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Date Posted: 12:33:52 07/20/09 Mon
Author: Jeffman
Subject: Re: Actually, I kind of doubt it
In reply to: Paul Davis 's message, "Actually, I kind of doubt it" on 06:04:15 07/20/09 Mon

Which is why a stimulus wont do crap. It wont put people back to work. All it will do is deepen the hole being dug.

I also dont see how continuing to allow banks to hold tax money is helping anything. If they are bankrupt then they are bankrupt. Giving them a trillion more dollars to sit on wont make them any less bankrupt and it wont help them write off these bad loans.

From my perspective we are propping up entities that need to be allowed to go bankrupt.. not all at the same time but they have to go...otherwise we wont see the end of this mess for alot longer.



>In a "normal" recession, business is oversold,
>business drops, prices drop, business has layoffs,
>business is profitable again, business recovers.
>
>That's not at all what is happening now.
>
>What's happening now is that over 100 trillion in bad
>loans were let out by scam artists, essentially.
>These bad loans were repackaged in such a way that
>they filtered into the entire economy - hell, you'd
>just as soon say the entire economy since 2000 was
>based on them, because it was. As of right this
>minute, we now have FEWER JOBS in the USA than we had
>exactly ten years ago on this date. We'll end the
>decade with negative job growth almost certainly -
>over a 90% chance as things would have to turn around
>dramatically in the next four months, and nobody is
>laying bets on that.
>
>Anyhow, we based the entire economy on this fake
>paper. Remember that debits equal credits, and
>credits wind up in banks, where the credits are lent
>out again at a rate of seven to one or higher. That's
>how we get a quadrillion dollars (not my figure, world
>bank figure) of "stuff" based on a small fraction of
>that in loans. Crap, some of this "stuff" was under
>leverage of 30 to 1. So it didn't take a lot on one
>side of the scale to equal a quadrillion on the other
>side of the scale.
>
>Now, this is the bad part, the Treasury, Bush, the Fed
>and just about everyone in Congress insisted the banks
>not be allowed to fail. The bad thing about allowing
>them to fail was that letting them fail meant there
>would be no financial system at all - so you'd have to
>set up a government lending house that would
>essentially replace all banks - which the govt was
>reluctant to do for obvious reasons. The other choice
>was let them fail and not replace the finance system,
>which would mean no loans at all, and companies such
>as ATT would be going bankrupt just because they
>couldn't carry things over month to month. It would
>have been crazy.
>
>That said, they propped up the banks, but then allowed
>them to KEEP THE LOANS MARKED AT VALUE SAVE IN THE
>CASE WHERE A BANK FAILS AND IS BOUGHT. IOW, if you
>walked away from a house a few months back, vandals
>broke in and gutted it out, then knocked the roof down
>as they left, it's probably still on the books at
>550,000$. Obviously, it's not worth that. There are
>MILLIONS of houses in similar situations.
>
>The banks holding this crap are bankrupt, and THEY
>KNOW IT. So they are putting back billions upon
>billions, mostly from govt money, and not lending
>anything.
>
>You wind up in nearly the same boat as before, you do
>have a financial system, but it's not operating.
>
>This won't be fixed in a few months, and stimulus or
>no stimulus has little to do with anything but putting
>some people to work again. We just jumped into bed
>with Japan, ten years ago.
>
>This is a pure mess. It will be fixed when those dead
>loans are written off, and not one minute before. And
>you can figure on that taking as long as it took to
>make the loans, and that was ten years.
>
>
>
>
>
>
>>The economy will need to recover on its own. A second
>>stimulus is just money down the drain. Ive said it
>>before and its still true. True increases in
>>manufacturing and hiring come with a consistant rise
>>in sales. A one time stimulus is not going to do
>>anything for the economy. Also, we need to start
>>looking at whether we can afford to keep throwing
>>money at this. We are close to 15% of GDP now.... Its
>>not going to be long and we will be hitting percentage
>>numbers closer to where we were during WW2.
>>
>>Had the US not bailed out these corporations and
>>allowed them to fail, we would be well on our way to a
>>'real' recovery.

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