Bailouts Distorting Markets
Guest Bloggers, Bailout News, The Economy, Real Estate December 22nd, 2008
Every time you turn on the news, you hear of yet another bailout. Citigroup, AIG, the Big Three automakers – one has to wonder if any responsibility is required to run a multi-million dollar business whatsoever. The government continues to help bail out big business while the little guy continues to suffer.
Now, it seems like things are turning around slowly but surely in our markets – but could this be a distorted result due to the bailouts? The answer is most definitely, yes.
The fact that the government is basically subsidizing these large corporations to keep them afloat means that the markets are basically being manipulated by invisible money handed down from good ol’ Uncle Sam. Not only are the current market results skewed because of these bailout dollars, but they may actually be worse than they seem.
Bailing out these companies has sent a message loud and clear to companies that are irresponsible with their business practices, and this message is that you can basically do whatever you want and the government will foot the bill.
What about all of the people out there suffering under the burden of bad debt that was encouraged by an unscrupulous mortgage boom? How is the bailout helping the ones who were ultimately hurt by predatory lending practices and bad business?
Of course, the answer is that the bailout has only helped those who really didn’t need the help to begin with. There are plenty of responsible large businesses that didn’t need to be bailed out by the government. This kind of slap-on-the-hand handout is sending the message that you don’t even have to do the right thing and you will get help without any recourse whatsoever.
So, now our markets look like they’re getting better, but it’s all based on unreliable data. How can we even tell if things are being done the right way anymore? We really can’t, and that’s the saddest part of all.
The entire world is in a financial meltdown, all while we continue to bail people out with nonexistent money. Only time will tell now what sort of repercussions will be felt the world over by our government’s decision to get big business out of trouble time and time again.
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This post was contributed by Kelly Kilpatrick, who writes on the subject of currency trading. She invites your feedback at kellykilpatrick24 at gmail dot com
December 23rd, 2008 at 2:22 am
It will be an interesting few years, I think the points you raise are quite valid.
Gerard Hagan - Homes For Sale Edmonton
December 28th, 2008 at 10:51 pm
The New Land Plan
It seems we have two problems, people without houses and houses without people. My suggestion for fixing this is as follows:
Use the bail-out money to give to every head of household a non-transferable coupon for one hundred thousand dollars to be applied to their mortgage and then finance the balance at a fixed five percent. Put in a stipulation that says if the house is re-financed or sold within five years, twenty percent per year of the one hundred thousand would be refunded back to the coupon program. (If the house is sold after one year, eighty percent would go back, after two years, sixty percent, etc. as it would do no good to have people grabbing the money and letting it go back again).
Example 1. If he owes over one hundred thousand, he would apply it and re-finance the rest.
Example 2. If he owes less than one hundred thousand, he would pay it off and recieve the balance.
Example 3. If he does not own a house, he would use it to get one. (If he purchased a house not up to code for eighty thousand and it needed thirty thousand to bring it up, the coupon would be good for the first one hundred and the rest would be financed at the five percent).
The houses that have been repossessed would be fixed up, lived in again and people would stay in them. The banks would have their money and a lot of people would be put to work fixing them up.
Since we (the people) are paying for the bail-out anyway, this plan would benefit everyone and not just the ones at the top. The country would be solvent again as people would have money to put back into the economy.
Thank you for your time and consideration,
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