Why the bailout won’t fix the economy

Yahoo Finance has a great article showing what will happen after the bailout is passed. The main points are the following:

Hank Paulson & Co. survey the banking industry and decide who will stay and who will go.
Within a month or two, Paulson buys $250 billion of worthless assets.
Confidence improves modestly, but banks continue to hoard capital and credit markets stay tight.
The credit crunch filters through to consumers
The economic news continues to get worse
The global economy continues to weaken: Europe, Asia, and, eventually, emerging markets
The stock market continues to fall, as corporate earnings come under increasing pressure and hope for an early 2009 recovery fades
The government enacts further measures to try to stop the fall in asset prices (stocks, houses)–including an expansion of the bailout plan–but these don’t work
A new round of white-collar prosecutions send a new posse of corporate villains to jail. Some will be guilty
The government announces a new New Deal
Eventually, asset prices will bottom: Housing down 40% in real terms, the stock market down at least 50%
Unlike Japan, we finally force our banks to write down assets as far as they need to be written down…and then recapitalize them
We gradually begin a long-term economic recovery
The stock market finally begins a new, long-term bull market

Read the whole article here.

National Bubble