Friday, October 03, 2008

Comment in the AIG forum at yahoo.

Same here. 800B USD is too much money to spend on something that has a marginal chance of working. Fanny Mae, Freddy Mac, Bears Stears, AIG, WAMU, and Wachovia action hasn't stopped the slide, what makes you think eight hundred measly billion dollars if going to reverse the trend? Better for the US Government (the People) not to waste all that money (a substantial portion of which would go to foreign investment houses, and the rest will be used most inefficiently) but keep it to fund work projects like in the New Deal, and to fund education projects and state services. You realize how many billions a year it will take to service that debt? $50B a year just in interest! The Bush economy has been based on borrowing from the future to pay for the present. Eventually, though, the interest on the debt overtake you and you have to file for bankruptcy. You want the US govt to go bankrupt? It will if there is a depression and it carries 2 trillion in debt. It will either be: service the debt, or pay soldiers payroll. Not a good choice.

Assume there's going to be a severe recession. Property prices are still about 50% overpriced. Keeping them artificially high through a bailout will mean less mobility and flexibility long term for the US workforce (too high mortgages, not enough money to save and spend; can't sell the house, can't move to take a better job).

Let the house of cards fall, but keep the cash to rebuild something else after that. If you burn the cash now, it will be a much bigger disaster, much longer in recovering. (My wife is Japanese. It happened to their country 1989-2006. It wasn't pretty for the common salaryman. You wonder why they work until 10 pm every single night? They had to to meet expenses.)

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