the sky is not falling
Posted by ecoshift on September 29, 2008
Just watched the House vote down the bailout bill in one window with a live Dow chart in the other. Spectacular drop in Dow prices, then a bounce, then trending lower with a final drop to a 777 point loss – nearly 7%.
Without wishing any ill will on anyone’s pension funds and 401Ks, I’m not upset out about this turn of events.
This vote did not break down on party lines. It was a purple coalition of Kucinich democrats and Ron Paul republicans that scuttled the administration’s bailout of “solvent” institutions. While I’m not against government intervention on principle, I am against making a bad problem worse by rewarding the people that created it. While the term “moral hazard” has been used quite a bit lately a more accurate term might be “corruption”.
The underlying problem is that our real economy is in a shambles. A median income won’t support the payments on median priced homes. We are not competitive with foreign producers and our manufacturing capacity has been reallocated to other parts of the world. We need to give solutions to these problems some serious thought. Caving in to an ill-conceived plan drawn up over the weekend on the the back of an envelope by the masters of this disaster is not in our best interests. The plan put before the house today is not a clear strategic imperative with the sophistication to actually turn this economic crisis around. Everything about it smacks of desperation emerging from a period of deep denial — except for the corruption.
Please note that no one can explain exactly how the plan defeated today would have prevented the economic correction that now playing out on Main Street. They only “hope” that it will mitigate an even worse outcome. No promises.
Came across an interesting quote in the Calculated Risk threads today:
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”
– Andrew Jackson, 7th US President
I think we just saved ourselves quite a bit of money that we will need to rebuild the real economy. Voting for this bill, despite the FUD worked up by corrupt financiers and the media minions, would only have delayed the inevitable, and perhaps made it worse. Certainly we would find our selves with fewer resources at our disposal when we finally face up to our situation.
I’ll try to post a few proposals for a response to this crisis that may offer a more reasoned and less corrupt path to economic stability when I get more time… I collected a few, then it appeared they would be moot. It now appears that we will have some time to pursue alternative proposals. I think this is a good thing.
Meanwhile, I just looked outside. The sky is not falling. It’s just a price correction for stocks with price to earnings ratios high above historic means. No way around it — with or with out the bailout bill. It’s a good time to tighten your belt, pay down your credit cards and brace yourself for a somewhat less consumer oriented standard of living.