The Truth About Bailouts

[ytowner]

Some are accusing the Republicans of wanting to help those on Wall Street and not those in the auto industry.... that is bull.

Do the people saying this even realize that it was the Republicans that were against these bailouts from the start. I am still angry as hell that $700 billion one passed. Since then the markets have fallen even more and tens of thousands of jobs have been lost.... UGH

[AllanY2525]

One of the reasons the government is bailing out Wall Street is that there was
not ENOUGH regulation, and Wall Street got GREEDY and STUPID.  Loan brokers
made MAJOR bucks on commissions by selling bad loans to people who could
not afford them - where did THAT get us, here on Main Street?

Securities brokerages took mortgage debts and re-packaged them as securities
to trade in the market - and where did THAT get us, here on Main Street?

The auto industry has been allowed to keep on manufacturing the SAME old
internal combustion engines, running on the SAME old fuel, for about a century
now - when, in point of fact, we have had the technology to get away from
this much outdated design for quite some time now.

When the car companies start building cars that are high-mileage, friendly to
fuels OTHER than Gasoline [and deisel], and still durable, affordable, and have
quality of materials and workmanship - with a good warranty to back it all up -
then maybe folks will buy the cars and the big three will "Get to make a little
money".

If the car makers wanna save money on labor costs - START AT THE TOP and
cut the salaries of those making the MOST money, rather than cutting from the
bottom up and hurting the working Joes that have families to feed.

[Elmo-Ytown]

How about we stop heavily regulating these companies and let them make a little money, then we won't have to bail them out.

[ytowner]

Truth is they are a dumb idea.

[irishbobcat]

The Truth About Bailouts       
      

       

November 25, 2008
by Peter Schiff
As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit's depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn't have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy.
The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What's worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.
When it comes to bailouts, the real discussions are not centered in Washington but rather in Beijing, Tokyo, and Riyadh. With no money of our own, our ability to bailout our own citizens is completely dependent on the world's willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.
Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to "lend" us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.
If Washington bails out General Motors, the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of "green" cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering "legacy" costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.
Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.
So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.
This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.
Peter Schiff C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.
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No more bailouts without strong enforcement of the taxpayers getting their money back!

Dennis Spisak
Ohio Green Party

www.ohiogreens.org

www.votespisak.org/thinkgreen/