The Economy

The economy is like a heart.  Blood has to pump through it, in this case, money and assets.  Sometimes capital loses its value and gets stuck in the system.  These “toxic assets” are like cholesterol.  They stick to the wall and prevent other things from getting through, causing a “blockage.”  Sadly, the economy isn’t some truck you can dump things on, it’s a series of tubes.

So right now, there’s a ton of cholesterol in the system and it’s causing problems.  A lot of Republicans want to wait it out and let the cholesterol later leave the walls.  A lot of Democrats want to rip the heart open and take the cholesterol out with their finger.  Henry Paulson wants to do an open heart surgery that’s only been done twice before.

So naturally, it’s a tough sell to either side since they are obsessed with our eventual economic destruction, but after many days people seem to have finally decided on the expensive operation.  While it can’t solve the problem, I was feeling kinda good about it. Hell, for some reason I felt like we could trust the people that got us into this mess.  I felt safe and secure.  Then I came out of class and saw this.

And worse, a stock market drop the likes of which that hadn’t been seen in 11 years.

So what broke their agreement? This.

Republicans bailed because Pelosi gave a last minute partisan harangue. 40% of Democrats bailed so they could blame the bill’s failure on Republicans.  Others bailed because they want to get reelected, not do the right thing.  You know, fixing the crisis they created.

Nice to see Washington hasn’t changed.

Addendum: At least we know the Treasury Department is efficient, competent, and surgical, right?  Right?

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

I suppose someone managed to talk Paulson down from a bazillion. I feel so much safer now knowing how on top of things the Treasury Department is.

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6 Responses to The Economy

  1. Lone Wolf says:

    The economy will not be destroyed, it is strong (not as in :Its doing good” as in “its been brutally beaten but it will survive and recover”) the economy will survive this.

    This bail out thing is a bad deal. Adding 700 billion to an already skyrocketing national debt is a big mistake. I’m not saying nothing should be done but buying back bad loans and giving hundreds of billions of dollars to these banks is not the answer.

  2. Keljeck says:

    Ah! A reader! Thanks for commenting.

    I agree the economy won’t be destroyed, it wasn’t destroyed in the Great Depression either, the economy will eventually reset itself. It always does. That’s how the free market works.

    My worry is what the economy will do in its reset phase, how bad it will become. I’d rather lean away from our errors than let our errors do us in.

    From what I’ve been reading from a lot of commenters, a ton of people are in a panic. Even Steve Forbes and Tom Coburn are saying we are set for some serious problems if we don’t act. I’d agree with them.

    The thing about the bailout deal is that it could end up turning a profit, we aren’t just buying assets at a discount, we’re selling them back out. Whether this turns a profit for the country remains to be seen, but it’s not like we will be $700 Billion dollars in the hole.

    But we are stuck between a rock and a hard place, to use an old cliché. I don’t think this will solve the problem. The real problem will hit in about eight years time. But it will help for the time being.

  3. jwojdylo says:

    Just as it has been stated before, we’ve been there before and we survived, so it’s not going to change; it is just going to be a very rough time for a lot of people!

    http://jwojdylo.wordpress.com

  4. Lone Wolf says:

    I understand but I doubt the consequence will be as bad as depression. A long bad recession but not a depression (and nothing near the grate depression).

    But none of that matters now, the Senate passed the bail out and the house most likely will.

    As for this “we might make money on it” no money is going to be made on it and the money lost (I think most of it) will end up being added to the national debt. The economy even with the bail out is still messed up and it will take a long time to recover (the consequences of deregulation).

  5. Keljeck says:

    A depression is a very strong possibility. We’re talking a complete loss of confidence in the financial industry. We can’t discount that possibility.

    And we made money on our bailout of the Mexican Government, and Sweden made a profit on their similar bailout. It is very likely we will at least break even.

    In the end it won’t cost $700 Billion, or close.

  6. Lone Wolf says:

    I strongly doubt that it would cause a depression. Its going be bad but not that bad. The economy is probably at the bottom or close too it. But just cause its at or near the bottom that does not mean we have seen the full effects of this, we will not see the full effect (all bad) of this for a long while.

    People seem to think that this bail out is a silver bullet, when if the bail out passes there will be consequences to it.

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