I just saw a guy on TV (MSNBC I think) talking about the stimulus bill and the bailouts. He was making the argument for them. He made some good points and some I didn't agree with. I happen to think a stimulus bill is a good thing, but I think the one we got is very flawed and wasteful. So here is a theoretical example of what easily could have happened without a bailout or stimulus.
AIG fails and it takes with it several big Wall Street banks. This starts a house of cards collapsing and somewhere in the 60-65% of all the banks in the nation either go under or are in severe trouble.
The credit markets lock up.
GM and Chrysler collapse and take with them all the companies that supply and work with/for them.
Many companies that rely on short term lines of credit are now no longer able to get them so they either cut way back or close down.
Unemployment jumps to somewhere around 30%. This causes people to freak out so they start making runs on their banks. This run on deposits helps bring down another 5-10% of the banks that were doing okay, but are now in deep trouble because people are shitting their collective pants and withdrawing everything they have.
With an unemployment rate that high more and more states go the way that California is now and even worse. With fewer people working and more people needing unemployment and food stamps and any form of help they can get the states have a huge drain put on them, but they have a greatly reduced income because of the lack of income tax revenues.
Foreclosure shoots through the roof bringing the already hurting housing market to its knees. If you have a job and are in good shape on your mortgage and plan to live in your house another 10-15 years, you have no worries. If you were planning on selling it good luck, the value of it has fallen through the floor and chances are you are actually upside down and owe more than it is worth. People will then challenge their property tax bills which will then even further reduce income for the states.
Companies nationwide continue to cut jobs because consumer spending is bottoming out. Consumer spending accounts for around 75-80% of our economy. When those people are either unemployed or worried sick about their jobs they will stop spending and will just by the things they need to survive. This causes unemployment to rise again an could further harm the economy.
We all sit around wondering how long it will take to get out of this. It might only last a couple of years. It may last much much longer.
The good news is there was no stimulus bill and no bailouts so we did save some money.
If this happened. Would you be more satisfied with Obama then you are today?
I'm not endorsing the stimulus as it sits nor do I think every bailout was a good one. I'm not endorsing Obama's actions. I'm just asking a question. If Obama put his foot down and gave nothing out and this occurred would you be happier?
AIG fails and it takes with it several big Wall Street banks. This starts a house of cards collapsing and somewhere in the 60-65% of all the banks in the nation either go under or are in severe trouble.
The credit markets lock up.
GM and Chrysler collapse and take with them all the companies that supply and work with/for them.
Many companies that rely on short term lines of credit are now no longer able to get them so they either cut way back or close down.
Unemployment jumps to somewhere around 30%. This causes people to freak out so they start making runs on their banks. This run on deposits helps bring down another 5-10% of the banks that were doing okay, but are now in deep trouble because people are shitting their collective pants and withdrawing everything they have.
With an unemployment rate that high more and more states go the way that California is now and even worse. With fewer people working and more people needing unemployment and food stamps and any form of help they can get the states have a huge drain put on them, but they have a greatly reduced income because of the lack of income tax revenues.
Foreclosure shoots through the roof bringing the already hurting housing market to its knees. If you have a job and are in good shape on your mortgage and plan to live in your house another 10-15 years, you have no worries. If you were planning on selling it good luck, the value of it has fallen through the floor and chances are you are actually upside down and owe more than it is worth. People will then challenge their property tax bills which will then even further reduce income for the states.
Companies nationwide continue to cut jobs because consumer spending is bottoming out. Consumer spending accounts for around 75-80% of our economy. When those people are either unemployed or worried sick about their jobs they will stop spending and will just by the things they need to survive. This causes unemployment to rise again an could further harm the economy.
We all sit around wondering how long it will take to get out of this. It might only last a couple of years. It may last much much longer.
The good news is there was no stimulus bill and no bailouts so we did save some money.
If this happened. Would you be more satisfied with Obama then you are today?
I'm not endorsing the stimulus as it sits nor do I think every bailout was a good one. I'm not endorsing Obama's actions. I'm just asking a question. If Obama put his foot down and gave nothing out and this occurred would you be happier?
~TheDoc - ICQ7765825
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