What if we did not bail out the banks?

Discussion in 'Economics' started by cubical, Mar 5, 2009.

  1. cubical

    cubical

    How bad would it have really gotten? If we let the free markets take care of it all would we have taken the pain like ripping off a bandaid, all at once?
     
  2. This is what you would get if the largest banks were all allowed to fail at once:

    [​IMG]

    If the largest banks fail at once, the fear and pessimism would be so deep no one would have confidence to start a new one. Without major banks to provide credit lines to businesses then they can't expand or operate, can't buy raw materials, can't add to payroll, etc.
     
  3. It's amazing that the question needs to be asked.

    What would happen to your wife if 10 crazed junkies invaded your home?

    Answer: same as if the big banks failed.
     
  4. glennku

    glennku

    USA would have created 50 new Wal-Marts from $10 Trillions bail-outs and stimulus package instead of giving $10 Trillion as a gift to bankrupt campanies and banks.

    50 new Wal-Marts will create 102 million new jobs.
     
  5. toc

    toc

    '50 new Wal-Marts will create 102 million new jobs'

    fine, but who would buy goods from these 50 walmarts. i think, not sure, that walmart has annual sales of $300B which means 50 x 300B = 15T worth of goods.

    US economy is not big enough to buy $15T from just one company.

    The main reason for bank bail out is not that they would cease to exist but the credit crunch that would basically 'cold freeze' the whole economic system and bring the nation to stand still.

    CNN reports that there are 3M more layoffs in the pipeline before the trend reverses. Bail outs are not over yet!
     
  6. glennku

    glennku

    History says that bankrupt companies shut down after sometime because they are already bankrupt. So providing $10 Trillion bail-out to bankrupt companies is basically throwing $10 Trillion in the fire.
     
  7. glennku

    glennku

    Alternatively

    USA has 300 million citizens.

    Now 10,000,000,000,000/300,000,000 = 33,334.

    If USA government gives $10 Trillion to 300 million USA citizens. Each citizen will get $33,334.

    Each USA citizen will have $33,334 to spend for USA economy. Ultimately USA economy will get $10 Trillion purchases.
     
  8. I could have gotten so bad that all those people at Goldman (who work so much harder than people working 3 jobs) might not have got their bonus entitlement.
     
  9. delete
     
  10. well actually, with money velocity, it cud have been more... but i suspect lots would have gone to reducing debt, setting aside for rainy day, etc... which is good, if you overlook the fact that the we still owe the money, plus interest...
     
    #10     Mar 7, 2009