A Bitter Pill

The Federal Government is setting up a $700,000,000,000.00 bailout of the economy. Those are a lot of zeroes all in one place at the same time.

As I write this on Monday the Stock Market is down almost 400 points. Lots of questions abound about this bailout. Most of the experts think that it’s absolutely necessary and yet, no one knows if it going to work or not. We have watched some financial giants collapse and others are in danger.

Economically we have some major issues. Unemployment is up, though not catastrophically. Prices are up.

The price of oil is a disaster. This not only impacts our daily commute or our riding about town or our vacation trips. This impacts food deliveries and prices. This will greatly impact people this winter when they pay for gas, oil, or additional electricity to heat their homes. People who get sick because of living in colder than usual environments will strain the medical system.

There is also no place to invest money. Stocks are haywire at best. Bonds are doing nothing. The interest rates for investments are almost non-existent. The economy, for the average person, is not very good.

Is the bailout a good idea? I don’t know. I’m not sure anyone is addressing the fundamentals of what put is in the situation we are in.

First, there was the predatory selling of variable-rate mortgages. Sadly, many of the people who fell for this scheme were not educated as to what they were getting into. I strongly suspect that people were told that the interest rates would not spike. It was a lie. They did spike and many people were in trouble. As real estate plummeted people’s debts were higher than the value of their homes. As so many of these mortgages had been sold, and insured, when people defaulted on the mortgages, major money was lost.

Secondly, was the rampant short-selling of stocks. Goldman Sachs and Morgan Stanley are two banks that have been healthy, have solid assets, and were not in trouble based on anything that they did wrong. Last week, however, their stocks dropped like rocks and the banks, almost overnight, lost half of their value. This took place because ‘investors’ were short-selling their stock, betting that these banks were over-valued, and betting that they could drive the price of the stock down. There is a temporary ban on short-selling, but in the coming weeks, when the ban is lifted, I can’t imagine these ‘investors’ will be back at it.

As a digression, what does it say about people that they invest in hopes of a company’s collapse? It is mind-boggling.

In the midst of this is a Presidential campaign where two candidates are promising major tax cuts for most of us and happy days arriving.

For those who like to argue ideology, for those who love government, our government failed us.

For those who like to speak about the free market, the free market failed us.

I do not know what the solution to all of this is going to be. I do know that the pill we need to swallow shall be a bitter one.