The Bail Out - Why? is it a Good Idea? and Will it Matter to Us

Firstly, I believe that using tax payers money to bail out a market is wrong.  Same if a failed private sector project is bailed out by government funds.  Why should the average mum and dad reimburse for poor performance from senior executives who often earn megabucks?   A poorly managed bail out provides a safety net in that it can enter the minds of a corporate world that "it doesnt matter if we take this risk and fail as the government will bail us out".  Its hardly a good thing.  If you take the risk and fail then you should accept the negative consequences

Having said that I saw a placard on TV from the US saying "Bail out people not banks".  Well I have no definite idea how to do that but it seems justified.  There is a real risk that if the financial sector is not bailed out in the correct fashion then it will massively affect individuals and families in that the economy will be in a tailspin and interest rates, ability to borrow money, private sector investment and unemployment will all be in negative territory. 

If business cannot borrow money, then they don't expand then they don't need more staff. Further, if the expansion meant construction then all the workers (white and blue collar) associated with the expansion works do not get paid.  There is a significant flow on effect.
Each of us who are employed in the private sector would be aware that our employers would no doubt reconsider the company employment levels if the economy declined.  So is a financial bail out an indirect bail out for people?? 

In my opinion it's far too early to really answer that.  It now seems certain that US will be in recession and it is hard to believe some are even talking about the D-word!!

With regard to the sub prime crisis - former US President Bill Clinton has said the system has failed in that

*You cannot blame a person who lives in a poor area, goes to a bank gets a cheap loan to buy a house in a better area. Then can't afford in a few years time due to changing circumstances
* you cannot blame the finance broker selling the loan if the person buying is very very keen (see above) and the broker is paid commission
to provide the loan
* you cannot blame the bank as they have hungry customers

Charming Bill said better regulation is needed - I agree

For me I don't think in some countries we realise the enormity and seriousness of the situation. Many of us are far too interested in the next event on the Paris Hilton social calendar or the latest sporting result. However, should the poor market results flow on to unemployment then it will certainly a different story.
  
There is no doubt the results are very bad as the Dow Jones was at under 9000 in October 2008 (from 14000 the year before).  In Australia the market has fallen from 6800 to 3900 in the same period meanwhile the country continues to export raw materials to the growth economies of Chian and India.   The Australia economy has been booming for a decade and now looks shaky due the situation in the United States. 

I think the bail out should proceed but only if financial regulation improves and the bail out is in controlled fashion. By the way if it is managed well - the US Government stands to make
Billions as it will be buying very cheap stock and once the economy turns they can sell it off for a mega profit.  

Nonetheless, I believe the American Empire is in a very slow but eventually terminal decline and either Barack or the one time POW will have an enormous task when they gain office in January 2009.

K

www.karmafinancialresearch.com