ANOTHER bailout!

[competentone]

Originally Posted by jyl

Let's suppose govt had let BSC fail, and then completely stood aside and provided no support to rest of financial system - banks, money markets, brokers, non-financial companies, etc. Suppose other govts had done the same.

Then most likely LEH MER GS MS would have failed too, also numerous commercial banks including C. Similar results globally - Barclays, RBS, UBS, CS, many German banks, etc. Essentially a near-global collapse of banking system, triggering appx $4.2 trillion of FDIC guarantee payments, while another $2.6 trillion of uninsured deposits would be lost (end 2007 data).

Most money market funds would have collapsed, so that's $4 trillion or so of investors' money gone (early 2008 data).

Equities would have collapsed, of course. More than they have.

Credit to consumer and businesses would have shut down, full-stop. You can see how much damage a tightening of lending standards is doing to the economy right now, imagine the damage from a sudden -70% to -90% decline in lending?

Global trade, state/local govts, other areas of economy would have been slammed.

And the Federal govt's own ability to fund its operations - maybe even to pay the FDIC guarantees - would have been in danger. Since China, Japan, and other buyers of treasuries wouldn't be happy that the US govt decided to fiddle while America burns.

Under your scenario, the Second Great Depression would have started in spring 2008.

And would be ending at the end of 2008 as all the "bad actors" would have been wiped out completely.

With the current situation the "bad actors" and "zombie businesses" are being kept afloat at the expense of the "good actors" and solvent businesses.

The government is destroying the healthy in the economy in order to save the sick and dead and especially the corrupt.

Not allowing failed businesses -- and especially, not allowing the failed financial system to collapse -- is creating another Great Depression.

"Pretending" it's not there, doesn't mean it's gone away.

[Dude76]

Originally Posted by competentone

And would be ending at the end of 2008 as all the "bad actors" would have been wiped out completely.

With the current situation the "bad actors" and "zombie businesses" are being kept afloat at the expense of the "good actors" and solvent businesses.

The government is destroying the healthy in the economy in order to save the sick and dead and especially the corrupt.

Not allowing failed businesses -- and especially, not allowing the failed financial system to collapse -- is creating another Great Depression.

"Pretending" it's not there, doesn't mean it's gone away.

The weakness in your thinking is that "good actors" would have been wiped out too. MSFT a company with not 1 cent of debt could not survive without customers. No-one would survive it. If you think they would, you don't understand how intertwined the financial services business' are on one another, and how dependant all business' are on the financial services industry. You could not have stopped the dominos from toppling over. The collapse you keep on insisting on would have resulted in ZERO, which isn't good even if it happened in '08.

On principal everyone agrees with the idea that those who took the risk should pay for it, but when the cost of making them pay for it takes everything with them all the sudden any ration person doesn't want to live on principal alone.

Your talk of collapsing the entire financial system is just chest thumping talk. If you collapse the system what would you replace it with, and how are you prepared to handle that world? Can you survive without food, without fuel, without ammunition, without money, or without medical attention? And if you can survive without all that, can you defend yourself against 1000's of people who will kill you for what you have?

If you have gold and think you are safe because of that I have some news for you. It is a soft shiny metal that is not good for much of anything. It is only your belief that it is worth something that makes it so, just the same as the paper money in your pocket that you loath so much. If you only have a piece of paper that says you have gold then your no better off than any fool holding Lehman brothers stock. In your world whether you want to admit it or not possesion becomes 10/10ths of the law.

I'm sorry but even if we are heading into a great depression it is shorter and shallower than what your peddling.

[jyl]

Originally Posted by competentone

And would be ending at the end of 2008 as all the "bad actors" would have been wiped out completely.

With the current situation the "bad actors" and "zombie businesses" are being kept afloat at the expense of the "good actors" and solvent businesses.

The government is destroying the healthy in the economy in order to save the sick and dead and especially the corrupt.

Not allowing failed businesses -- and especially, not allowing the failed financial system to collapse -- is creating another Great Depression.

"Pretending" it's not there, doesn't mean it's gone away.

"And would be ending at the end of 2008". Did the Great Depression last less than 1 year? No, it did not. It lasted at least 4 years (from 1929 to the trough in employment and GDP in 1934). Some claim it lasted until WW2 - I'd agree many of its effects did.

This is even though the Hoover Administration did something like what you advocate. It did relatively little to support the financial system and economy.

[turbo6bar]

US Plans $800 Billion to Ease Lending Crisis

This is an excellent article and worth a look. The tables and graphs are quite good.

In the last year, the government has assumed about $7.8 trillion in direct and indirect financial obligations. That is equal to about half the size of the nation’s entire economy and far eclipses the $700 billion that Congress authorized for the Treasury’s financial rescue plan.

Wow!!!

Does make me reconsider my deflation scenario.

[competentone]

Originally Posted by Dude76

The weakness in your thinking is that "good actors" would have been wiped out too. MSFT a company with not 1 cent of debt could not survive without customers. No-one would survive it. If you think they would, you don't understand how intertwined the financial services business' are on one another, and how dependant all business' are on the financial services industry. You could not have stopped the dominos from toppling over. The collapse you keep on insisting on would have resulted in ZERO, which isn't good even if it happened in '08.

On principal everyone agrees with the idea that those who took the risk should pay for it, but when the cost of making them pay for it takes everything with them all the sudden any ration person doesn't want to live on principal alone.

Your talk of collapsing the entire financial system is just chest thumping talk. If you collapse the system what would you replace it with, and how are you prepared to handle that world? Can you survive without food, without fuel, without ammunition, without money, or without medical attention? And if you can survive without all that, can you defend yourself against 1000's of people who will kill you for what you have?

If you have gold and think you are safe because of that I have some news for you. It is a soft shiny metal that is not good for much of anything. It is only your belief that it is worth something that makes it so, just the same as the paper money in your pocket that you loath so much. If you only have a piece of paper that says you have gold then your no better off than any fool holding Lehman brothers stock. In your world whether you want to admit it or not possesion becomes 10/10ths of the law.

I'm sorry but even if we are heading into a great depression it is shorter and shallower than what your peddling.

Trying to understand your thinking is difficult.

The fact that you can possibly think that all economic activity would come to a complete and total halt tells me that you have an extremely limited understanding of the economy -- and productive people -- all around you.

I'll speculate that you're one of those "idiots" (like Paulson or Bernanke) who have absolutely no understanding of the idea of people actually living within their means.

I'm guessing that you only understand the concept of "borrow and spend" -- and subsequently think that a "freeze" in the credit markets will somehow result in "all" economic activity stopping.

Well I have news for you, there are literally millions of Americans who do not live with a "borrow and spend" mentality. Millions in this country live within their means; they save and invest before they spend money.

Without the bailouts, the irresponsible lifestyles of many (I suspect you are in that crowd) who "consume before they have produced" would have had to come to a screeching halt.

For the millions who live within their means, things would certainly change as the economy shifted (because the "borrow and spend" crowd would no longer be significant actors in the economy), but generally, those who live by "producing before they consume," would do OK.

The government's recent actions boil down to nothing more than irresponsible people being bailed out at the expense of the responsible (with the government effectively "stealing" the savings of the responsible through inflation of the money supply to pay for the bailouts.)

Taking from the productive to give to the nonproductive is not the way to bring about any economic recovery.

The government's actions is only making things worse. The depression that is coming will be much worse than it would have been if the government would have just stepped aside and let the bankrupt businesses (and people) fail. A lot more of the healthy businesses (and productive people) will now fail because they have to pay to keep the losers "propped up" artificially.