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America's economics - Bailout failure





Skye001
"The real problems came on the Republican side - where a large majority saw this as an un-American measure which flies in the face of the basic rules of capitalism. "
- BBC News
http://news.bbc.co.uk/1/hi/business/7643199.stm

I am a keen investor, but when I heard that American lawmakers rejected the congress bill it sent shivers down my spine. The main reason not to bail out the Fat Cats!

Please!!! I have heard american people say that the bill should fail, the banks should pick up after themselves and the FAT Cats...

People this aint like the dot com bubble burst... this is the finance industry! The very back bone of world's economics. If america goes down consider a huge domino's affect effecting everyone!

America spends trillions on war, has no health care system and when something really important was needed it was rejected... America needs to remove its war mentality for a stable infrastructure...

What are your views?
bogger
the bailout shouldn't have been required, it was poor economic policy that got them there in the 1st place.

However, yes, I think you need it, and I think that the election is going to seriously mess up the chances of this passing.

I've been on holidays, so I only have a small understanding of the whole going ons.

maybe someone could post a description of what exactly the bill was? (summarised, Razz)
LumberJack
Bogger, in a nut shell, the bailout plan was the government purchasing 700 billion of the worst graded debt structures (subprime and the whole lot of them), at a price they really could not come to an agreement on. Congress was afraid of taxpayers paying too much for a lot of crap, without really any guarantee. Banks pretty much did not want to sell it really low. A very expected impasse, even without the partisan politics and drama. There were people who said if this was done properly, Americans may stand to gain a buck or two from it, but it is really really risky. In reality, this plan would not have really fixed anything, there is a lot of crap to hit the fan yet. It would have just delayed the inevitable really.
LumberJack
On another note, what the markets really need is an "economic stabilization plan" (with all the spin doctors in the USA, I don't know how the Paulson Plan ended up dubbed the "bailout" plan, it was setup to fail from the get go)

Here is my two cents on what will prevent a depression (a recession is here my friends):

3 things are needed: Confidence, Time, and PROPER policy to prevent such BS from happening again. Wall Street and Main Street are in the midst of a Paradigm Shift, 2 years from now nothing is going to look the same.

Confidence is pretty much bring back liquidity to the markets. No one wants to lend to each other right now, Balance Sheets are useless and no one is taking any risks. Banks are not even lending to each other.

Time is required to so financial institutions are able to take the hits on their income statements. The banning of short selling will help immensely as people were profiting from driving their stock down, making it impossible for them to raise capital. Some of the volatility in their stock prices should be eliminated.

Regulation. Well, this is the most difficult. Credit Default Swap Market must be regulated. I am not sure really how. I would like to see limits on how much leverage can be on the markets. A more comprehensive system of credit ratings would also assist investors. It cannot be done in a week or two. Someone needs to dedicated the next 3 months to getting the logistics of this done...
lagoon
The Senate are going to vote on a revised bailout plan in about an hour.

I'll be interested to see the result, as it could determine the presidential winner.
bogger
it'll be a no. Ireland has gone for an interesting bailout plan now.

400bn worth of contingent liabilities, with punitive interest rates, it's a short term fix, but is meant to do nowt but increase consumer confidence, which it has done, and mightily so
LumberJack
I also heard that Ireland was going to provide unlimited deposit insurance. Is that so? Do you think it will result in a lot of capital flight into Ireland?
bogger
only the first 100k is guaranteed in each account. this was required, as beforehand everyone had multiple accounts of 20k each to minimise risk. now they can close their accounts again
ptfrances
interesting information... Thank you t Wink
OpposableThumbs
I'm not a right-wing Republican (or indeed a Republican of any kind). But I love watching Republicans who think the "invisible hand" of the market should decide the fate of medical care, retirement, and all sorts of things that should be supported by the Federal Government, all of sudden want the government to step in with a 700 billion dollar bailout. And, oh, while we're at it (Republicans continue), let's cut taxes because we don't want big government running our lives.

And, by the way, it doesn't look as if the 700 billion dollars has done a thing to help the stock market, either in the United States or in the world economy.

And frankly, all the patriotic fat cats who simply want to keep the American Economy going should be the first to volunteer their millions and billions to help the cause.
pamelahicks
The country did not want this bailout, and we made it very clear... but it happened anyway. That doesn't seem very much like democracy at all.
jonchalk
LumberJack wrote:
I also heard that Ireland was going to provide unlimited deposit insurance. Is that so? Do you think it will result in a lot of capital flight into Ireland?


British Columbia's Premier announced a few days ago that they will also provide unlimited deposit insurance, however only for Credit Union account holders.

As for the bailout in the US - a little, too late. While nations around the world are implementing immediate changes and providing economic help at all levels - from the consumer to companies, which could stimulate the economy or at least slow down the downturns, the US is still "talkng" about it. So far I have not seen action.

Take British Columbia (Canada) for example. They have cut personal and business taxes that became effective immedately, thus putting more money in pockets for spending or at least to hold in savings accounts. Another immediate impletmentation is to promote credit education.

I also have noticed that countries around the world are eagerly awaiting the results of the US elections. It seems that they are counting on Obama winning and if so, that he may be (no pun intended) the change that is needed to make a positive improvement in the world economic crises.

I also get the impression the planet is holding their breath for the results of the US elections.
JessieF
pamelahicks wrote:
The country did not want this bailout, and we made it very clear... but it happened anyway. That doesn't seem very much like democracy at all.


Well, the second bailout plan went through, but at 2 billion dollars instead of 200 million. Just the other weekend, that company(I believe it was Fannie Mae) was caught spending 31,000 dollars on their 20 executives just so they could play golf! Tax payers are paying these idiots to play golf! I swear, if they go bankrupt again, I will be extremely pissed if another bailout plan is made, because by then, I will be working, and I refuse to pay taxes just so those guys (who're already rich and can pay for the game themselves) can play golf. Not paying taxes is not illegal, just lying on your income tax is. xP Of course, considering some consequences....might as well pay. >.,<
grashopa
None of the bailouts will work as you cannot replace the amount of money that was in the system after the credit bubble we had and no one will jump back in on the back of the government putting money in because government money will be taken out of the system at some point whether it is 3 or 5 years from now and that leaves you back where you started with a big chunk of money coming out.

The bubble was based on borrowing money for 6 months and never paying it off. You simply found someone else to borrow money from for another 6 months. In this way there was no limit to the amount of money you could borrow since you never paid it off, you just borrowed more money. So the size of the borrowing became a huge bubble 100s of times the size of our government's debt. It all stopped when after the last 6 months no one was there to lend you money for another 6 months. The government does not have enough money to become the lender here to this market.
Skye001
Well the new president Mr Obama, is planning to raise a 200mill stimilus package for the stock market, the american budget deficient is 10trillion i think as soon as he gets into office.

Its like a tsunami, you cant stop it but you can raise the flood gates higher but its still going to flood ya arse!

Alot of companies are now going to China for aide, so watch the economic power factor swing from left to right in the coming months / years.

But the best solution so far has been nationalisation!
seagod
Also,Asia and other continent.
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