Wed 28 Jan 2009
This makes no sense to me.
Millions of Americans are going to have to borow money from credit cards and banks to pay their taxes. A large portion of these tax dollars will go to TARP and to bailouts. This money is being given to financial instutions - supposedly so they can loan it out - so people can pay their taxes…
<blockquote><em>Isn’t this like giving ourselves a blood transfusion with a leaky hose?</em></blockquote>
As far as bailing out companies like GM, it sounds good — to keep tens of thousands of people employed. The fact that they’re making products that people aren’t buying seems to be ignored. Wouldn’t it make more sense to give them the money directly and ask them to do something more useful?
For example: Tom Friedman in "The World is Flat" suggests that the dot-com crash made billions of dollars worth of fibre-optic cable available for pennies on the dollar when the companies that invested in them went bankrupt. This meant that these assets that were a bad investment at the original cost were a ‘gold-mine’ at pennies on the dollar and helped create our marvelous communications system.
In other terms: If I were to get a bunch of investors together and build a huge office park in a place that didn’t need one, my ’stupidity’ would cause me to go bankrupt and the office park which I had intended to sell for 500 million might sell at auction for 5 million. The investors, who took the risk, would lose. The town which now has a beautiful new building for a great price, would win, by being able to attact new business into a building at rock-bottom prices.
As far as a company like GM - if they were to go bankrupt then investors (who took the risk) would lose but there would be an incredible group of car-building assets available, cheap, for another company who could use it it to build cars that people want.
The losses, which investors agreed to risk, are instead being spread among all taxpayers. Any investments that those same investors made that are working, of course, they get to keep.
That relates to:
<p align="center"><em>"If I win, I get to keep my money — if I lose, we’ll all chip in to pay my losses." </em></p>
<p align="left">or — socializing losses while privatizing gains.</p>
<p align="left">I don’t know how this is going work. Hopefully our new president and his administration do. I just hope that they keep in mind that when an investor makes a bad decision, he loses money. His community or government can help — I’ll chip in to help people who lost their life savings — but not when a large portion of my support goes to underperforming high-paid executive who drove the company into the ground.</p><!–wordpresz–>
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