Quote:
Originally Posted by Pleasurepays
i was just watching the news and pondering the newest plan for the Fed to pump money into the system that almost completely escaped the attention of the media.
i understand that no one is going to be happy about any decision thats made and thats the nature of politics.. however, in this case.. its the financial markets that matters. its their opinion that matters. its all the foriegn holders of US debt that matter. its the price of gold rising that matters. and in spite of the obvious reactions to these "plans" it all gets worse.
...but this whole thing of borrowing money to spend our way to prosperity is bizarre beyond description.... and all begs the obvious question.. "why don't we just print money and spend it like this all the time if thats what helps the economy"... i am very much a fiscal conservative and believe strongly in the market to recover. i say that as someone who lived in russia through its transition and witnessed first hand how quickly wealth can be created against all odds.... against the absence of a functioning court system, banking system, tax system etc. there is no such thing as a company that's "too big to fail" - if you believe that.. then you've never actually seen an entire banking system and currency collapse and stood there on the street and watched how fast people pick up the pieces and grow the economy again.
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I agree that the idea of the fed buying up a bunch of out debt is probably not a good idea. Spending to get out of this may not be the way either. But it might work.
I think the basic idea behind the Obama plan is that they want to "prop up" the economy for a few years in hopes that during that time the private sector will rebound and create jobs. Then those who are working on stimulus based jobs can transition into private sector jobs. Once the economy has rebounded we can start to worry about dealing with the deficit and all the debt.
It is a risky proposition that could fail miserably. The alternative is ugly too. It is like picking between eating a shit sandwich and eating a shit sandwich that has mayonnaise on it.
Without a bailout and stimulus companies like AIG would fail. They would bring a ton of banks down with them. The banking system in this country would nearly (if not completely) collapse. Sure your local little independent banks my survive, but they won't have the money to loan to companies or business or even people who want to build a house or buy a car. Job losses would be enormous and all of this could very easily lead us into a depression that could last for years and years. Then again we could bounce back rather quickly and rebuild and make things strong again. If we do bounce back and don't then put some form of regulation in place we will be looking at this problem again in another 15-20 years.
With the bailout and the stimulus plan it is an effort to ward this off. Maybe it isn't the best solution. There is a lot about it that I don't like, but if you can avoid having people lose everything and having the county go into a depression (or at least a very deep and ugly recession) I think it is worth a try. Maybe it will work and maybe it won't. If it fails and we could end up in a depression, but it looks like we were probably headed there anyway.
There are economist who say the stimulus plan will fail. Some of them fail because they say it is not big enough. There are some economist who say it will work. There are some who don't know. We haven't really been down this road before so it is a new situation.
Personally I would rather see us go down swinging and trying to fix the problems then just letting it all cave in and rebuilding from scratch. That said, it is only worth preventing the problems if we take steps to help make sure these things don't happen again.