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  1. #1 $700bn Bail-Out Vs. Facing The Music 
    John
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    The media, who call themselves news, are sensationalizing the current economic crisis. As can be expected, they are only echoing what politicians and bankers have to say about the subject which boils down to basically pointing the finger at each other. The dirty politicians blame the greedy banks, and the greedy banks in turn blame the dirty politicians. It's all bullshit legitimized by half truth, because the whole truth is just too hard for an American patriot to swallow. Americans ourselves, as credit demanding consumers, have an equal share in the guilt of the current meltdown.

    I fully expect an onslaught of accusations ranging from my post being 'unpatriotic' to 'blame America first'. However, I believe the greed of an American consumer to be just as damning in this crisis as the greed of banks and the incompetence of government. I'm attempting to start a conversation which addresses, at least among this board, something that politicians could never address head on. To say that the American consumer is just as guilty as a greedy bank would be political, career ending suicide, but that doesn't mean it's not true.

    To put our current credit crisis in perspective with a drug trade analogy: When drugs invade a neighborhood, is it the fault of the greedy drug dealer who provides the supply, the greedy junkie who provides the demand*, or law enforcement who doesn't address the problem until it's too late? Maybe it's all three. Wherever there is high demand, supply will do it's damnedest to meet it one way or the other, even if it means bending or breaking the rules. This, in my opinion, is exactly what has led the American economy to it's current state. The credit supply met the credit demand by bending the rules, the greed fueled by this demand for credit overran good business sense, and this eventually overran the mortgage loan system.

    Basically our congress has been given a choice, we can bail out U.S., U.K, and European banks (yes they will all be eligible to participate in the $700bn U.S. taxpayer funded debt buying program), and face the consequences later, or can we tighten our belts and face the music today. Personally, I opt to face the music today. The Americans who chose to take out another credit card rather than save up for that 40" flat screen plasma T.V. are just a guilty as the bank who issued the credit, or the government that stood aside and let the bank make that questionable loan. Eventually all those credit payments added up to more than that consumer could chew. To say it is all the banks fault for providing the credit, or all the government's fault for not stopping the bank is just absurd if you are going to ignore the fact that said consumer acted irresponsibly in the first place.

    So this talk of spending $4,666 per taxpayer to bail out the banks and benefit consumer taxpayers is just plain stupid. In the capitalist viewpoint, both parties deserve what they get. In my opinion it will be better in the long run. Think about how your grandparents lived their lives after they went through the great depression. They pinched pennies, they conducted their affairs more efficiently, they learned the lessons of the depression, living in excess, and living beyond their means had brought upon them and their parents, and they built a better nation from those lessons. Our current instant gratification, more credit equals more stuff hyper-consumerist culture would do much better in the future if we were taught those same lessons today.

    A lot of you may not like to hear it, but the demand side of this credit bubble explosion shares the same blame as the supply side. I think we Americans should face the consequences of our excess and lavishness like men, and not go groveling to the government, begging them to charge every man equally to bail out our credit supply so that we might still enjoy the credit offered. It might mean we have to tighten our belts and start living within our greatly reduced means, but in the long run I think we will be much stronger and more capable for it.

    We, as credit hungry American consumers in general, (not necessarily every individual) share just as much responsibility as the banks so far as our economical state of affairs is concerned. We should not turn to socialist/collectivist measures to get our credit dealers back on the corners offering their wares. That will only compound and prolong the real problem: Americans want stuff they can't afford today, but might be able to afford next year. If we know whats good for us, we will let these banks fall and we will learn how to live within our means, without a Best Buy credit card, and without cheap easy credit on every corner. Maybe we'll even start putting money into the savings account again while we are saving up to buy that bedroom set instead of going down to rent-a-center to take on another monthly payment.

    *Yes the junkie is greedy, just not greedy for money. The junkie is willing to sacrifice anything to get the drug, that is greed.
    Last edited by John; 09-24-2008 at 06:08 AM.
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  2. #2  
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    Excellent, excellent post. I have been saying this very thing since this whole mess was hatched out by our "leaders". Nothing has gotten me more on point and pissed off than these people standing around saying it is everyone's fault but mine.

    If I have $1,000 and I choose to loan it to my buddy for a new big screen tv knowing I am not getting it back because my wife said I could but then expect my Mom to bail all of us out who is the fool? I say all four...me for loaning it, my wife for saying it's ok, and the guy I am loaning it to because he knew he couldn't pay it back and borrowed it anyway. And my Mom for giving me the money to cover my loss!

    But no one seems to want to speak the truth. Thanks for doing it!
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  3. #3  
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    Your post is spot on; the consumer, the lender and our politicians are responsible for this mess. I do put more blame on the politicians due to deregulation, Greenspan, Congress and the Prez. They were all asleep at the wheel and numerous warning signs were ignored. The majority of our economy is based on spend, spend, spend. The bubble was bound to burst with no interest home loans and people taking out second mortgages on houses that they had only lived in a few years. Putting a mortgage on your house to buy a new car, boat or a vacation is insane.

    The bad part is that banks have started curtailing lending to business's. McDonald's was refused a loan. Only those individuals will great FICO's scores will be able to buy cars, furniture, etc at low interest rates as the banks have pulled in their horns.

    I don't like the bail out; experts on both sides of the fence have different opinions on whether doing nothing will cause the banking system to collapse. This decision will not just effect the US but foreign countries who are holding these bundled mortgages and other debt securities. If AIG goes into bankruptcy, derivatives (insurance) which insulates those debt securities from inflation and the dollar falling will be worthless. I also do not know if other countries will purchase our notes (debt) if they do not have assurance that the dollar is sound. They may lose confidence and cause the dollar to go down further.
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  4. #4  
    John
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    Thanks for the responses. I thought for sure I was going to be called an America hater for saying what I did about American consumerism. Trade, commerce and buying up what you want and need are definitely good things...but only if you can afford to pay for it.

    Quote Originally Posted by lacarnut View Post
    I don't like the bail out; experts on both sides of the fence have different opinions on whether doing nothing will cause the banking system to collapse. This decision will not just effect the US but foreign countries who are holding these bundled mortgages and other debt securities. If AIG goes into bankruptcy, derivatives (insurance) which insulates those debt securities from inflation and the dollar falling will be worthless. I also do not know if other countries will purchase our notes (debt) if they do not have assurance that the dollar is sound. They may lose confidence and cause the dollar to go down further.
    There are a lot of factors, too many in my opinion for any one expert or panel of experts to guide the economy out of this mess, and I think that is what is so difficult to swallow about this bailout. I mean Secretary Paulson arrived at the number of $700 billion, but that's just a guess, an educated guess to be sure, but a guess nonetheless. Secretary Paulson cannot control the overall market, and no economic condition is permanent. What it if $700bn isn't enough to restore the economy and the GDP declines anyway? I'm sure the injection of $700bn new dollars will definitely cause some inflation, so Americans will be faced with both inflation & recession. Taking into account foreign securities and the exporting of debt makes this very complicated and unpredictable market even more complicated and unpredictable.

    Anyone who claims, as Secretary Paulson & Bernanke do, that they have the answer to this riddle has simply made too many assumptions in their strategy. I'm going to follow Acom's Razor and go with the solution that carries the least assumptions: The market will sort it out because people, especially Americans don't like being poor. It may take a few years to sort out, but it will get sorted out. Tampering with the problem now runs the risk of making this worse while extending the amount of time it takes America to get back on her feet.

    Meanwhile it seems as if the Democrats are beginning to hint as using this bailout to 'buy a stake' in the banking industries. That's fancy speak for more nationalization of private banks. :eek: I know it's the job of Congress to regulate interstate commerce and to coin money, I'm not so sure I like this particular congress taking on that role.
    Last edited by John; 09-24-2008 at 08:04 PM.
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