Econ Illiterate here: How do we know the bailout failed?

[Taverner]

I don't understand any of this stuff - - but it seems obvious that the Paulson package failed from the posts I'm seeing here.

Did it fail? And if so, how do we know?

I mean, I knew it wasn't going to give us results that quick, so how do we know now that it didn't work?

[SpiralHawk]

1. It was a republicon idea

End of discussion.

[endarkenment]

2. google news business

Here: http://news.google.com/?ned=us&topic=b

there is nothing there except really bad news. Really bad news. The worst run of bleak economic data and news reports I have seen in my lifetime. Forget the stock indices, we know they are all dragging downward and have been now for months, the reports from big and small companies of poor results, bleak forecasts, layoffs, problems, irregularities, executive firings, etc. are there day after day after day.

[Tierra_y_Libertad]

3. You mean "bailout(s)".

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4446980&mesg_id=4446980

[Warpy]

4. It's still nearly impossible to get any sort of a loan

unless you are wealthy enough not to need one.

[Mike 03]

5. Big, Good Question.

Just off the top of my head:

1. The Banks are not lending, not even to each other. Banks have to lend to each other, or else everything else gets screwed up
2. Consumers are not buying anything they don't have to buy, which means:
3. The retail industry is dying on the vine as we speak.
4. Overseas, the markets are crumbling, including
5. The emerging markets and some markets which were believed to be able to 'decouple' from the crisis.
6. Money market funds are still having to be infused with money because panicking people are getting out of the markets
7. The VIX is still in the fifties or sixties (last time I checked)
8. One in seven homeowners owes more money on his/her house than it is worth and there is not much relief in sight
9. The next two shoes are beginning to drop: Commercial Real Estate and Credit Cards
10. How frightened Hank Paulson sounded today.

I'm sure there are some things I'm not recalling

[Pale Blue Dot]

6. Many of us explained why it couldn't work before it even passed.

Bottom line: If the problem is massive government, corporate, and personal debt, you can't fix the problem by throwing money at it - that's just common sense. And face it, Taverner: even the most vocal supporters in Congress were saying that they weren't really sure the bailout was going to work - but they had to do something.

This was doomed from the beginning, and I'm getting goddamn tired of trying to warn people about this stuff, being told that I'm a Chicken Little (which happened again today), and then being right.

I'll warn everyone again: this is going to get much, much worse, and I don't see a way out of it for many, many years. I invite you all to bookmark this and throw it in my face in a year if I'm wrong. I'm not.

[Taverner]

7. I don't want to prove you wrong or right

I just want to understand this

I am not a money person

[Pale Blue Dot]

9. My tone was not directed at you, and I'm sorry if it sounded that way.

I'm just extremely frustrated. 2 years ago we might have done something about it, but no one wanted to hear it. Many don't want to hear it even today.

[Mike 03]

10. I've seen some threads where people were very rude or condescending to those asking

about this crisis, and I hate that. This is not easy stuff to understand IMO.

[Mike 03]

8. It IS going to get much, much worse.

But I understand why most people don't understand this.

It's not easy to understand how bad this situation is.

$700 Billion is not even a fraction of what would be necessary to fix this. I think that is what Paulson realized today.

[nc4bo]

11. I just had a nauseating *what-if* thought....

So it seems not matter how much $$ is pumped into the economy (we do have a clue, right?), we're going to see a huge financial and economic collapse.

What if the entire idea is to strengthen the better performing banks with tons of capital so after the dust clears and the fires burn out, there will be a handful of strong financial institutions in place to profit off of the rebuilding process?

IOW, Let the weak fail, the strong will circle like vultures ready and willing to start the profiteering game all over again when it's over.

:puke:

[Mike 03]

12. That's not so far out.

Paulson used to run Goldman Sachs, I think.

I don't think this was intentional, because it was motivated by greed and the invention of these very crazy instruments such as "credit default swaps" and so forth.

But now that it is survival of the fittest, it is very easy, if you are the Treasury Secretary or a bank regulator under the auspices of a government body, to determine who lives and who dies.

I have that during the nineties some major banks were checkmarked for destruction while others were allowed to slide.

[depakid]

13. Depends on what you mean by "fail"

If anyone thought these actions would prevent a recession or directly prop up stock markets, then they were simply misinformed. Success or failure has to do with unlocking the global credit markets, so companies can continue to operate in the ordinary course of business.

To some extent, that's been occurring: http://www.bloomberg.com/apps/news?pid=20601091&sid=afpuyzX33HrA&refer=india

though Paulson's behavior today didn't promote much confidence in the system.

[Mike 03]

14. They talk about LIBOR but it hasn't seemed to help much. NT

[depakid]

17. The spreads are still astonishingly high- but have been moving in the right direction

thanks in no small part to the infusions of cash by goverments and central banks.

During the worst of this, even states like Massachusetts and California couldn't get short term loans- and companies couldn't get letters of credit- prompting stories about ships full of cargo piling up in the docks, for fear they wouldn't be paid for on arrival.

[Mike 03]

19. Thanks for the conversation

It's nice to speak with someone who understands these issues better than I do and can shed some light on all of this.

[Mike 03]

15. But I definitely agree with your comment that no one should confuse these rescue efforts

with the performance of the stock markets. That's a fantastic point.

I hope people heed your warning.

Awesome point.



I would Kick that comment by Depakid if I could. It's crucial.

[On the Road]

16. Quite the Contrary

at the time of the initial bailout, the whole financial system was on the verge of complete collapse. That did not happen. That was the thing to be avoided. Averting a recession was not the issue.

I don't know whether the money was spent wisely or not. I don't know if the new proposals are good. The world community seemed to like the British plan better than Paulsen's plan, which may be one reason it was changed. But the fact that businesses are still plugging along, people still have jobs, and the financial sector still exists is good news.

[OPERATIONMINDCRIME]

18. Don't Expect The Closed Minded Perpetual Cynics To Grasp That Simple Concept.

They're too absorbed inside their own little bubble to grasp objective concepts like that. They lack critical thinking skills and claimed its doom from day one, back in the time when only the most ignorant of fools would claim such since it was not something that was going to turn around our economy in a day.

Some people here are incredibly narrow minded, knee jerkish and unable to think critically on certain topics. This is one of them.

Good post.

[TreasonousBastard]

20. We don't know yet, and we won't know for a while...

this whole bailout thing hasn't really even started-- a few hundred billion was thrown out and now the plans have changed again. Note the entire "bailout" so far has been less than half the Defense budget for the year, and the Pentagon, NSA, and CIA don't give any IOU's or stock issues.

We are in completely uncharted waters where even the experts are at a loss to say what will happen. I went to school for this stuff and I have no idea what's going on-- I doubt many DUers have a better background in it than I do, but that doesn't stop them from knowing everything yakking up a storm. Curiously, some DUers I know know more than I do have been silent on the matter.

It looks like we might have another "Bretton Woods" where all the international rules will change again, hopefully for the better, and that will have another huge effect on how things go here.

It does look like we're heading back to a 50's mentality where we actually have to pay for things, not put them on plastic or bet the house to buy stuff. That, more than any banking problems, will have the greatest effect on growth. But, even in the 50s there was the "keeping up with the Joneses" mentality that had everyone out going broke buying everything they could--some things about human nature never change.

(Layaways are coming back. Do we see Christmas Clubs on the horizen?)