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Straight Story: Economy status report
Treasury Secretary Henry Paulson departs the Capitol after meeting with bipartisan members of Congress on Capitol Hill on Sept. 27, 2008.
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About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
HERE'S AN ECONOMIC PLAN GUARANTEED TO SUCCEED -
People are saying that $700B is an incomprehensible number. Well, let me make this simple. There are currently ~6B people on this earth. Which means we could give ~$100B to each person on this earth with the proposed 'Bailout'.
If we REALLY WANT CHANGE, why don't we give $1 million to each person residing in the US, $2 million to each small business, and $3 million to each small business focused on clean tech in the country, and use the rest to give each resident of this country complete health insurance, fix our education system, fix our infrastructure, fix social security, and save the rest?
Wall St. is a $$ black hole.
THE CONSUMER IS WHAT DRIVES OUR GLOBAL ECONOMY!
THINK.
My take?
The average American that politicians are answerable to actually like, and even relate to, the likes of Sarah Palin and will vote for her. So the public is clueless. They actually like the drubbing Wall Street is getting and don’t understand the implications.
Having said that there was NOTHING in the bailout package that would punish Wall Street for three years of outrageous greed and predacious sales of instruments they knew all along had no value. They paid off the credit agencies for those fake triple-A ratings and wound up with unimaginable fortunes for their criminal activity. Beyond that, they spent the last 10 years hounding American corporations to put all their best technology abroad so they can take advantage of cheap labor and sell the U.S. economy down the toilet. And they made even more money on that advice.
In many ways, this is a good thing because the politicians were in cahoots as they too profited in campaign donations, speaking engagement fees, bribes and in tax coffers. Anyone who insisted on oversight was drummed out of the room. Now it’s time for a good flushing of Washington, which created the crony capitalism that segued into the Socialist state needed to bail out the connected.
The politicians feel the anger, and can’t be seen to be on the side of their enablers on Wall Street. (By the way, the media also has a very guilty hand in all of this.)
This is a HUGE mess. But there is a psychology in the hinterland that they are willing to go down with the sinking ship if it means taking with them the powers that caused it and that gave them so much heartache. The little guy will fall so the big guys will fall harder. It’s a good trade off. I’ll gladly lose my trailer park doublewide if it means they lose their Hamptons MacMansions. The anger runs that deep.
There will be no bailout package unless five investment bankers are hung by their necks in the town square. There will be no bailout package unless investment bankers return three years of ill-gotten gains and golden parachutes that totaled (I hear) about $200 billion. They enriched themselves on the mess they created. There is no sympathy for Wall Street from any quarter that I know of, including myself who lost a bundle of serious dough in September.
This is the worst situation I’ve ever seen by far in my years of following the economy and it will get much worse than what you saw today. Banks that survived the Depression are gone in a single weekend. Nobody knows where to safely park their money. The FDIC is a joke – a brittle stick propping up a potential cave-in. If all that’s left of U.S. treasure disappears, remember we haven’t even paid yet for that Iraq war yet. This is comeuppance to the extreme. A major punishment from all the forces in the universe over our hubris and stupidity and willful anti-intellectualism.
Here’s the question to really think about. What if we spend the $700 billion (really $1 trillion) and the economy goes into recession anyway. What do we do then?
If the economy needs a bail out; let’s deliver it via the tax payers rather than the banks. Let’s inject liquidity using something similar to the economic incentive package by using “Stimulus Payments†of about $5,000 per tax payer. This number is calculated by dividing the proposed $700 Billion by the approximate number of U.S. Taxpayers of 138 Million yielding $5072 per tax payer. (Of course this number would be a little higher if we left out the million or more mortgage holders that are, or soon will be, in default on their loans; after all, they and corrupt financial industry representatives are responsible for this problem.) The recent “Stimulus Payments†of $600 proved to have some beneficial effects; perhaps giving $5000 to each tax payer would yield a very dramatic effect.
Now it is clear that not all of the money would be put into the banking system, but much would. Many of us are more than a little concerned about our individual financial futures and we will put the entire amount into savings. This would represent an injection of liquidity into the banking system.
Some of us would like to reduce the burden of our home mortgages and/or other debt and use the money to pay down these loans. This would also have the effect for injecting liquidity in that it would free up dollars in the financial system.
And still others would simply spend the money doing what Americans do best, consuming as usual. This will have the effect that was desired for the current $600 “Stimulus Paymentsâ€.
My personal feelings are that this situation was caused by greedy financial companies, et al., providing loans to people who probably knew they were getting in over their heads but were gambling that they could pull it off and now they find themselves facing the cold hard truth that they gambled too much and lost. You could argue that the root cause was deregulation; and perhaps you’d be correct. But, it was unethical and/or risk-taking individuals who abused the lack of regulation, and they should be the ones paying the price. That is why I believe it would be better to provide liquidity via tax payers—responsible tax payers—and leave the banks and their high-risk debtors to work things out without direct Government (tax payer) help.
I was listening to your marketplace show on PBS just now while I was driving around and picked up the show again after I came out of a store. All I heard you say was something about this (???) being the safest place for your money right now as it was only getting under 1% but it was safer than putting your money under a mattress because you didn't have to worry about a fire. WHAT WAS THAT? I'm thinking it might have U.S.Treasury bonds, but I'd like to make sure. Thanks so much for this information. Sincerely, Elaine See
