Well, let's see if this makes any sense. Fannie and Freddie had to be bailed out by the government, Merrill Lynch had to be bought out to stay afloat, Lehman Brothers went bankrupt with about $613 Billion in liabilities, AIG got a $85 Billion dollar loan from the US Government to stave off more trouble, the US Treasury Secretary Paulson announced that there will be a RTC that will buy up all the troubled mortgages that could total upwards of $1 Trillion, short selling is being regulated/basically stopped (even though shorts help to accurately value the market), and the Dow Jones ended the week just about even.
We're fine then. Close one, but there is nothing to worry about.
Let us use some thought if we could. The government has come in and decided where to put a bottom in the stock market. Good news? A bottom is good news. If the government is doing this, isn't that an obstruction of free market capitalism? A pundit on CNBC said yesterday that "Today is the end of free-market capitalism as we know it." Um? OK. The market is up? The stock market now lacks any reality, legitimacy, and accurate pricing of stock. It's a fantasy land of ludicrous insanity. As much fun as that sounds; this only makes the problem so much worse.
So what happens from here? Well there are two options. One is that the government keeps the bottom in place. This only transfers the burden; it does not get rid of the burden. However, this will mean that the stock market will be OK-ARTIFICIALLY. The transfer of the financial stress then will lay on the head of the government, which is where it is right now. This mutates the problem, and will likely require an external force to fix the problem. The other option is for the government to step aside at some point. What happens then is that the artificiality is removed, and we go back to reality. Is reality a happy place? I ask this because this whole last week of financial Armageddon was reality. Postponing this reality could make it much worse.
Which option will be chosen? I personally prefer never leaving reality; seeing as that is where we are living. Are the American people really in charge of what is going on/goes on? How long has it been since we were?
Subscribe to:
Post Comments (Atom)
4 comments:
Emily Dickinson once said to tell the truth but tell it slant. I think that particular statement can be applied with the current financial situation. The truth hurts some time and now is a time when it does. Several things can come from such pain people realize what's going on and they decide to try and do something about it. Or worse people can deny it. Knowing where the bottom is can be a good thing because the only place to go is up. Sometimes a government has to intervene when its economy is not doing so hot. It's interesting what companies were bailed out by the government and which ones weren't. I would think that the companies that the government chose to bail out were ones that could give more confidence to the American people. Tripper commented in class about having confidence in our economy. I think it's a valid point because without confidence nothing seems to exist. A lack of confidence in the abilities of Fanni Mae, Freddy Mac, and AIG would devastate the economy. I would be ok with the government stepping in to pinch hit but ultimately the usual players have to get back into the game. Sometimes a distorted view of reality can be better off in the long run than the full pledged pain of seeing things the way they really are
I would be more confident if the government stayed out of this situation. Especially seeing as how this whole problem was mostly caused by the government and its' interference in the market with certain policies.
I bet they will borrow the money from china. we already owe them a lot in loans so why not add a few hundred billion more?
OK. So let's keep borrowing money from China until the fed collapses. Sounds like a plan. Or; maybe we could try something else.
Post a Comment