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Should Government Bail Out Business?

Posted December 21, 2008 8:22 AM

You need to know what is broken before you can fix it. In banking, the blame is placed on 'toxic' loans. In the automotive industry, some point to trade imbalances, saying manufacturers of other nations enjoy access to U.S. markets that is not reciprocated. There is also the ever-popular finger pointing at unions, overpaid executives, the fluctuating price of energy, and so on. Others blame a tendency to emphasize shareholder profits over reinvestment in new technologies, machines, and people. What is the root cause of the problem, and can government assistance help fix the problem?

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#1

Re: Should Government Bail Out Business?

12/21/2008 6:12 PM

Government is the problem! So I ask you, can government solve the problem?

Look up the the federal "Fair Housing Act" (Title VIII of the Civil Rights Act of 1968).

When the Fair Housing Act was first enacted, it prohibited discrimination only on the basis of race, color, religion and national origin. In 1974, sex was added to the list of protected classes, and in 1988, disability and familial status (the presence or anticipated presence of children under 18 in a household) were added (further codified in the Americans with Disabilities Act of 1990). In certain circumstances, the law allows limited exceptions for discrimination based on sex, religion, or familial status.

Then look up the "Consumer Protection Act", sp 1998 additions.

These two laws ascertained the present economic crisis, by requiring lenders to lend to people they otherwise would not lend to. To say that we have an open market system is a laugh. However, I am not laughing. Government is a necessary evil, but when the intelligent part of the masses relinquish their participation in said government, the end result is what we have now.

Live long & prosper.

Spock

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#2
In reply to #1

Re: Should Government Bail Out Business?

12/21/2008 10:27 PM

A GA to you Sands,

I think the true definition of 'oxymoron' is, "Hi, I'm from the government and I'm here to help you."

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#5
In reply to #1

Re: Should Government Bail Out Business?

12/22/2008 8:38 AM

Well said. All one needs to do is to look at what Government does to see how not to do it. Unfortunately, the government has decided and been allowed to participate in and inject itself into institutions that the Constitution never intended. It probably began with the Civil War when Lincoln decided to preserve a Union that he had constitutional right to preserve. States Rights has been a battle from the tiimes of the Revolution when the battle began between the Federalists as represented by John Adams and the Republicans as represented by Thomas Jefferson. The Republicans lost.

As in anything no one is blameless here and this whole matter was precipitated by the government who, as you so wisely point out, injected itself in the ability of Banks to discern who was capable of paying back the loans, in favor of "helping" (ouch that word again) the people who "deserve" to own a home. "Activist Organizations" promoted this nonsense by threatening lawsuits against banks that refused, and Congress again "helped" by creating Fannie and Freddie to line their own pockets while we spent ourselves into oblivion. I and probably many of those of you who participate here, didn't spend but I got hurt too.

Hang on! It's going to be a rough ride now that we have the communists in power.

I don't know if it will ever turn around. The damage may be irreversable... we may have reached the point of no return because the non-working masses, including illegal immigrants, have discovered they can elect anyone they want to give them everything they want...the demise of Democracy.

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#3

Re: Should Government Bail Out Business?

12/21/2008 11:26 PM

Personally, I dont believe the government should bail out business in a free market economy. If the free market is to operate properly, government should have no hand in it, other than to protect the public. If GM fails, let them fail. Someone else will buy up the company and if they can manufacture cheaply in the US they will do so. If not, they will dismantle the equipment and send it elsewhere. I particularly disagree with the bailout of GM (in spite of the fact that I stand to loose cash if they fail). I worked for years in the steel industry which the government thumbed their nose at when they went belly up because of unfair trade practices from abroad and unscrupulous practices by GM. When the steel industry went belly up, they were bought out and now have foreign owners who are willing to run them correctly. Perhaps GM management (and unions) need to learn that they are not "too big to fail".

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#4

Re: Should Government Bail Out Business?

12/22/2008 6:50 AM

Governments need cash flow long term...To get cash flow flowing they,governments,need taxes...To get taxes they need workers sending in income taxes..They need workers buying things and paying taxes on those purchases..They need property taxes which requires workers to buy property and continue to pay taxes...As cash flow is tight short term loans become necessary..Financial instiutions don't enjoy lending money short term because the margins are not nearly as wonderful as say credit card/lines of credit rates and have slowly turned off this tap..In doing so the lenders globally apparently working in concert have squeezed the workers employeers to the point where workers have no money and owe the lending institutions big time(surprisingly banks appear to be price fixing globally whereas chemical companies etc are being fined constantly for collusion with respect to pricing of commodity chemicals for example... one can only asked why similar judgements against banks etc is never persued??).Lending institutions balk but have no inherant moral directive for lleniancy or even common courtesy in consumer/business loans and started calling them in..People needed cash so they went to their moneymakers (often the same group as the moneylenders) and found out there was nothing in the till (or at least a lot less than anticipated)..So as this little exclusive domain of money lenders and money managers became exposed for the bias and lack of real character shown over the years the entire economic interdependant global system became angry,constipated and bloated at the same time...No one could borrow money..(well except those with lots to begin with) so the potential for global sadness became very large quickly...Sad people become inactive,constipated,bloated and consequently quite irritable.The government to liven up their citizens/to give them direction and keep sadness from turning into chronic depression is doing the right thing..An active,working person keeps the wheels of society moving forwards....and keeps the money lenders and money makers happy to lend at 19.75% above the overnight rates that they have available to them...or the 2-5% that they,the money lenders,have access to..Hmmm..Something wrong in the whole system...Means its a systemic problem requiring a long term cure.Government bailouts keep the disease at bay and also keep it(the economy) alive which is critical for even the moneylenders and moneymakers who as far as i can see are a serious source of the overall difficulties we as a globally interconnected civilization are experiencing.

Regards....Marty Wolf

What can i say...Lifes just not fair but its certainly interesting

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#7
In reply to #4

Re: Should Government Bail Out Business?

12/22/2008 11:11 AM

I agree entirely with your points, but I dont believe that a governmental bailout will solve the problem. Only squeezing the people and organizations that caused the problem has any hope of correcting the situation long term, and long term is what we have to be looking at.

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#6

Re: Should Government Bail Out Business?

12/22/2008 9:51 AM

"It is not nice to fool Mother Nature"

In the wild, the lion eats the weakest or slowest zebra and the buzzards feed off the carcass. It isn't pretty, but it is impersonal and orderly in the bigger picture. So it is in a free market economy.

When the do gooders get involved the slowest zebra gets a head start and the lion must wear a weight belt to make it all even. The zebra, now empowered by virtue of its weakness, gains weight and gets slower still, but by now the lion has been forced to convert to a vegetarian. Meanwhile the buzzards apply for welfare, because they have been displaced and there is a movement to pass a buzzards bill of rights and on and on....

The free market, like nature, can be cruel and heartless, but politicians with blowhards with good intentions upset the natural balance. The attempts to "fix" the problems are going to do nothing but prolong and aggrevate the choas.

Let the banks and GM fail. It won't be pretty, but it will be prettier than what will eventually occur when mother nature finally gets her way.

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#8

Re: Should Government Bail Out Business?

12/22/2008 12:05 PM

I believe there are several major problems re the government "fixing" the economy. The U. S. automobile mfgers are saddled by a combination of union agreements for medical insurance, pensions etc for retired workers and also by mega-salaries and bonuses for "top" management, regardless of how good they do their jobs. By allowing these industries to declare themselves bankrupt, the weighty anchor of the Union's drag on the economy could be null and void, and make better concessions with industry. In other industries and companies, you have CEOs making mega-million dollar salaries, combined with multi-million dollar bonuses, even as their companioes and industries sink into the mire. Look at Staples, for example, where the CEO made something like $ 26.4 million this year. If that salary and bonuses had been kept below a million, every employee could have received a few thousand extra dollars, which would typically have been spent into the economy. Look at the top exec's at the major oil and energy companies. Should they reap mega-million dollar salaries and bonuses for allowing the cost of fuel to jump over $ 4 a gallon in the US, and higher in most other countries? We "tax payers" are not going to solve the problem, but we'll have to bear the burden of the problem for years to come.

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#9
In reply to #8

Re: Should Government Bail Out Business?

12/23/2008 2:22 PM

The oil companies did not "let" the price of gas and oil go up.

Crude oil and gasoline, home heating oil as well as natural gas are all traded in the futures market. Big oil does not set the price - the market does.

The run up in the price of crude that paked on July 11, 2008 just north of $147 a barrel was not caused by greedy speculators and oil companies. The futures traders (portrayed as evil speculators in the media and engrained in the mindset of millions of sheepel) do not run up the price just to line their pockets. Remember, for every contract bought, someone has to sell a contract. If Trader X thinks prices are going up he has to buy from Trader Y who thinks prices are going down. If they go up, Trader X profits and Trader Y looses. The converse is true in a falling market.

Now, why did the price of oil get run up so? The run up in oil coincided with a weakening US dollar and a deteriorating US economy which also coincided with other major economies beginning to faulter. As economies and the stocks which said economies are built on begin to faulter money began to flow OUT of stocks and into the safe haven of gold and oil. This increased the demand for oil contracts (as did the seasonal increase in demand from summer driving).

As the barrel price of oil increased demand began to decrease. As the dollar firmed the price of oil also began to come down.

You can not make a case that Big Oil is fixing the prices of oil. If you can, explain why home heating oil is so low right now in December when it should be high because of seasonal demand (which is out of phase with gasoline demand)?

The only influence Big Oil has on the price of oil is how far the tap is opened. The domestic oil companies are bringing every drop to the market they can (hindered at every turn by environmental legislation and anti oil politicians). On the other hand the members of OPEC and other producers (Think Hugo Chaves singing Deo with Danny Glover and Senior Belafonte) close the valve as tight as they dare in an attempt to keep prices as high as possible.

What caused the erotion in the US economy was the "housing bubble" which was caused by government polocies dating back to the '60's (already outlined) which forced lenders to make loans to those they would not normaly make loans to. This increased demand for homes and increased the prices disproportionatly. Then, to compound the insanity, Fanny and Freddy were allowed to assume all of these questionable loans (Thank you My Boy Lollypop Barny Frank). The mortgage lenders, knowing they could write questionable loans and then dump them on Fanny and Freddy all of a sudden had signifficantly lower risk and then it was full speed ahead.

All good things must come to an end.

The government is the last entity to "fix" anything. There are few things the government SHOULD do, and fewer things the government does well. The government should not be micro manageing a free market economy or building cars.

As the government keeps sticking it's finger where it ought not be they keep printing more and more dollars to "bail out" certain segments of the economy they simply dilute every other dollar in circulation (in your pocket) thus compounding the problem.

Travis
What Would John Galt Do?

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#10

Re: Should Government Bail Out Business?

12/23/2008 2:35 PM

I would wish you a GA Travis, but Guest doesn't count, so......

BTW, what would John Galt do and where is he when we need him?

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#11

Re: Should Government Bail Out Business?

01/02/2009 1:24 PM

The root cause of the problem is the Federal Reserve ( a private corporation, that pays no taxes and has no accountability) and has control of the nations money supply. Their screwball policies have created the current economic mess and fostered malinvestment, misallocation of resources, and destructioin of our currency. The Fed now hands out money to bailout all of their "bankster" friends at the expense of the American taxpayer with absolutely no accountability. This country needs to abide by the constitution and return control of the money supply to congress as well as return to a gold standard to keep the politicians honest.. Support HR2755 for more information see

http://www.endthefed.us/

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#12

Re: Should Government Bail Out Business?

01/02/2009 2:16 PM

Why stop there? If we are going to re institute some of the old tried and true practices, let's bring back tar and feathers and the pillory.

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#13

Re: Should Government Bail Out Business?

01/02/2009 7:32 PM

no, we should not be bailing out crooks. we should be putting them in prison.

to guest #11.

also, the government should return to funding itself only from import taxes, like the constitution gave them the power to do. all other taxes are unconstitutional. the supreme court has determined that the government has the right to make all of the taxes, but it is only constitutional because they say so it is. i guess they are saying that the rights and restrictions the constitution gives the federal government are in conflict. i still think they are wrong, and so do many people in this country. the problem is that the crooks are in control. remember, only the rich or powerful get to be supreme court justices and get to MAKE LAW AND CHANGE THE CONSTITUTION. the average sheeple never get to be either rich or powerful. therefore, the constitution and the governement have been hijacked by the rich and powerful. it is legal, but it ain't right. the end result is going to be the destruction of the united states in the name of greedy rich and powerful people. of course, they won't be impoverished by this, they are too rich and powerful. they and the crooks in power will be the only ones with anything real left. everyone else will be third world citizens.

you may think this is pessimistic. perhaps. but it will also turn out to be true.

joe

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Anonymous Poster
#14

Re: Should Government Bail Out Business?

01/04/2009 8:19 PM

OK, where to start is the problem here and I guess government is the best place.

Government needs people who can define and fix problems, this is an area most politicians are completely lost in. True they are supposed to employ people with these skills but again politicians chose other political animals for these positions and so it goes on right down the ladder. The whole of government evolves into a hot air machine that guesses what solutions should be before defining the problems.

This leads to a general myth that a free market are more efficient than controlled markets this is only correct when bad government hampers industry instead of helping. Private business can not compete against well run government services, which raises other myth. Governments have businesses, government represents every one so can not be classed as a business, business means "doing ones own trade" governments run services for the "public good" and national security, again politicians are very confused about this point.

"Well run" government service should only have 50% of the costs that private industries have so a "good government" should be able to turn around companies with problems providing they don't pay stupid prices for none existing assets. Companies should be allowed to go broke first and if costs to society (unemployment benefits damage to other sectors, etc) are going to be greater than running the company the government should take over and remarket the company later to recover costs.

Blame if any rests on all of our heads, we are all to complacement when it come to picking politicians. Political parties are no different to religions, they follow an ideology and the followers don't accept that it could be flawed. In other words these people enmeshed in their idealism are the wrong type of person to be running a government and we are stupid for voting for them.

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#15
In reply to #14

Re: Should Government Bail Out Business?

01/04/2009 9:00 PM

Guest,

A good post for the most part. The complacency of the voters certainly helps crooked politicians BUT:

'In other words these people enmeshed in their idealism are the wrong type of person to be running a government and we are stupid for voting for them.'

Usually it is not really thier idealism but an idealism that has been sold to a segment of the public. In other words, they tell the sheeple what the sheeple want to hear.

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