Residents express doubt about bailout
By Katie Pizza
Argus Observer
Monday, October 6, 2008 10:27 AM PDT
Ontario—A number of area residents interviewed Friday on the streets of Ontario expressed nearly unanimous disapproval of the $700 billion Congressional financial bailout.
Many, including several who did not wish to divulge their names, said the funding bailout package hurt, rather than helped the nation.
Local resident Jose Schmerber expressed a succinct opinion when asked if the bailout plan was a good idea.
“Heck no,” Jose Schmerber said. “Because we need to put more money towards our schools.”
Ontario resident Aaron Ballou also believed the funds were misdirected.
“I think the money can be used for better things,” he said. “Like education, war vets, helping senior citizens and low-income housing people. I feel our veteran’s aren’t getting treated properly.”
The United States House of Representatives voted 263 to 171 to pass the bill Friday.
The legislation allows the treasury to buy $700 billion in bank assets, with $250 billion available immediately.
While the funding measure is designed to help out the struggling American financial industry but the bill is also loaded with plenty of other perks, including $5 billion for higher education tuition deductions and $400 million in deductions for teachers who buy school supplies with their own money.
The bill also clears the way for $110 billion dollars in various other tax breaks.
Other items of interest in the bill include: Funneling $478 million to filmmakers and producers who produce their movies and television shows in economically depressed areas;
$758 million in electric car tax credits; $100 million to help pay for NASCAR and other motorsport racing facilities depreciation; $2 million in tax-exemptions for employers who give fringe benefits to workers who bicycle to work; $49 million in damage awards for people hurt by the 1966 Exxon-Valdez oil spill and $2 million exempting children’s wooden practice arrows from being taxed.
“I don’t think they deserve any of that stuff,” one resident, who wished not to be identified, said.
However, another woman who also declined to be named, said she believed the bailout was a good idea.
“I think our country needs it,” she said. “Because if we don’t, it’s going to hurt small business.” Area resident Irma Ramos expressed the same viewpoint.
“I think it’s bad,” she said. “It’s not right. Why do they need to spend all the friggin’ money?”A Fruitland resident was also concerned.
“It’s not good,” Marilyn Ohler said.
Michael Allen wrote on Oct 20, 2008 7:47 PM:
The Truth is that we now require about $5 of debt to generate $1 of GDP.
The Truth is that the reason you were not asked to approve $700 billion to capitalize 10 new banks, thereby creating seven trillion in lending capacity is that the economy cannot soak up that new lending capacity; each dollar of new debt generates almost no aggregate GDP. If this were not true then that would be the logical and effective cure for the 'credit crunch" - if the borrowing capacity and impact on GDP necessary to help existed. They do not.
The Truth is that you were lied to about the purpose of the TARP/EESA, because what you were sold was mathematically impossible. It is supposed to be unlawful to lie to Congress.
The Truth is that the purpose of the EESA/TARP is to rescue the bankers on Wall Street and elsewhere who have made imprudent loans, all of whom are aware of the declining value of a dollar of debt in the economy - a fact they have intentionally concealed from you. The bankers (including Hank and Ben) all know how to do this math, and they are well-aware that the best they can do at this point is to "Rob every dollar you can while the getting is good, and hope they don't figure it out before you get the cash."
The Truth is that once you reach a level where a dollar in debt will not support a dollar in GDP you must inevitably either pay down or default that excess debt. Unfortunately, in this case we must pay down or default approximately 80% of the aggregate public and private debt in the United States in order to return to a standard were $1 in debt will generate $1 in GDP. Defaulting or paying down less will "turn the clock back" to a degree, but does not change the ultimate outcome. Only returning to $1 of debt returning $1 or more of GDP, and holding the total level of debt outstanding at or below that level, results in a stable monetary system.
The Truth is that the monetary and banking system is inherently unstable until and unless this is done, and as the "zero point" is approached it becomes more and more unstable, producing more and more violent dislocations. This is why every crisis since 1968 has been more serious and required larger and more intrusive interventions to calm, including the 1970s/80s energy shocks and inflation crisis, the 1987 market dislocation, the LTCM crisis, the Tech Implosion and now the Credit Bubble/Housing crash.
The Truth is that the absolute worst thing you can do when "in the hole" like this is to spend even more on a deficit basis, thereby driving the debt ratio higher and return-per-dollar-of-debt in GDP lower. The last eight years have been disastrous in this regard.
The Truth is that the TARP/EESA and other "stimulus" and "rescue" packages, which now total more than $1.6 trillion dollars, have dramatically tightened the spiral depicted above. The above graph does not include the impact of the Fannie and Freddie rescue nor of the EESA. Both will move the return-per-dollar-of-debt meaningfully lower.
The Truth is that $7 trillion in new lending capacity, if it was put into the market and utilized, might well push the aggregate rate of return for $1 in debt below zero - that is, force it to a negative rate of return. Ben and Hank know this, which is why they didn't propose that solution, and why they did not force the bankers (under law) to lend out the recapitalization they provided.
The Truth is that if we reach the point where a dollar of debt has a NEGATIVE impact on GDP The United States monetary system and government will implode. The reason for this is mathematically obvious - each additional dollar of borrowing beyond that point actually contracts GDP instead of growing it; this is, for all intents and purposes, a "black hole". It is that event that has led to the implosion of other monetary systems such as the hyper inflationary implosion of Argentina.
The above are mathematical facts, not my or anyone else's opinion.
It is your job to safeguard this nation and prevent this outcome, even if you are lied to or have these facts concealed from you by people who know better.
We are dangerously close to that event horizon and your actions are bringing us closer to it, not moving us further away.
Debt that cannot be serviced must be defaulted. While it sounds counter-intuitive, the "bad mortgages" must foreclose, not be reworked. All of them.
House prices must fall to no more than 3.5x incomes on a median basis.
Corporate debt (e.g. LBOs, etc) that cannot be serviced under existing terms must be allowed to, and indeed encouraged to, default.
The contraction in outstanding debt that this will produce must occur, and the economic impact that results from it, while painful, is far less painful than a monetary system failure.
A monetary system failure is inevitable if we reach the point where one dollar of new debt no longer supports a positive contribution to GDP.
Again: This is mathematics, not social science or politics. It is not subject to your or anyone else's desires or political aspirations. It is as certain mathematically as is the fact that 2 + 2 = 4. "