Thanks for the response, Pandaemoni, I see what your saying. Maybe the diner was a bad example, I was just trying to make the point that most businesses do not have the luxury of a government bailout and just have to make it on their own. No company should be allowed to be so big, that failure would kill the economy...or am I just living in a pipe dream?
You see if what Pandemoni said was correct, there would be a bunch of billionaires lining up to invest and inject a cash infusion to that company for stock options. It happens all the time. That company getting bailed out is going to help reinforce the mentality of corruption and no penalty of loss or punishment for mistakes or illegal wrongdoing.
I do agree that something needs to be done about the "too big to fail" companies. Preferably those companies should be compelled to buy insurance against their own collapse from the federal governent (i.e., pay a special "too big to fail tax") that offsets the need for the government to step in. Hard to price that insurance, but not impossible, and it shifts the risk of these market disruptions back onto the markets themselves. That said, the impact of AIG is global, and the feedback from its falling would circle the globe in a way that it wouldn't from most businesses. We can wish it weren't so, but wishing alone won't solve the problem.
Something weird happened. Let me just say that i believe this started at the lower level and i dont think the people involved understood that people take out loans they wont\cant pay for.
Nope. You cannot have a free economy that only goes up up up, particularly in such an irresponsible time that the U.S is having right now. From expensive wars, to CEOs getting away with fleecing Billions out of legitimate investors, to Joe blow with all kinds of shit he doesn't need that he bought on creditcards...with a bumper sticker "He with the most toys wins". I know America just likes to win. Win all the time. Sometimes, you lose and it is important to acknowledge it and rebuild, or you will lose bigger.
No there would not be a bunch of billionaires lining up, but feel free to put words in my mouth and senselessly and incorrectly expand on my remarks the next time you don't understand what I'm saying, m'kay? It is true that AIG has a healthy equity cushion, but you need a strong risk tolerance and a long term outlook to rely on that, and most investors do not have it. If AIG's assets were liquid (and hence you could realize a return on them swiftly), AIG wouldn't need the loan. If that company defaults on the loan (a real possibility), the government will need to seize its assets and sell them in a divestiture that could take a decade if you want to get full value for them. No private investor want's to buy their way into a bankruptcy, even in a secured position, and in this case it's hard to tell what the market value oif the assets would be. Governments, not caring about "returns" as much, tend to have a higher risk tolerance and more of a tendedncy to place value on externalities like enhanced market stability that private investors do not care about.
You see if what Neizschefan said is correct, then the economy has not gone steadily up since the middle ages, after all you can't keep going up, up, up! No doubt we are due for the crach backwards to medieval levels of income and economic prosperity any century now.
LOL you don't care if your government gets fucked on the loan? That's GOT to get paid someday too Panda(the government debt)! You must work in some kind of financial circle to have a fucked up idea like that...
Right and if we are to believe you, there has never been a "correction" for bubbled markets, uninformed or ill-advised investing(RAMPANT now).
I do care if the loan is repaid, but the loan can be repaid by liquidating AIG in along and deliberative process, as opposed to liquidating it in a firesale this week and hoping everyone else can pick up the pieces. One way (my way) gives people the time needed to unwind deals and ease the fall. Another way (your way) threatens to leave many, many more people unemployed, homeless and looking for soup kitchens. If you can't understand the difference between a slow liquidation and a quick collapse, then I propose we illustrate it thusly: Let's find a tall tree and climb to the top. I will climb down a ladder, and you can jump off and freefall to the ground. We'll both wind up at the bottom, but one path there will have inflicted a great deal more damage.
Of course there are corrections and cycles, please point to where I said otherwise . . . Go on . . . Do it! Oh, I'm sorry, I seem to have set fire to your straw man. Learn to argue like an adult, using logic. Please. You make me embarrassed for you.
Sounds to me like you Americans love the benefits of a free market economy, without the pains of an honest, downturn. Good luck. Governments always grow, they never shrink. Hand them a few more powers while you are at it. Jesus christ, and my country is freaking about spending 10-15billion a year on the Afgan war. I'm starting to think Canada, will come away pretty clean even if U.S completely topples.
There is no recession. Don't believe a word you hear in the Newspapers! What the poor and middle class call "recession," the super rich call "f**k yeah, honey time." Its a maneuver where the rich get richer and the middle class are shoved around by fat-ass corporations, creating a sort of modern feudal spiral. CEO's do insider deals, ruining all the stocks. Businesses rape government funds by going bankrupt and getting bailed out with public funds, thus destroying and inflating the dollar. Meanwhile food goes up in price, gas goes up in price, the middle class are then found wearing 1500's dark age type peasant clothing. (k, maybe not quite that bad, but you can see whats up) The problem is that filthy rich people are getting angry and greedy with each other and thus beating the hell out of everyone else. The gas prices go up when a hurricane hits, or when a man somewhere in Malaysia sneezes and shits simultaneously, thus qualifying as a "good reason to increase the price of gas." But it isn't just that, the dollar is inflating like hell because corporations are jumping on the "feudal bandwagon" and abusing government funding, such as the many corporations that now infest (invest?) Iraq, millions and millions of dollars disappearing into building a country you and I will never visit! (it wouldn't be so bad if the corporations didn't make everything so overpriced) MUTHERF**KERS!
Exactly, this is nothing less than the premeditated, carefully planned and executed, road to economic Feudalism.
I am not sure your remark is incorrect...though it's rather like saying, "You Americans love the benefits of living in homes, without the pains of an honest house fire." In fact, it is true, we love living inside walls, and yet we also call the fire department when those walls catch on fire, as some homes invariably will do from time to time. In this case, though, the analogy isn't so much to a single housefire, but to a conflagration that threatens to set an entire neighborhood ablaze. Your suggested solution seems to be that Nero had it right. The emperor should fiddle while the whole of Rome burns (at least, that is, if Romans want the benefits of housing). There is nothing illogical about wanting the benefits of a free market and wanting the government to mitigate the effects of downturns. We can debate the effectiveness of the mitigation, different bail outs the government might try or even whether (or why) certain targets are more deserving of it than others, but nothing suggests the two desires should be mutually exclusive. In my case, if the effect of the collapse were limited to a single company and its investors (e.g. "Joe's Diner"), I'd be more or less in favor of letting it collapse. Even then, I'd be in favor of the government providing job assistance and unemployment compensation to Joe, and his employees. When a business's collapse generates significant negative externalities, though (which is precisely when people call it "too big to fail") then government efforts to at least control those externalities make sense and are appropriate. The problem is that controlling the externalities on a one-by-one basis is a fool's errand. There are too many loose ends to grab ahold of and piece together. It's easier to shore up the troubled company itself. That gives everyone affected time for the mess to come in to a relatively smooth landing, as compared to the looming crash.
-Maybury MZM is talking $2 Trillion this time around. Adjusted for consumer price index is still an over 22 fold increase of that of the 1950's. The roof, the roof, the roof is on fire. You know the rest.
