Originally Posted by ChrisLKKB
For those who think the $700B is a bad idea...
(excerpts from The Bailout: Myths, Half-Truths, and Inconsistencies ).......etc.
Some of the biggest myths floating around is that its all to save the markets. That isn't strictly true, its more about saving the monetary system, that is why the stakes are so high. You could arguably say that the markets are the monetary system but that is only partially true. The markets are the visible elements of the monetary system and they are responding to parts of the system that are largely invisible but are the backbone of every financial transaction that takes place. At the heart of all of this is trust, and that is what is in short supply. Banks do not trust each other, and with good reason. We see an ever increasing number of banks fail, and now banks that have rescued other banks fail, the monetary system slowly, but surely breaks down. Would I want someone to pay of a debt with me with a fistful of derivatives? NO. Would I want them to pay cash? that's better. What I really want, is my debt to be settled in gold or some other commodity. I have lost confidence in money, that's what's going on right now. Oil prices and other commodities will see saw in apparent disorder against world demand because they are seen as a refuge protected from some of the current dangers. We have already seen this with oil prices. $120 down to $90 a barrel, all in a heart beat. Did the world demand for oil change that much? No.
No politician ever explains any of this, probably because they don't understand it themselves, or they think we are too dumb to understand. What the feds are trying to do is restore confidence, or trust, back into the system. They want to do that by taking out the bits that scare the money men.
WWW said, (I think) that $700 billion would not be enough and the bailout should not go ahead. I feel he is partially correct. $700 billion is a fraction of the bad debt (btw we are not talking ALL debt, just the rancid bits). To sanitize the full extent, $5 trillion? The feds feel that the lower $700 figure is enough to restore enough confidence and get the system to sort the rest under its own steam. I feel they are right to try this, it may work, although its effectiveness diminishes as the delays continue.