If No Bailout, How Bad Would It Get?
 

Lets face it we're hearing "watered down" accounts of what *could* happen if the worst came to the worst and the credit markets seized up, but what would ACTUALLY happen?

Paulson, Bush, Bernanke...... all the talk on the media is watered down, all the talk in the meetings is heavy because they need congress to understand the justification for the $700 BN. So whats the real situation?

Theres been a lot of talk about "End of America Superpower Status" and "End of dollar as a reserve currency" etc etc..... would it really be like the great depression?

The great depression was not limited to United States, so no I don't believe it will be as bad as the great depression but it can become very desperate.....

If you're worried about your bank failing, you pull your money out. If everyone pulls their money out of all banks, everything collapses. That's what would happen.

The depression was started in the US and spread throughout the rest of the world.

The situation with the market was probably limited only to the US, but the entire world is in economic crisis at the moment.

yea.. the world economy is so connected these days, we dont' know the meaning of 'depression'

Your congress will approve the rescue plan, they have no choice - it's either that or a big fuck up, and I'm tlaking really BIG fuck up.

The dollar will tank. Jobs will be lost. No credit for anyone. Homes lost. No student loans. No extra spending. Fewer people spending money online. You will make less money.

I agree 100%

Will the $700 billion rescue plan effectively fix the problem or just staive it off for awhile longer, or make it so that instead of hitting rock bottom we stay a few rungs higher?

Wall Street wise, I've heard estimates of about a 2000 point drop in the DOW.

Keep in mind the job situation has not yet played out either. Our nation has been averaging a negative 70k jobs per month for over a year now. Almost all economists declare that the job market needs to create 100k jobs a month just to account for new people entering the job market.

So if we have a need for 100k jobs to be created each month for the people just entering the market sitting on top of an average of negative 70k jobs a month of people loosing jobs for over a year. That becomes a huge ass number. Well way beyond just the jobs lost that people are currently talking about (just the 70k).

Then they do tabulate unemployment in a fucked up way. Eventually if someone has been without a job long enough so that they are not longer collecting a check they no longer count stat wise.

This turns into a lot of people who can not pay bills, borrow money, spend money, or so forth. Running into the holiday season soon to boot as well when many companies make their bottom lines. Few will be spending money let alone have any to spend beyond any bills they can pay. This will lead to more budget cuts by companies which will be more lay offs. Turns into a vicious circle.

From what I understand the bailout will allow the market to avoid bottoming out and it will also allow the government to buy up all the bad debt and restructure it. If done properly it could fix the problem. if they just hand money to the same douchebags that caused the problems it may only be a short term fix.

In the end it will be meaningless unless they do something in the form of some kind of rules or regulations to keep this from happening or we will be doing this again in another 8-10 years.

If there is no bailout it could get real ugly. Banks could close, people could lose their retirement and pensions, companies that rely on short term loans could close or greatly scale back causing there to be a huge loss in jobs, it could be a very ugly situation.

Not to mention that our workforce is going through is shift. The middle class in America was built on manufacturing jobs. There were jobs that any high school graduate could get and after working it for a while could start to make good enough money that they could buy a house and raise a family. Those jobs are now being shipped overseas. Companies don't want to pay people $20 an hour for the same job they can pay a Guatemalan $2 a day for and with the outsourced jobs they don't have to provide health coverage, 401K, disability, unemployment, social security and they don't deal with things like OSHA regulation.

These manufacturing jobs are being replaced with lower paying service and retail jobs and good paying IT jobs. So your average manufacturing guy, when he loses his job, either has to take a lower paying job or go back to school and learn a new trade and this adaption to the market change is helping to cause unemployment to rise and the job market to be off center.

Yup, can just be a perfect storm of crap for the economy and not just the US economy either. It will drag everyone down.

Very true. We are very much a global economy these days so things that happen in one country can greatly effect things and people in other countries.

Correct me if I am wrong, but we don't have $700BN, which means we need to "print" $700BN, which further devalues the dollar. So, although it might provide a small fix, it just escalates a larger problem.

Let it fuck up. That's what is needed. Bail these fuckers out and in 10-15 years when it's all forgotten they can go back and fuck up. Why? Because they'll know they'll be bailed out again. HOW do they know this? They are ALWAYS bailed out. Anyone one here old enough to rememebr the saving and loans scandal? Wasn't that bailout suppose to prevent shit like this from happening? Companies promise employees pensions and then they go bankrupt or don't have the money so the government bails them out and pays for all the pensions the companies promoised. The airlines are badly mismanaged for decades, but in order to prevent the industry from collapse the taxpayer bails out these fuckers too. I could on and on. Now here these Richie Riches are again with their bowls out saying "please sir may I have some more?" And some people complain because some whore gets a $500 welfare check and foodstamps for her and her 4 kids. Fuck all these fuckers. Enough is enough.

Yep so say hello to $6 a gallon gas and $5 a gallon milk, $3.50 for "cheap" bread. $3 a dozen eggs. Yep this bailout will sure solve things.

If no bail out and people become insecure in the banking system, there could be a possible run on the banks. That would cause all the banks to fail and would affect the world not just America. If the banks failed in the US it would cause banks of other countries to fail.

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.

P.S. Keep in mind 5yr arm resets are around the corner. This will create another wave of foreclosures, and possibly more toxic securities raising their head etc.

In my opinion. These fucking bankers thought they could repacked these shit loans into good loans,sell them off to other people and no one would know the wiser. Because on average the good loans should out perform the bad loans. But they took it to the extreme and now we're all fucked. It god damn criminal. They should all be taken out and shot.

And the other bullshit about not limiting ceo compensation because then they won't get the best and brightest to apply for the job.. Well, they ALREADY HAD THE BEST AND THEY STILL FUCKED IT UP!!!! I'd rather have a fucking monkey running these institutions, at least we could train the fucker!

buy gold guns and ammo

Already doing all of that :)

the bail-out is nothing but a temp fix... to prolong the big crash, seems inevitable at this point.

The world's ecnomy is linked to the US's

That sounds about right and the flow on effect worldwide will be just as bad.

first of all. US doesnt have $700 BN . How to solve it? Print new money, that effect wil bring the dollar down, way down. Dont do the bailout. Let the market reconstruct itself.

The original question should have been asked, "How bad will it get with the bailout".

The bailout should not and most likely will not happen.

1. We do not have the money.
2. This is a bailout to the banks.

We should have accepted the recession after the tech explosion and the 9/11 attacks. Greenspan lowered rates to 1% and created another bubble... the real estate bubble. Add to this there were massive warning signs in 2005 with FreddieMac/FannieMae that were ignored by Congress... another opportunity missed.

We need pain to make Wall Street learn that there is risk and the US taxpayers will not bail them out every time they fuck up. If we try to "buy" our way out of this recession then we are not letting the forces of the market work... and merely delaying the pain.

I have been faxing all week and lighting up my Senator and Congresswhore. As have many other Americans... the bill, in its original form, will never pass. I wish they would do the prudent thing: nothing

-dd

p.s. JP Morgan just scraped together 1.9B for WaMu. There is a ton of money in the sidelines... If the banks and investment houses need money badly they can do what all entities do that have "shit credit" - pay a premium for the money. Bank CD rates at 10% would flood money into the banks... currently at a high of 4.25% they are not accurately pricing risk and the public/investors are not buying. As to the bad paper they are holding... that is their problem. Suffer the losses on the mal-investment just like I have to when I make a shitty investment.

I'm really suprised how many people are not aware of that.

It's a ticking time bomb in the real estate market that could make the current situation look like a walk on the beach.

It costs the US government litterly $20 to print 1 million in bills. Nice work if you can get it, huh?

Well said......... it could well be that the $700 BN would be put to better use elsewhere in, for example, protecting main street.

"Last week we were at the brink of something that would have made anything that's happened in financial history look pale. We were very, very close to a system that was totally dysfunctional and would have not only gummed up the financial markets, but gummed up the economy in a way that would take us years and years to repair. We've got enough problems to deal with anyway. I'm not saying the Paulson plan eliminates those problems. But it was absolutely, and is absolutely necessary, in my view, to really avoid going over the precipice." - Warren Buffet

Those #s aren't that far off as it is.

Let's go all Fight Club on it and just roll it all back to 0.

yeah, let's just tell everyone to rest everything to 0 and start over.. how hard is that?


;)

With the current credit market crunch, is anyone seeing an impact on their sales yet? With less people with active credit cards, and more people maxing theirs out, you'd think porn would be the first expense people would cut from their daily spending. I know I've seen a decline in sales despite an increase in traffic. Guess I could just blame it on the tube sites! :disgust