[quote=cabal]
First, let’s agree the intent of the bailouts were to defend this country against an economic collapse. What you’re talking about now is effectiveness and here we have some common ground. I posted this relatively updated bailouts tracker link in another thread.
If you view the bailouts in totality, it’s clear to see this shotgun approach attempted to benefit the greater population either directly or indirectly. Yes there’s lots of giveaways, but while some were focused on banks, I was more interested in things like the liquidity of the bond market, especially the billions in corporate debt maturing in 08/09. If businesses were unable to refinance their debt, or if the cost of borrowing doubled/tripled, or if credit ratings were downgraded, there is absolutely no doubt in my mind the resulting next wave of cost cutting measures across fortune 500 companies (layoffs, inventory purge, etc) and subsequent domino effect to the econmy would have put us in a depression. The world may not end, but the suffering would have been intolerable to the point the govt would have taken action anyways. I agree it is kicking the can down the road, but kick it far enough and the pain gets diluted and manageable.
[/quote]
cabal,
Have you ever considered the possibility that interest rates are **supposed to be** higher than they’ve been for the past few years?
Has it occurred to you that the low interest rate environment is one of the leading causes of the “crisis” because fixed-income/bond investors were forced to reach for yield and had to move into riskier assets in order to meet their projected returns (think: pension funds)?
When you say the bailouts are “benefitting” the masses, are you assuming that high asset prices/costs are a good thing when people’s wages are stagnant or declining? I couldn’t disagree more.
Have you thought about the fact that deflation can be a GOOD thing, as market distortions and excesses can be wrung out of unproductive sectors and reallocated to more productive and useful sectors?
Low interest rates can be both a cause and effect of a loose credit environment. IMHO, the past decade was an example of low interest rates causing loose lending (thanks to Greenspan’s refusal to allow markets to reset when they needed to), which led to the “credit crisis” as markets tried to normalize and reverse years of Greenspan’s market “medicine.”
