the bailout to keep the economy going, AND to make those poop-faced poopers on Wall Street bite the bullet.

Anonymous said...

I would love for there to be the case, but I fear that the only way out of this thing might be to allow a massive self-correction. Who knows, though. There are far more educated folks than me.

Anonymous said...

Ya, painful correction probably coming. It's our freaking consumption-craved society. Stop shopping and save some freaking money! Naturally, this would kill the economy, but it's still something that should happen. As opposed to W telling everyone to go to the mall.

I really think we should just let Palin go to Wall Street and do some good old fashioned fixin'.

JBW said...

I think you're all right on different levels: I want to correct our economy and hold those accountable who are most to blame for this mess while at the same time insisting on personal responsibility for everyone else who was harmed by this state of affairs, particularly those who were merely speculators trying to make some easy cash.

I admit that I don't particularly like the idea of this bailout and Obama's endorsement of it is one of my differences with the man but to be honest I don't have any better ideas and everyone seems to agree that something must be done fairly precipitously to avert the destruction of our financial system, so here we are.

On a considerably lighter note, I know BD was joking about Palin but not surprisingly there are some idiots on the right who are seriously considering this a viable option:

"Gov. Palin may be just the person to speak their language. Surely, she could fairly promise in return to campaign in their districts and defend their decision to skeptical voters. Then, hold a joint press conference hailing them as heroes for biting the bullet to switch their votes and save the economy and, while she's at it, explain to the media that she has learned as a Governor that being a doer matters more than being a talker. 'Nancy Pelosi, here are the votes you couldn't deliver in your own caucus. Now, let's get beyond finger-pointing and do the people's business.'"

That's just the kind of straight talking reformer we deserve in our hour of need; I'll believe the press conference idea when I see it.