Welfare for the rich - $700 billion bailout

[rnatalli]

Aberkowitz has some good insights as always. I'll add this, people need to stop thinking the debt is going to sink the country. The US GDP is about $13 trillion per year and the debt about $11 trillion over several. There are two strategies basically with dealing with this debt. First, try to pay it off by cutting spending and second increasing income. Increase the GDP at a faster rate than the debt and all is good. If you take a good look at history, you'll see the government's debt-to-income ratio was far worst after WWII which showed national debt at about 125% of its per year income. Granted, the debt total is approaching an uncomfortable level, but there's a way to go before it sinks us. Its this very perceived panic that is adding fuel to the fire.

 

[MinusTheBear]

The dow is down 500 points right now. Lots of uncertainty on wall street. I think they are ready to vote on the bill this afternoon.

 

[itschris]

The dow is down 500 points right now. Lots of uncertainty on wall street. I think they are ready to vote on the bill this afternoon.

Fundamentally, things are sound. I've personally invested just over $20k in the past 10 days. Large money managers have been churning and profit taking over the past few days with the huge swings. The only thing we're worried about on our end is being bought out. I doubt that'll happen because our stock price is not bargain for the financials, but you never know. Things will settle down once the hysteria dies down.

In a few days, something new will happen and everyone will care less about this.

 

[rnatalli]

The dow is down 500 points right now. Lots of uncertainty on wall street. I think they are ready to vote on the bill this afternoon.

I say let the market fluctuate; that's what they do. If they were always stable, it'd be tougher to make money. Investors aren't going anywhere as there are a lot of deals to be had right now.

 

[itschris]

Well... as of now, the bailouts dead. It's ridiculous. Pelosi sure didn't help with her blather. I wonder what happen if Democrats skipped just one opportunity to politicize anything. I wonder. Would their approval rating grow beyond 20% seeing that they hold the majority? I wonder what would happen if just once, they could actually put the country beyond their own political celebrity? I wonder if their approval rating would drop any further if they didn't blame Bush for literally everything that ills our world? I wonder.

 

[adk highlander]

Well... as of now, the bailouts dead. It's ridiculous. Pelosi sure didn't help with her blather. I wonder what happen if Democrats skipped just one opportunity to politicize anything. I wonder. Would their approval rating grow beyond 20% seeing that they hold the majority? I wonder what would happen if just once, they could actually put the country beyond their own political celebrity? I wonder if their approval rating would drop any further if they didn't blame Bush for literally everything that ills our world? I wonder.

Common Chris that is just crap. Both parties politicize everything and I don't know what happened and why the bill did not pass. I know we all have our opinons but your statements above prove you have blinders on and are as one sided as those you oppose.

 

[D.R. Payne]

I am not defending Pelosi, but come on: if anyone actually changed their vote because one of their fellow talking heads said something "that hurt their feelings" right before the vote, then they are in the wrong occupation...

 

[itschris]

Common Chris that is just crap. Both parties politicize everything and I don't know what happened and why the bill did not pass. I know we all have our opinons but your statements above prove you have blinders on and are as one sided as those you oppose.

No you're right. I'm not blaming Pelosi for the failure. Looking at the roll call there were more Republicans bailing than Dems from the quick look I took. I meant the Pelosi thing as a seperate issue. I simply fail to see the purpose of using the time to rail against administration. There was no need for that... not then. It was cheap and done for nothing more than political value.

Believe me, there was plenty of cowardice on both sides of the aisle on this vote. I just hated the way she took that opportunity to beat the drum. I should have been more clear.

 

[itschris]

No you're right. I'm not blaming Pelosi for the failure. Looking at the roll call there were more Republicans bailing than Dems from the quick look I took. I meant the Pelosi thing as a seperate issue. I simply fail to see the purpose of using the time to rail against administration. There was no need for that... not then. It was cheap and done for nothing more than political value.

Believe me, there was plenty of cowardice on both sides of the aisle on this vote. I just hated the way she took that opportunity to beat the drum. I should have been more clear.

Beyond all that, with every dollar drop of our stock, we become more appealing as one of the next buyouts. Our assets alone would be worth a buyout if we drop about 30-40%.

What I want, from both parties, is to stop pointing fingers and put the country first. Stop worrying about whether or not you'll get re-elected and do the business of the nation. Most people simply do not understand or have a firm grasp at what's at stake. Sometimes politicians need to do what right for the country as opposed to what's right for them. I don't want to hear another peep out of the Pelosi, nor do I want any Republican nobody out there trying to make a name for himself by pointing fingers either. They just need to do their job.

 

[adk highlander]

No you're right. I'm not blaming Pelosi for the failure. Looking at the roll call there were more Republicans bailing than Dems from the quick look I took. I meant the Pelosi thing as a seperate issue. I simply fail to see the purpose of using the time to rail against administration. There was no need for that... not then. It was cheap and done for nothing more than political value.

Believe me, there was plenty of cowardice on both sides of the aisle on this vote. I just hated the way she took that opportunity to beat the drum. I should have been more clear.

I understand what you are saying. After last night and the love fest and "we have a bill line" that I heard from everyone I cannot believe this has happened. I think the anger we feel has nothing to do with our political opinions it is just a "you have to be kidding feeling" that at this point there are those that are making this plan fail for issues that have nothing to do with what the bill is actually supposed to do.

 

[MinusTheBear]

I just hated the way she took that opportunity to beat the drum..

This is what politics is all about. They are all opportunists, that is why they are in politics. You just can't single out one party or person. Both are guilty!

 

[mtrycrafts]

Wrong. Japan is the big one and has been for some time now:

....

Yes, but China is closing the gap

 

[rnatalli]

Failed bills and all this chaos is part of democracy. It's slow, painful, and downright stupid at times, but still beats the alternatives.

 

[mtrycrafts]

...
Second- You have to stop equating government debt with consumer debt. When you and I take out a loan, we have to pay everything back along with interest and normally at rates that are unfavorable to us. .

Yes, but we could refinance, take out an interest only loan, and just keep taking it out until we go bankrupt.
But, my question would be, while it is as you indicate, the US debt is constantly renewed, why would we not want it ever paid off or payed down to nothing over time?
When the interest rate on the debt in the past was high, the interest was as much as the Defence Department budget. Like another empty millstone around the government's neck.

 

[mtrycrafts]

Aberkowitz has some good insights as always. I'll add this, people need to stop thinking the debt is going to sink the country. The US GDP is about $13 trillion per year and the debt about $11 trillion over several. There are two strategies basically with dealing with this debt. First, try to pay it off by cutting spending and second increasing income. Increase the GDP at a faster rate than the debt and all is good. If you take a good look at history, you'll see the government's debt-to-income ratio was far worst after WWII which showed national debt at about 125% of its per year income. Granted, the debt total is approaching an uncomfortable level, but there's a way to go before it sinks us. Its this very perceived panic that is adding fuel to the fire.

Maybe the thinking process that it is compared with GDP is not appropriate?
That GDP is in private hands mostly, not the government's income.
Someone has to pay the interest, and that comes from taxation, no? From us.
Do we really want to pay interest in perpetuity, ever increasing?
I'd rather not have interest payments in perpetuity

 

[aberkowitz]

But, my question would be, while it is as you indicate, the US debt is constantly renewed, why would we not want it ever paid off or payed down to nothing over time?

I'm going to need to channel my inner Alexander Hamilton to answer this properly .

Your argument was the same thing that was presented by many of the founders including James Madison, which was that being in debt was a bad thing for a young, struggling country. Hamilton argued the opposite, saying that the country should have a national debt (although I don't know if he could even comprehend 10 trillion) in order to establish the concept of "the full faith and credit of the United States". That term is incredibly powerful today- if the US government says that XYZ has value of $100, and it guarantees it, then XYZ is worth $100. It's exactly how our monetary system works. Hamilton understood that by building up a debt and continuously making good on our interest payments would provide the US with the financial backstop to borrow more as time goes on, particularly during the rough times when we needed it. It's a bit counterintuitive to the way personal lending works where you generally have limits on how much you can borrow based on the collateral you have. What Hamilton sought to establish is a limitless source of borrowing for the US based on the fact that we have pristine credit and would never default.

The only way the US was able to get through WW2 was through our ability to limitlessly borrow. Debt/GDP was at 140% at one point, but the government was able to continuously issue war bonds to raise more money.

Pulling back to today, I don't disagree that the debt needs to fall somwhat based on the debt/GDP ratio- it should probably be in the 60% range as opposed to the 80% range- but nobody knows the "right" range. Wiping out the debt is silly, given that there's very high demand for it and investors see it as a safe haven. The government always borrows at the lowest rates on the market. If the government can borrow at 2% and then "lend" at a higher rate, it's always worthwhile to have debt.

Now, the deficit is a different story. We should try as hard as possible not to be running large yearly deficits because it shows that we are managing our budget poorly- either spending too much or not collecting the efficient amount of taxes (99% the former, 1% the latter).

 

[haraldo]

Really really great idea to provide $700 B to companies that's not going to survive anyways

 

[Rickster71]

Ignore the dramatic headline over this clip. I think they're all to blame.
Though the clip itself is interesting:http://www.youtube.com/watch?v=UVVVzEKauzY&feature=related

 

[Mort Corey]

If the government can borrow at 2% and then "lend" at a higher rate, it's always worthwhile to have debt.

For the last (quite a few) years we've kinda been doing that bass-ackwards. Treasury issues debt at approx 4-5% and the Fed loaning money below the rate of inflation and the rate of the notes. Really strange has been the last week or so with people purchasing Treasury instruments at a negative rate....now that's a deal

Mort

 

[aberkowitz]

For the last (quite a few) years we've kinda been doing that bass-ackwards. Treasury issues debt at approx 4-5% and the Fed loaning money below the rate of inflation and the rate of the notes. Really strange has been the last week or so with people purchasing Treasury instruments at a negative rate....now that's a deal

Mort

Yeah- there was a period where we had one screwy yield curve. Looked like a "U".