Tuesday, September 30, 2008

What's Ahead for the Economy?

By now everyone knows the bailout failed and that the stock market dropped about 770 points. I'm left very nervous and uncertain. With many questions:

1. Why did so many Congressmen vote against it, including 40% of the Democrats?

2. Why are so many Americans upset about it? Is it because they don't understand that it's not supposed to be about bailing out big companies but about the very fundamentals of our economy? In other words, is American ignorance causing angry communication that is spooking nervous Congressmen up for re-election?

3. But is that really what the bailout is about? Is it really gloom and doom? What will the markets do today? What's the real danger?

4. Would this bill really turn us decisively down a road to a more socialist economic system?

What's really up?

15 comments:

Angie Van De Merwe said...

Americans beame involved and got to know some of the specifics. They did not trust the government to do what was right, as there was no balance of power.
Paulson used to be part of Goldman/Sachs. The only representative of Big Corporations was a man who was part of Golman and Sachs, who had 20b at stake. With no oversight, and Paulson calling the shots, you don't think there would be occassion for Paulson to pad his pockets, as well as his cronie's?
Besides this, the Federal Reserve kept cutting interest rates to puff the market up, and don't we feel exploited and betrayed because we want to be able to trust our government? At its foundation, the checks and balances are what bring Americans security that corruption will be held at bay...
Although everyone knows that government works this way, Americans don't like to see and hear the crass disregard for their system. And those whose own pocketbooks will be bothered by it, are watching very closely. We should always care that much in our sphere of influence...

John Mark said...

I read your blog to learn, and occasionally participate in the conversation, even though I am probably much like one of those "representative" pastors in your masters program :) on most topics.
I think that generally, whenever the government "tinkers" with Wall Street it is a bad thing. I was told a few days ago by my accountant brother that most of the people who lost in the plummet of October 1989 were actually better off two years down the road. As for the market, it will eventually take care of itself, IMVHO.
As for homeowners, I don't know. The first time I tried to buy a house I was told point blank, "You can't afford even a modest home on your income." Now if some bank had been willing, or pressured to loan me money on my less that 15k yearly income on say, a 100k home, I don't see how that could be called predatory, but I digress.
If Congress is convinced it must intervene, it should do as little as possible, and I speak as a man whose very small mutual fund is all I will have to live on, besides my government pension. I dread seeing my third quarter statement.
I don't want to see anyone suffer, but there is only so much even the US govt. can do, and even at this point, nothing will ever be the same in the financial world.
And though I struggle with this far more than I should, it seems to me that Matthew 6: 33 has to come into play for people like me.

Ken Schenck said...

John Mark, I'm sure you know as much or more as I do about what's going on. In the post I was not referring to people who oppose the bailout recognizing the broader issues. Frankly, if I had a clue what was going on I might be vehemently opposed to it. Hardly anybody seems really to know what the impact of not doing this will be.

I was referring to people who only think this is about saving a few banks. I'm worried that students at IWU won't be able to get student loans next year... in other words, if they're being straight with us (maybe they're not), we're talking financial Armageddon.

Angie Van De Merwe said...

I don't think you have to worry about financial Armeggedon, as I don't think Congress would be taking two days recess if that were so...No Congressman is going to ignore their own self-interest. And if they thought for a minute that this would create damage to their finances, they would be up all night until something was finalized.
From what I hear, those in power knew this was coming for awhile and turned their noses up at it...who knows if this is a political ploy to redirect America's focus off the election...From what I hear, the Democrats were ready to side with Bush and get it over with..but these were also the ones who were shouting down those who opposed the quick "solution". Can you imagine being in McCain's shoes, knowing that the Republicans will, as usual, be the "fall guys". Hopefully, he can remain above the frey...

Ken Schenck said...

It's just very hard sitting from where we are to know. I heard on the radio just a few minutes ago that the "let it work itself out" position is a minority position among economists, that the majority think it is too risky not to take this sort of action.

I imagine that both McCain and Obama are in the same position you and I are--we have to decide who to trust. It seems irrational to me--in any area of knowledge--not to go with what the majority of experts think, unless you are an expert yourself or can identify a critical presupposition you are competent to dispute.

Angie Van De Merwe said...

Ken, maybe you should go and do what your "ideal" candidate for presidency wants you to do, to save the economy...go inflate your tires..:)
Seriously, I'm afraid that the powers that be, the foreign powers are behind this crisis. They have been waiting for an opportune moment, and it is for control of the world under Shairia. I am not trying to be a conspiracy theorist, but the goals are clearly made and we are too focused on our own self-interests to care about the future...and how that can be affected by other powers. Hopefully, I have a colorful immagination, otherwise, we haven't seen the iceberg yet...

On a more local level, we have also been shortsighted to not understand that local politics in a global market is a dangerous place to play...

Caleb Landis said...

Ken I am not going to sit here and tell you that everything is going to be fine. Let me start with why this bail out was a bad idea to begin with. First of all the financial crisis was started because of this theory of "too big to fail." See corporations know and knew that the Fed was going to bail them out no matter what happened because of the very loose monetary policy the Fed has been using since the minor recession in late 2001. So with nothing to loose banks just started lending money to anyone that asked and more than that they gave people 2 and 3 times what they actually needed. Then when people started bailing on these loans banks began to fail and the Fed came in and paid the bills. So when you hear on the news that it is wrong for these banks to go bankrupt and close but all the CEO's walking away rich its because the Fed paid the bills instead of the CEO's that made the bad decision in the first place. Now Paulson came up with a bail out plan to pay more of those bills for the banks and financial institutions. If the bill had been passed then banks could have kept working under these faulty methods.

I know that on the news and in Washington everyone seems to make this whole thing out to be this financial Armageddon. This is just ridiculous! The reason it seems so bad right now is because the Fed has been propping up the economy for the past year. So now the recession/depression will be worse than it would have been a year ago or even two years ago. Recessions are a necessary evil of the market. What a recession does is take all of the resources being allocated poorly to another use in the market where hopefully the resources will be allocated in a more efficient manner.

This is definitely more than saving a few banks. I think its mostly about covering up the bad decisions that the bureaucracy has made in the last seven years. You will hear and probably have heard that the market is to blame. When someone blames the market they are blaming something that we haven't had in this country for over 70 years, that is free market. The bail out bill was about saving the rich people who thought they could make any decision that they wanted and not have to pay for it. If the bill had passed then the people that certain politicians would like you to think are evil, CEO's and others with market power, are the ones going to walk away with millions of dollars in profit. All of this while the little guy would have been out on the street with nothing at all now to fall back on!

With this bill failing it will become harder and harder to get loans in the next couple of years, that is if the Fed does the right thing and raises interest rates. However, this will be short lived. A few years down the road as the economy recovers loans will be more available. It all comes down to patience. We are all going to struggle for a few months to a few years depending on how the Fed reacts but on the other side is a bright future.

Angie Van De Merwe said...

another btw, the experts do not hear those who are conservative, usually, because their view of the world is diffeent...conservatives, those who adhere to the nation-state and its interests are considered backwards to those that are progressive politically. This is due to an unfortunate attitude of philosophical sophistication at the costs of pracitcality...and the real world of politics and what happens in the real world...not the ideal, but the real. Economists, depending on their view of globalization, will play out differently in how they understad what we are to do...usually, they are on the side of redistribution of wealth, using the market to do so...we'll see..how much anyone knows...all we can do is wait and see...

Ken Schenck said...

Caleb, I tend to agree with you and others on most of how we've got here, although I suspect that some modest regulation might have averted the current crisis.

Angie, I doubt that most economists are Democrats. If anything, I would guess they are Republicans or Libertarians. That's part of why it stands out so sharply to me that most of them think we have to do something.

It's a little like the Iraq War--I agree with McCain that what is most important now is that a President know what to do now given where we are more than that he knew what to do when we were trying to decide whether to go to war. So now, we need to do what we need to do now, regardless of who is to blame for getting us to this point.

I just don't know personally what that is...

Angie Van De Merwe said...

Caleb,
Thank you for your educated insight. Because of people like you who take the time to blog in their area of expertise, we all learn more...
Ken, I know most economists are not Democrat, but I do think that globalization has made a difference in the way that economics is understood and that plays out in how our nation-state and global markets interact, interface and what the ultimate purpose of the market is...
I think that Americans are angry and/or afraid, because their govenment was to allow them the freedom to pursue their interests. And now, they don't know whether they will be able to or not. They fear that this will be long term and don't know whether it will impact their quality of life, as well as the choices they will have. It is unfortunate that the greed of the banks (and Wall Street), have "fed" some that were needy, those who would not be able to otherwise afford housing. But, I would like to know how needy these individuals were...because the leaders in the banking industry, as well as the leaders in at Wall Street, should be held accountable for the debt, not the taxpayer..I heard one commentator talking about the government taking the 700 b. and helping pay off the mortgages of the American people....interesting idea...

Angie Van De Merwe said...

Part of this bail-out problem may be A.C.O.R.N. which is a community based organization. Some corrupt practices are being revealed...everything from voting fraud to funnelling monies from the bail-out...Read it. I believe it was in the Washington Post...And you want Obama to win?!

Anonymous said...

Ken, why don't you quit worrying and trusting in politicians to make this a better world. Politicians are the ones who got us into this mess in the first place. Who do you think was running Fannie Mae & Freddie Mac?

Instead, trust in the Lord and lean not on politicians! I would think that an astute theologian like you would "seek first the kingdom of God." Only those with "Sunday School Faith" put their trust in politicians and worry about economics.

::athada:: said...

Craig,
I don´t think those words will be very soothing for those getting bombed by enemy governments, loosing their house, being abused by the police, etc. Isn´t there something to be said for God´s general (not saving) grace, for economies that prosper, for social institutions that aren´t dysfunctional?

Anonymous said...

athada..

Maybe govtments are the major cause of these problems. I guess if you are in favor of a liberal, socialist govt, you are in the will of God. If you happen to be a conservative, then involving yourself in politics is not cool.

Putting your faith in govtments or politicians to bring about the will of God in the world is futile, you will learn this as the years go by.

::athada:: said...

Craig,
You sound like a libertarian, not an anarchist. We are going to have governments. They are going to rule justly or they are not. I´m not trying to say that gov´t is more important than the church, but to ignore would be completely out of touch of people´s day to day concerns - like safety, prosperity, health, etc.