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Please end the bailouts

keepinitreal
Posts: 58
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11/9/2012 12:42:25 PM
Posted: 4 years ago
Why Bush and Obama both bailed out corporations I have no idea. Enough is enough. If they are meant to fail and go bankrupt, then let them bankrupt. The notion that it will cause a lot of people unemployed and that it can lead to a systematic crisis to the real economy is all politics. People being laid off due to a company failing is not the end of the world to that individual. A major impact on the financial system from a company bankruptcy is exaggerated. What is worse is that the inefficiencies still linger in the system if government subsidies inefficiencies in corporations and industries. So enough is enough.
R0b1Billion
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11/9/2012 4:39:13 PM
Posted: 4 years ago
At 11/9/2012 12:42:25 PM, keepinitreal wrote:
Why Bush and Obama both bailed out corporations I have no idea. Enough is enough. If they are meant to fail and go bankrupt, then let them bankrupt. The notion that it will cause a lot of people unemployed and that it can lead to a systematic crisis to the real economy is all politics. People being laid off due to a company failing is not the end of the world to that individual. A major impact on the financial system from a company bankruptcy is exaggerated. What is worse is that the inefficiencies still linger in the system if government subsidies inefficiencies in corporations and industries. So enough is enough.

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FREEDO
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11/9/2012 6:08:06 PM
Posted: 4 years ago
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.
GRAND POOBAH OF DDO

fnord
Ron-Paul
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11/9/2012 9:37:21 PM
Posted: 4 years ago
At 11/9/2012 6:08:06 PM, FREEDO wrote:
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.

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Relevant
Posts: 5
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11/10/2012 1:48:18 AM
Posted: 4 years ago
At 11/9/2012 6:08:06 PM, FREEDO wrote:
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.

I keep hearing this. Is there a good resource where I could check out the reasoning behind this? Just using my own (small) brain, I would think that any bailout would create "fake" jobs while they slowly fail anyways.

If they aren't making enough money to survive, getting money thrown at them won't suddenly get them more business.

I realize that it's probably much more complicated than this, but these are my initial surface thoughts. Any resource would be greatly appreciated :D
FREEDO
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11/10/2012 4:09:27 AM
Posted: 4 years ago
At 11/10/2012 1:48:18 AM, Relevant wrote:
At 11/9/2012 6:08:06 PM, FREEDO wrote:
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.

I keep hearing this. Is there a good resource where I could check out the reasoning behind this? Just using my own (small) brain, I would think that any bailout would create "fake" jobs while they slowly fail anyways.

If they aren't making enough money to survive, getting money thrown at them won't suddenly get them more business.

I realize that it's probably much more complicated than this, but these are my initial surface thoughts. Any resource would be greatly appreciated :D

It really comes down to the issue of liquidity. Search it. Liquidity is really the leading force behind how well the economy does. It's the measure of how easily wealth is able to move around. During a recession, no wealth has(usually) gone anywhere. We haven't suddenly lost mountains of things. What has happened is just that wealth gets tied up; flows less easily. In a perfect economy, stimulus wouldn't make sense, since you're merely taking wealth from one place(or time) and putting it in another. However, due to changes in liquidity, which--even in a purely rational system--is inevitable due to Chaos Theory, it does make sense. Even more so in light of the fact that you don't want to continually increase liquidity. You just want to strike a balance. Over-liquidity creates bubbles, or "booms", that will inevitably burst.

By using a centralized force(the government) to strategically move wealth, either through debt or taxation, it can help stabilize the economy. Improvements to the social safety net, sometimes included in stimulus, is also very effective for helping an economy escape from recession. This is because less liquidity, and hence less social mobility, exists among poorer people.

Another way that government can affect the level of liquidity in the market is by adjusting interest rates through a central banking system. It is undeniable, both for this reason and others I have stated which are also the result of a central bank, that the economy has become much more stable since the introduction of central banking. If you merely research the history of recessions, you will see that decreased frequency and longevity of recessions coincide with banking reform.
GRAND POOBAH OF DDO

fnord
FREEDO
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11/10/2012 4:24:09 AM
Posted: 4 years ago
At 11/9/2012 9:37:21 PM, Ron-Paul wrote:

You know, I used to be a Libertarian. I would gawk at the same things.

I see that a lot of Libertarians are smart people. This is because smart people are good at theorizing. But that's really all Libertarianism is; theory. Facts led me to a different conclusion, which also helped me to learn that such simple and eloquent theories as Libertarianism can never be used to understand the world. In the real world, the facts are not made to fit the theory, the theory is made to fit the facts. The facts often look obscure and contradictory and this is because the correct theories are actually complex and filled with chaos; never so pretty as Libertarianism.

Anyone who drops ideology will have an infinitely easier time sorting through this mess. No pure theory is right. Humans just aren't that smart. And the universe just isn't that fair. If you're concerned with facts, then you're going to need to stop fighting for some moral highground.

The excuse is often made that college indoctrinates people with liberal professors. However, just perhaps, it may be true after all that researching the facts will actually lead to certain perspectives because those perspectives are the ones that those facts are accurately represented by.
GRAND POOBAH OF DDO

fnord
keepinitreal
Posts: 58
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11/10/2012 7:17:21 AM
Posted: 4 years ago
Let's say a major corporation is interconnected to the financial economy in the sense that if this major corporation fails/bankrupts that it will negative effect other companies and in the aggregate sense, the financial system as well. This is the notion of too big too fail. In economics term, this is systematic risk-the risk of one corporation failing will lead to a financial recession or financial crisis. If the financial system collapse then of course this will also affect the real economy (us non-Wall street folks). This is the argument that the Bush administration used to bail out AIG and other financial companies in 2007-2008 and why the Obama administration used to bail out the auto industry. The other arguments that politicians used is that this will lead to those employees being unemployed but really, like the argument above, it is exaggerated as political rhetoric.

Because of fear of people being unemployed and systematic risk, politicians give stimulus or aid to the failing corporations IOT give them liquidity to their balance sheet. Usually the reasons why industries, corporation, or companies bankrupt or fail is because of their inefficiencies internally. Inefficiencies because maybe their profits have been negative, they have so much liability (debt) that that their assets (income flow) can't cover the liability or illiquid assets can't cover the liability as quickly, or because of other companies just beating them in the market due to competition. So the stimulus/aid is in sense that the public sector will re-allocate wealth from the public sector (indirectly via US tax payers and private sector) to inefficient units in the private sector. However, they would use borrowed money or printed money as a form of aid to failing corporations.
If asset prices are suppose to fall, then you let it fall. By preventing it from falling because of fear of affecting other asset prices will only be a short-term solution. The inefficiencies remain and this does not imply that asset prices will not fall again due to the same reasons that caused it to fall initially.

Now let's look at the pros and cons to this.

PROS.
1. Prevented the corporations from bankrupting and failing because now they have free wealth from politicians.
1.a. Employees or workers won't get laid off as much if the company did bankrupt.
1.b. The economy won't go as a bad as it should have if the companies fail.
1.b.1. Recession isn't as bad because those companies didn't bankrupt.

CONS.
1. By giving aid to failing corporations, this just rewarded them for being inefficient. This is like (A student not studying for a test but let's say, he got the lowest score in his class-which was expected. this will lower the classroom average test score drastically and the teacher does not want this to happen so the teacher gives the student free points to raise that rest score up-rewarded the student for not studying)

1.a. This encourages a false safety net-2big2fail companies know that the government has their back if they fail.

2. Money that the government could of used somewhere else like paying off its debt or fixing roads is now being re-allocated from a more efficient area to a less efficient area.

3. Prevented a systematic risk but does this imply that the inefficiencies that caused the companies to fail has disappear and gone away? No- the inefficiencies that caused it to fail still remain. In other words, just because it was prevented from failing the first time does not mean it won't happen again in the near future.

3.a. So if AIG or GM fails and doesn't learn from their mistakes and calls for bankruptcy again-should the government give them aid again?

4. Corporations get free money but they get to allocate within their company to what areas that need money to fix the issues. remember the news about big bonuses to executives after obama bailed out companies? exactly.
lewis20
Posts: 5,093
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11/10/2012 8:27:38 AM
Posted: 4 years ago
At 11/10/2012 4:09:27 AM, FREEDO wrote:
At 11/10/2012 1:48:18 AM, Relevant wrote:
At 11/9/2012 6:08:06 PM, FREEDO wrote:
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.

I keep hearing this. Is there a good resource where I could check out the reasoning behind this? Just using my own (small) brain, I would think that any bailout would create "fake" jobs while they slowly fail anyways.

If they aren't making enough money to survive, getting money thrown at them won't suddenly get them more business.

I realize that it's probably much more complicated than this, but these are my initial surface thoughts. Any resource would be greatly appreciated :D

It really comes down to the issue of liquidity. Search it. Liquidity is really the leading force behind how well the economy does. It's the measure of how easily wealth is able to move around. During a recession, no wealth has(usually) gone anywhere. We haven't suddenly lost mountains of things. What has happened is just that wealth gets tied up; flows less easily. In a perfect economy, stimulus wouldn't make sense, since you're merely taking wealth from one place(or time) and putting it in another. However, due to changes in liquidity, which--even in a purely rational system--is inevitable due to Chaos Theory, it does make sense. Even more so in light of the fact that you don't want to continually increase liquidity. You just want to strike a balance. Over-liquidity creates bubbles, or "booms", that will inevitably burst.

By using a centralized force(the government) to strategically move wealth, either through debt or taxation, it can help stabilize the economy. Improvements to the social safety net, sometimes included in stimulus, is also very effective for helping an economy escape from recession. This is because less liquidity, and hence less social mobility, exists among poorer people.

Another way that government can affect the level of liquidity in the market is by adjusting interest rates through a central banking system. It is undeniable, both for this reason and others I have stated which are also the result of a central bank, that the economy has become much more stable since the introduction of central banking. If you merely research the history of recessions, you will see that decreased frequency and longevity of recessions coincide with banking reform.

The government is the reason for the boom and bust as their actions in the case of liquidity traps are no more informed than anyone else(like big banks) would be. Central bankers aren't any smarter by the fact that they are central bankers and even with its tools the central bank has not been able to prevent major economic downturns.
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ax123man
Posts: 317
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11/11/2012 6:23:57 PM
Posted: 4 years ago
At 11/10/2012 4:09:27 AM, FREEDO wrote:
At 11/10/2012 1:48:18 AM, Relevant wrote:
At 11/9/2012 6:08:06 PM, FREEDO wrote:
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.

I keep hearing this. Is there a good resource where I could check out the reasoning behind this? Just using my own (small) brain, I would think that any bailout would create "fake" jobs while they slowly fail anyways.

If they aren't making enough money to survive, getting money thrown at them won't suddenly get them more business.

I realize that it's probably much more complicated than this, but these are my initial surface thoughts. Any resource would be greatly appreciated :D

It really comes down to the issue of liquidity. Search it. Liquidity is really the leading force behind how well the economy does. It's the measure of how easily wealth is able to move around. During a recession, no wealth has(usually) gone anywhere. We haven't suddenly lost mountains of things. What has happened is just that wealth gets tied up; flows less easily. In a perfect economy, stimulus wouldn't make sense, since you're merely taking wealth from one place(or time) and putting it in another. However, due to changes in liquidity, which--even in a purely rational system--is inevitable due to Chaos Theory, it does make sense. Even more so in light of the fact that you don't want to continually increase liquidity. You just want to strike a balance. Over-liquidity creates bubbles, or "booms", that will inevitably burst.

By using a centralized force(the government) to strategically move wealth, either through debt or taxation, it can help stabilize the economy. Improvements to the social safety net, sometimes included in stimulus, is also very effective for helping an economy escape from recession. This is because less liquidity, and hence less social mobility, exists among poorer people.

Another way that government can affect the level of liquidity in the market is by adjusting interest rates through a central banking system. It is undeniable, both for this reason and others I have stated which are also the result of a central bank, that the economy has become much more stable since the introduction of central banking. If you merely research the history of recessions, you will see that decreased frequency and longevity of recessions coincide with banking reform.

Right, and how many centuries and trillions dollars is it going to take for keynesians to figure out just how much money to print to fix liquidity problems? For me it's too late. They already completely F*d up my retirement due to inflation. That and the fact that they practically force us to invest in the speculative market by their ZIRP policy and "controlled" inflation. There are no safe investments right now that pay more than inflation. You might also ask yourself how much they will need to debase the currency in the future just to pay off the real debt. Yea, this plan is all coming together nicely.
ax123man
Posts: 317
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11/11/2012 6:37:22 PM
Posted: 4 years ago
At 11/10/2012 4:24:09 AM, FREEDO wrote:
At 11/9/2012 9:37:21 PM, Ron-Paul wrote:

You know, I used to be a Libertarian. I would gawk at the same things.

I see that a lot of Libertarians are smart people. This is because smart people are good at theorizing. But that's really all Libertarianism is; theory. Facts led me to a different conclusion, which also helped me to learn that such simple and eloquent theories as Libertarianism can never be used to understand the world. In the real world, the facts are not made to fit the theory, the theory is made to fit the facts. The facts often look obscure and contradictory and this is because the correct theories are actually complex and filled with chaos; never so pretty as Libertarianism.

Anyone who drops ideology will have an infinitely easier time sorting through this mess. No pure theory is right. Humans just aren't that smart. And the universe just isn't that fair. If you're concerned with facts, then you're going to need to stop fighting for some moral highground.

The excuse is often made that college indoctrinates people with liberal professors. However, just perhaps, it may be true after all that researching the facts will actually lead to certain perspectives because those perspectives are the ones that those facts are accurately represented by.

Just out of curiosity, which facts are those? You're right that the real world is chaos and we humans are generally relatively dumb. But I think it is a mistake to view libertarianism as some simple-minded utopia. I realize that the message comes across that way at times. I get that. But ultimately we have to make choices and don't choices result in ideology? For example, it seems to me that collectivism vs individualism is a basic choice people make. How do you get around making that choice? Or how about the decision whether it is ok to use force to influence a groups idea of morality? YOu can argue that it's complicated, that sometimes it is and sometimes it isn't. Great then who decides when it is and isn't?

I mean some people are ignorant of the choice but I sincerely doubt you, or hardly anyone on DDO are that ignorant.
sadolite
Posts: 8,834
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11/11/2012 9:42:19 PM
Posted: 4 years ago
Not bailing out defunct banks and businesses is Un-American and anti-capitalist.
It's not your views that divide us, it's what you think my views should be that divides us.

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TheRainKing
Posts: 12
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11/13/2012 4:07:29 PM
Posted: 4 years ago
At 11/9/2012 6:08:06 PM, FREEDO wrote:
The consensus among economists is that government stimulus works and that these specific bailouts did keep the economy becoming worse than it would have.

Not to sound like Bill Clinton, but it all depends on your definition of the word "works."

I'm strongly opposed to bailouts, but I acknowledge that they "work" in the sense that they accomplish a certain narrow set of goals. However, I argue that these goals are net counterproductive.

For example, they work in that they save a business from going under... at least, right away. This might avoid some short-term uncertainty and unemployment. However, this also produces a range of undesirable effects. Aside from my personal opposition to taking from Peter to give to Paul, bailouts tamper with one of the fundamental principles of capitalist economics: that businesses rise and fall according to whether or not they can deliver a value that people will pay for.

When businesses feel the repercussions of inefficiency and bad management, they are more likely to improve because they are at risk of failure. The DMV persists despite terrible, inefficient service because they are the only game in town so to speak. You must visit them if you want to drive or register a vehicle. On the other hand, businesses who compete must find ways to get an edge over the competition.

Bailouts insulate business from that need to compete because, instead of earning their money through better and innovative services, the taxpayer is mandated to give them financial assistance under threat of force.

So, in the long run, bailouts only encourage the same behavior that led to them in the first place and increase market inefficiency by funneling money into inefficient businesses. While denying bailouts may increase short-term pain, the overall benefit of a more efficient market and better services overtime is preferable.
"And like the seasons you are also, and though in your winter you deny your spring: yet spring, reposing within you, smiles in her drowsiness and is not offended." - Khalil Gibran
Wallstreetatheist
Posts: 7,132
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11/15/2012 3:42:36 PM
Posted: 4 years ago
At 11/11/2012 9:42:19 PM, sadolite wrote:
Not bailing out defunct banks and businesses is Un-American and anti-capitalist.

What? Fractional reserve banking isn't capitalist, it relies on government rigging the game in their favor from the start via legislation.
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wiploc
Posts: 1,485
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11/25/2012 9:13:39 PM
Posted: 4 years ago
Any resource would be greatly appreciated :D

There's a book called _Points of Departure_, containing an essay called "Maynard Keynes (Rhymes with Brains) and the Mandarin Revolution." Changed my thinking.

Be careful about ordering the book though. There are at least two other books with that title.

Here's another source for, presumably, the same information: (John Kenneth Galbraith, "Maynard Keynes (Rhymes with Brains) and the Mandarin Revolution," Harvard Magazine, May/June, 1977).
slo1
Posts: 4,309
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11/27/2012 1:24:07 PM
Posted: 4 years ago
At 11/9/2012 12:42:25 PM, keepinitreal wrote:
Why Bush and Obama both bailed out corporations I have no idea. Enough is enough. If they are meant to fail and go bankrupt, then let them bankrupt. The notion that it will cause a lot of people unemployed and that it can lead to a systematic crisis to the real economy is all politics. People being laid off due to a company failing is not the end of the world to that individual. A major impact on the financial system from a company bankruptcy is exaggerated. What is worse is that the inefficiencies still linger in the system if government subsidies inefficiencies in corporations and industries. So enough is enough.

It is easy to say to let it go to h in a handbasket. It is another to truly understand the repercussions of not bailing out the financial system and saying I'm going to let everything fail. Once one understands how far down stream the financial collapse would have affected, you would have to be a cold hearted person to watch it all crumble.

Watching a forest fire burn may be the best thing for the ecology in the long run, but throw humans in the mix and sometimes it is better to try to put the fire out.

This financial collapse made the Reagan bail out of the savings and loan system pale in comparison. The world global financial system stopped lending money, even overnight to each other for a week until action was taken. It would not have just been financial companies that went under. It would have been many others who relied on financing.
Greyparrot
Posts: 14,212
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11/27/2012 1:49:56 PM
Posted: 4 years ago
At 11/27/2012 1:24:07 PM, slo1 wrote:
At 11/9/2012 12:42:25 PM, keepinitreal wrote:
Why Bush and Obama both bailed out corporations I have no idea. Enough is enough. If they are meant to fail and go bankrupt, then let them bankrupt. The notion that it will cause a lot of people unemployed and that it can lead to a systematic crisis to the real economy is all politics. People being laid off due to a company failing is not the end of the world to that individual. A major impact on the financial system from a company bankruptcy is exaggerated. What is worse is that the inefficiencies still linger in the system if government subsidies inefficiencies in corporations and industries. So enough is enough.

It is easy to say to let it go to h in a handbasket. It is another to truly understand the repercussions of not bailing out the financial system and saying I'm going to let everything fail. Once one understands how far down stream the financial collapse would have affected, you would have to be a cold hearted person to watch it all crumble.

Watching a forest fire burn may be the best thing for the ecology in the long run, but throw humans in the mix and sometimes it is better to try to put the fire out.

This financial collapse made the Reagan bail out of the savings and loan system pale in comparison. The world global financial system stopped lending money, even overnight to each other for a week until action was taken. It would not have just been financial companies that went under. It would have been many others who relied on financing.

These banks still wont give out loans. how would that be any different if they went bankrupt?
slo1
Posts: 4,309
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11/27/2012 10:02:24 PM
Posted: 4 years ago
At 11/27/2012 1:49:56 PM, Greyparrot wrote:
At 11/27/2012 1:24:07 PM, slo1 wrote:
At 11/9/2012 12:42:25 PM, keepinitreal wrote:
Why Bush and Obama both bailed out corporations I have no idea. Enough is enough. If they are meant to fail and go bankrupt, then let them bankrupt. The notion that it will cause a lot of people unemployed and that it can lead to a systematic crisis to the real economy is all politics. People being laid off due to a company failing is not the end of the world to that individual. A major impact on the financial system from a company bankruptcy is exaggerated. What is worse is that the inefficiencies still linger in the system if government subsidies inefficiencies in corporations and industries. So enough is enough.

It is easy to say to let it go to h in a handbasket. It is another to truly understand the repercussions of not bailing out the financial system and saying I'm going to let everything fail. Once one understands how far down stream the financial collapse would have affected, you would have to be a cold hearted person to watch it all crumble.

Watching a forest fire burn may be the best thing for the ecology in the long run, but throw humans in the mix and sometimes it is better to try to put the fire out.

This financial collapse made the Reagan bail out of the savings and loan system pale in comparison. The world global financial system stopped lending money, even overnight to each other for a week until action was taken. It would not have just been financial companies that went under. It would have been many others who relied on financing.

These banks still wont give out loans. how would that be any different if they went bankrupt?

They give out more loans when they are functionally operative than when they go belly up. Fundamentally as FREEDO mentioned it is a liquidity problem and it was time bound. When a fractional banking system does not have enough money to fund daily operations and obligations that is when real bad stuff happen.

Even with less competition those who are left don't have the ability to acquire new funding to expand operations to pick up the slack because in this case they were taking losses themselves and shoring up their own financial position and as a result were not able to provide financing to other companies who needed it to stay in business. This 2008 crisis had the potential to blow the great depression out of the water.
darkkermit
Posts: 11,204
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11/27/2012 10:11:04 PM
Posted: 4 years ago
At 11/27/2012 10:02:24 PM, slo1 wrote:
At 11/27/2012 1:49:56 PM, Greyparrot wrote:
At 11/27/2012 1:24:07 PM, slo1 wrote:
At 11/9/2012 12:42:25 PM, keepinitreal wrote:
Why Bush and Obama both bailed out corporations I have no idea. Enough is enough. If they are meant to fail and go bankrupt, then let them bankrupt. The notion that it will cause a lot of people unemployed and that it can lead to a systematic crisis to the real economy is all politics. People being laid off due to a company failing is not the end of the world to that individual. A major impact on the financial system from a company bankruptcy is exaggerated. What is worse is that the inefficiencies still linger in the system if government subsidies inefficiencies in corporations and industries. So enough is enough.

It is easy to say to let it go to h in a handbasket. It is another to truly understand the repercussions of not bailing out the financial system and saying I'm going to let everything fail. Once one understands how far down stream the financial collapse would have affected, you would have to be a cold hearted person to watch it all crumble.

Watching a forest fire burn may be the best thing for the ecology in the long run, but throw humans in the mix and sometimes it is better to try to put the fire out.

This financial collapse made the Reagan bail out of the savings and loan system pale in comparison. The world global financial system stopped lending money, even overnight to each other for a week until action was taken. It would not have just been financial companies that went under. It would have been many others who relied on financing.

These banks still wont give out loans. how would that be any different if they went bankrupt?

They give out more loans when they are functionally operative than when they go belly up. Fundamentally as FREEDO mentioned it is a liquidity problem and it was time bound. When a fractional banking system does not have enough money to fund daily operations and obligations that is when real bad stuff happen.

Even with less competition those who are left don't have the ability to acquire new funding to expand operations to pick up the slack because in this case they were taking losses themselves and shoring up their own financial position and as a result were not able to provide financing to other companies who needed it to stay in business. This 2008 crisis had the potential to blow the great depression out of the water.

I actually debated this against BS. He changed my mind and made me favor the financial bailouts.

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Wallstreetatheist
Posts: 7,132
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12/2/2012 1:55:21 AM
Posted: 4 years ago
At 11/15/2012 3:42:36 PM, Wallstreetatheist wrote:
At 11/11/2012 9:42:19 PM, sadolite wrote:
Not bailing out defunct banks and businesses is Un-American and anti-capitalist.

What? Federal Reserve banking isn't capitalist, it relies on government rigging the game in their favor from the start via legislation.

Fix'd
DRUG HARM: http://imgur.com...
Primal Diet. Lifting. Reading. Psychedelics. Cold-Approach Pickup. Music.