Image via Wikipedia Are you tired of tax payers having to pay for the mistakes of a bunch big shots on Wall-Street? Ready to storm Washington and throw out all the nit-wits that suggested bailing out AIG and the earlier companies that crashed?
Well before you get too concerned about how the US Government is spending your money, let’s talk a bit about whose money it is. First, about that loan. If you are one of the very, very few Americans who does not have a mortgage, credit card debt, or a car loan, you can skip to the next paragraph. If you are certain that you can sell your house for more than your total debt load, you can also skip to the next paragraph, but remember that most houses are not worth as much as you think and there is still room for them to go down more. So you owe money to a financial institution right? And the financial institute owes money to its investors. Guess who those investors are? The money being used for the bailout may not be yours anyway.
So you still have money in your pocket? Congratulations! But what is that money? Paper, right? How much is that worth? What gives it value? A promise from the government. Who owns the government? The people? Well, kind of, but which people? America is in debt. Who owns all the debt? The people? Yes, but which people? US citizens own part of the American debt, but so do Chinese citizens, and people from all over the world. One of the biggest owners of American debt, though, is the Chinese government.
So in reality it is not the taxpayers money at all. The money belongs to anyone that owns American debt (primarily T-Bills if you are wondering). This bailout is coming courtesy of China. So instead of asking how long will Americans put up with all the bailouts, a better question is, how long will China put-up with these bailouts. And the answer is, probably quite a while. Why? Because American purchases are still worth millions of dollars. As a seller, you never want to put your customers in a situation where they cannot buy anything else. China has a lot invested in making sure that their biggest customer stays stable.
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Luke,
My question to you is, doesn’t the printing of all this money just make those T-Bills worth less? In reality the bailout really “stole” (depriciated) money from the American people and Chinese investors.
Matt,
That is an interesting way to put it but yes the more cash there is in the system the less valuable it is, but if China and the other major holders of US debt allow the US economy to collapse they risk losing everything instead of just 10% per year.
Why can’t our government come up with a better bailout plan?
California, (can I call you Cali for short
)
The reason they cannot come up with a better bailout plan is that they were not hired for this purpose. Thus we did not try to find people who are qualified to make decisions like this.
In my opinion, all the American politician is qualified to do is deliver grand speeches, written solely for the purpose of getting the politician elected and re-elected.
Luke,
Although the money can be traced back as a Loan from China, one can’t help think why $700bn can be found to bail out banks but not help the schools and renewable energy etc.
Although we obtained the money partly from China, it’s still up to us what we should do with it. Bailing out a bunch of failing companies just so they can repeat the same mistakes over and over is a bad idea.
Todd,
see the problem is that you think a democracy and a republic are the same thing. if this were a republic (as it was intented to be; “power to the people”) then we would have a say in all aspects of our government. In this democracy that we have been handed (almost socialist now by my calcualtions) the power resides with our elected officials. I will note that if you say the pledge of allegiance, no where in the pledge is the word democracy spoken, but REPUBLIC IS !! The time will come someday when the people will be fed up with the corruption of the system. It is only a matter of time. Keep fighting the good fight and stay INFORMED. bye
Matt,
I hate to rain on your parade, but you actually have the definitions of republic and democracy reversed. Also the founding fathers intend for the USA to be a hybrid of both, a democratic-republic.
I do agree, though, that the people should be more informed and more involved in the governing of the nation.
Todd,
I am very strongly in favor of the principles capitalism. I believe that if you allow a company to fail before it gets into the huge mess that America’s companies are in you can save much greater misery in the future. The problem is that for the past 50 years we have not allow a healthy rate of failure.
At this point if all the unhealthy companies closed their doors at once we would have another great depression making the 30′s look splendid by comparison.
I am not opposed to a full reboot of the economy, but I can definitely sympathize with those who are trying to deflate the economy slowly.
Did anyone see the reaction of the audience when Geitner made his recent trip to China and stated that China did not have to worry about the dollar?
A couple of points:
First, we have to see for how long China and other contries will be willing to buy American dollars. In the last summit in Moscow, a few countries talked of the necessity of having a new currency that would substitute the dollars as the main currency of doing business. In addition, the chinese government has already talked about slowing down the pace at which it buys dollars.
Second, it is obvious that the more dollars there are for the same or even less amount of assets, the lesser the value of those dollars is. It is just a matter of time before the adjustment is made.
China practically owns our economy, ever see anything anymore that isn’t made in China on the shelves? They have a huge vested interest in keeping us propped up…
Thanks Luke. Never look at it from this angle before. On one hand, it seems that China is happy to see US falter. But on the other, China has so much stake in US that they cannot allow that to happen. So who is doing what to each other? Politics…:)
.-= Col´s last blog ..Probiotic Advantage and The Benefit of Lactobacillus Acidophilus =-.
They are printing money that is backed up by nothing. The fed needs to be audited and people put in jail
The biggest problem is that people are not taught what money truly is. Most people think that money represents the value of some product or service and was in fact created by some person’s work. If this were true, then if every single person who owed money, aid their debts off, there would be a balance of zero in this world….unfortunately this is not the case. Over 90% of the money circulating and being spent in this world was in fact created out of nothing…it is credit. This system works great as long as people and corporations are keep borrowing and spending and banks(and countries) keep lending. Many people don’t realize this. Our entire financial system is a house of cards that is on the brink of collapse.
On a side note….the China/U.S. fiasco is the biggest Ponzi scheme in history. It makes Madoff’s look like chump change. If he got 150 years, the policy makers should be getting in the ballpark of 20,000 years.
Life Quotes – I second that suggestion! Those politicians that make billions off the commoners or spent billions off just to make themselve look good deserve 20,000 years.
.-= Col´s last blog ..Probiotic Advantage and The Benefit of Lactobacillus Acidophilus =-.
what about bailing out the worker, are they giving massive tax breaks to companies who will stay in the US, are THEY the GOV giving incentive to hire Legal Americans to work there since they are not what does that tell you about what they think of you
What seems funny is China is taking better care of the US than our own gov, they buy our T bills so we can buy there products, our own gov does not do anything so we can buy OUR own products, so many of us are unemployed and they do nothing. they try to take our guns, they try to take our rights away like freedom of speech, we can only say the correct things so that nobody is upset, waaahhhh. Maybe they should GIVE trillions of dollars to the banks again who wont lend it back because everybody is laid off, funny how that works