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Not giving them $700bn;
Dollar remains around current level if no further interest rate cuts or bailouts are made. Banks hold on to their money (stop lending) because they don't know whose holding toxic securities and afraid to lose their money. Kinda like a financial mine field. So with no banks lending, credit drys up businesses can't get short term loans to fund operations, which leads to layoffs, this in turn leads to more delinquent accounts, putting more stress on the financial system, banks lend less, more business closures, more layoffs... wash, rinse, repeat...
Giving them $700bn;
Passing the bail out will just prolong the inevitable, and make it worse and last longer.
If the dollar doesn't collapse then it will be worth essentially nothing. Inflation will sky rocket, and with high costs already from due to fuel (dollar devaluation and speculation), those costs will rise even higher. Putting even more stress on businesses, causing more layoffs, causing more delinquent payments further deflating the availability for banks to lend money, which stresses more companies depending on short term loans, forcing more businesses out of operation which leads to higher unemployment... wash, rinse, repeat.
Why will the second scenario last longer and be much worse? In the first scenario the dollar may retain its value. The financial system would have to work out the toxic loans and start trusting each other again. Start loaning and get business rolling The deficit wont be "as bad" relatively I guess. Whatever. We'd end up with...
1. High unemployment.
2. Many ppls life saving possibly decimated.
and probably a lot of other things I'm too tired to go into.
The second scenario, which may not work btw. And if it doesn't then
we'll end up with;
1. Devalued dollar. This will make the recovery longer because it has to be propped up
if not totally replaced. Like losing weight, it doesn't happen over night. Dollar devaluation will occur any way. You can not print money and expect it not to devalue.
2. High inflation due to said dollar being worth crap. Will occur anyways.
3. Countries may flee to other currencies ( I believe this is already taking place). This
further devalues the dollar (no demand), which causes higher inflation.
4. High unemployment.
5. Many ppls life saving possibly decimated.
and probably a lot of other things I'm too tired to go into.
I know I left out a few things, but I'm really tired so feel free to add, replace or shit on whatever. hehe.
If you buy the line these securities are going to make any money for us the tax payers. I have a bridge I can sell you. Because if there was any chance they could make money, we wouldn't be in this situation in the first place. Every bean counter and attorney would be all over it sucking them dry.
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