US Financial Crisis SOLVED!

US Financial Crisis SOLVED!

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SinbadEV
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Joined: 02 May 2005, 03:56

US Financial Crisis SOLVED!

Post by SinbadEV »

Okay, so the US government is planning on paying $700 billion dollars to US banks in the so-called "bailout" right?

700 US Billion (as apposed to UK) : 700,000,000,000
US Population is estimated at: 301,621,157

So a friend and I where discussing, this amounts to about $2320 per US citizen... and at an average household size of 2.59 it works out to about $6636 per US household...

So, what you do is you pay off up to $6636 of every household's debt, this money STILL ends up in the banks AND suddenly everyone has a little bit more spending power. Any household that has less then the $6636 would be given the difference just to be fair, but I doubt many families are in this situation anyways. So people can buy all those consumer goods, services and houses that are "rotting on the shelves" as it were and the economy gets a boost from the bottom up while the banks get the money they need anyways.

Soo... Opinions?
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Quanto042
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Re: US Financial Crisis SOLVED!

Post by Quanto042 »

That would be too easy.
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RogerN
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Re: US Financial Crisis SOLVED!

Post by RogerN »

Sorry, but there are several reasons why that wouldn't work.

First of all, the majority of mortgages in the U.S. are not currently in danger of foreclosure. If the government decided to pay $6000 towards all of these mortgages then it really wouldn't help the economy much. Why?

1) The majority of these loans are low-risk, so from the bank's perspective there's nothing to be gained by paying them off early. In fact, you may actually be hurting the bank. Interest rates are extremely low at the moment, so most banks would prefer to continue collecting interest on older, reliable loans. By paying off the loans early you reduce the bank's income.

2) Most home owners will not change spending habits just because you paid off $6000 of the mortgage. The monthly payment stays the same either way, so there's no extra cash to pump into the economy. And if you're already in debt, it's really not responsible to take a bailout and then dig yourself right back into the same hole...

Another fundamental problem with your proposed solution is that's a real bailout instead of the pseudo-bailout we have currently. Your solution would have the government basically give away $700 billion, and taxpayers would never be repaid. We can't afford to just give away that much money. That's why the current pseudo-bailout plan involves buying bank stocks and loans. The government will eventually recoup some or most of the $700 billion.

Finally, it's just not efficient to attempt to address the financial crisis by randomly giving out money. The majority of loans in the US are OK, so you waste effort and money by trying to fix them. To efficiently address the problem you must selectively target bad loans and issues which are causing credit problems.
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smoth
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Joined: 13 Jan 2005, 00:46

Re: US Financial Crisis SOLVED!

Post by smoth »

after katrina there were kitrina handouts from the government. I know lots of people who work in electronics stores /sections of stores.

people would come in with their katrina money and buy games.

bush did that economic stimulus check and I used it for gunplay.
BaNa
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Joined: 09 Sep 2007, 21:05

Re: US Financial Crisis SOLVED!

Post by BaNa »

On this theme:

we had a program that was supposed to help needy people buy computers, I used it to get a new video card twice in 3 years...

anyhoo, I'm not sure why it is good if the government buys up a lot of toxic debt at "market" prices, which are actually high above the true market value of such loans. As for the money coming back, sure, it will come back, unless the firm you are helping manages to fail yet again. If any of the banks getting the bailout where to go bankrupt, the money going their way would be wasted, so now the govt. is on a slippery slope, as we can see from the more and more money they are giving AIG.
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Zpock
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Joined: 16 Sep 2004, 23:20

Re: US Financial Crisis SOLVED!

Post by Zpock »

Money is like blood, it needs to flow. The government is like the heart, and the banks are like arteries, and industry maybe lungs/intestines/etc. The financial crisis is like a clog in the arteries, and you don't solve that by giving each cell (people) in the body a tiny bit of blood, you need to fix the clog itself. In the end you always will have the same amount of money/blood, the important thing is the flow of it.
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AF
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Re: US Financial Crisis SOLVED!

Post by AF »

The taxpayers paying to pay the taxpayers money?

While ti sounds fine to beginw ith you must realise that its not free money for everyone because the government still has to pay it back with interest.

Then there's the fact that any bailout of that size means borrowing from other countries, which negatively impacts upon the value of currencies.

I think they should have enforced regulations and protected the banks that way but allow banks to fall down and merge together.

I also like the way the UK did it, in the form of buying preferential shares in the banks. Now the UK government can intervene when bank bosses try and give themselves golden payoffs and extravagant parties. No more reward for failure.
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PicassoCT
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Re: US Financial Crisis SOLVED!

Post by PicassoCT »

There is another little dirty Trick to save the World. End the Banksecrecy between Banks, give them the right to look into each others Books completely. Replcae Trust (not working) through knowledge (working)
Crisis solved..

Or we print Money that´s starting to rot while lieing around unused. so the Banks have to move, just to have anything left at all ;)
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AF
AI Developer
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Re: US Financial Crisis SOLVED!

Post by AF »

I think no bank would ever want to lend to another if they could all see each others balance sheets
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Zpock
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Joined: 16 Sep 2004, 23:20

Re: US Financial Crisis SOLVED!

Post by Zpock »

AF wrote:I think no bank would ever want to lend to another if they could all see each others balance sheets
Isn't that the problem?
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AF
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Re: US Financial Crisis SOLVED!

Post by AF »

Indeed but it would be much worse if everyone could see each others bank sheets. Banks that would otherwise weather the storm would collapse. Once markets recovered everybody would be uber cautious, and there would be the costs of auditing and making sure the figures aren't being manipulated for purposes fo corporate fraud.
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