Why The Bailout Should Be Renamed...."Smoothing Of Losses"

Discussion in 'Economics' started by libertad, Sep 25, 2008.

  1. The real question at hand is how can the prices be restored to where they used to be......or how can one rid itself of the lost value....if one cannot replace what created such high levered valuations previously.

    This loss is not going away.

    If the losses are not incurred now, they will be taken in some other form.

    ie...

    Monetary expansion
    Increase in debt
    Increase in taxation

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    The government does not create wealth in that it only shifts it around.

    Losses can be taken now, or either the true wealth creators will be weakened.
    .................................................

    What the government is attempting is called smoothing.

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    What could happen that would be wealth creating would be for the government to pay discounted prices for what has already declined in price.

    This is not going to happen, because the government is trying to avoid this type of price decline.