The Great Depression was engineered and prolonged by the FED. That's well-accepted, even by Keynesian Academics like Bernacke. Money supply was tied to gold, the FED withdrew shitloads of gold from private banks (thus destroying MS), and did nothing to decrease reserve ratios. People simply couldn't get loans during the Great Depression. This crisis could be resolved by nationalizing all toxic paper for >2 Trillion, then nullifying CDS derivatives. Done. This would clean up every shit bank tomorrow, restore lending, and prevent the "cascading failure" everyone is paranoid about. This hasn't happened. Nor will it. Thats what you should be concerned about. As for meltdown risk. Its bullshit. Yes, the dollar would devalue - temporarily. Yes, America would endure a harsh recession - temporarily. You have to remember that the entire value of crap derivative paper simply doesn't exist. So only the players WHO WROTE IT, go bankrupt. And thats where its Stops. Nearly half of American banks had nothing to do with writing derivatized paper. Only the Big Banks. So they get flushed and the other half take-over. THe Great Depression only lasted as long as it did because the FED would not release credit. Thats not the case today. Today, Shit Banks clogged up the entire system by their insolvency and effect on lending and confidence. They need to go under, once they're done, credit and confidence is restored. And banking returns to normal.
If you dont bail the banks out and depositors get worried, risk taking will vanish(its already happening) Buffett articulated the argument brillantly http://www.cnbc.com/id/15840232?video=1056711901&play=1 This forum is a great example, we are seeing threads all the time asking about safety of brokerage funds, money markets ,etc I bet these people are cutting back on risk. If C were to fail totally, you free market purists really think that these people who are already worried will even THINK of doing anything else other than buying gold, treasuries, safes and smith wesson stock?I bet once they hear the horror stories about uninsured depositors who got wiped out and insurers going under because they hold the bonds they will sleep with a shotgun under their matress. They certaintly wont risk their capital in starting businesses, hire or bid up the price of risky financial assets. Irrationality takes place and markets makes more mistakes in those conditions
You don't get it. Its all temporary. Like 12-18 months while the Shit Banks go under and liquidate. FDIC insurance takes care of 95% of depositors. The Big Money is in Bonds. Hence the Flight to Quality. Risk-taking and investment is done for, anyway. The Shit Banks have to fail in order for the market and investment to recover. Otherwise, the economy remains in a perpetual state of limbo while everyone waits to see if: a) The economy and real estate bottom, and b) The Government continues to pump trillions into C, JP, and BOA. A won't happen until Shit Banks lend. And they won't lend because they're on the verge of collapse. Thus, the economy is going nowhere except down until either the Shit Banks go under or new Banks take their place. Its a crisis of confidence. A Shell Game. 50% of banks got the Old Maid so the other 50% won't lend or buy products from anyone else because they know most Banks have cooked books and bullshit statements. This charade goes on for as long as the Government keeps propping insolvent Banks = Nowhere.
The bailout wasn't to save the banking system. The media controls the dialogue, they say (and the secretary of treasury says) "we need the bailout because it saves the financial system that's critical to the economy". Then every single debate on the bailout will be around those issues. People will debate back and forth whether the financial system is critical, whether it would cause a collapse. That's like someone saying "we need the bailout because the sky is blue". Everyone would then debate whether the sky is blue and if the lack of a bailout changes that. The bailout was a way for the super rich to get out of stocks before the big crash, the big crash is a way to depress the global economy.
they should go the way of circuit city. there are plenty of smaller banks -I have my money in Frost. There are other international banks that could pick up the pieces. Its like Toyoto and GM. Sony and Philco[used to make tv's]. Wall Street Welfare
The DOW would be trading at about 6500. There would be massive layoffs throughout every industry. The socialists on capital hill would be trying to exploit the issue to push their radical left agenda. Wait, that's what has happened anyway. Only difference...we'd have spent/wasted a lot less of tax payer money.