Originally posted by: AntiFreze
LET THEM BURN.
seriously. we want a capitalist economy when things are good and a socialist economy when things are bad. If we would just let the people who made mistakes crumble and die then new businesses would replace them that do it better. It's win win. No economy grows 100% of the time. It's cylical. So let the people over their head with mortgages they never could afford lose their houses, the banks go belly up, the stock brokers commit suicide. LET THEM F'N BURN.
We will have to lower our head and run through, but we'll come out better on the other end. All we are doing is putting a bandaid on a huge gash that is just going to bleed out anyways. We are prolonging the recession (possibly causing a depression). Anyone agree with me? Let the smart people do better and the greedy morons burn.
/rant
(drinking session + economics talk = this)
Ok, now that we're done with the silly, ignorant, and foolish populist rant, let's get down to reality.
First off, the world economy works based upon faith. Faith that credit will be repaid, faith that things will be better, maybe not tomorrow, but eventually. Faith that overall, we have a good system. Once you remove faith you have chaos. Chaos causes irrationality since faith is gone and the one thing people have left is their own concerns.
So, what happens when we allow irrationality to get out of control? We get a downward spiral of insanity, eventually resulting in the collapse of the system.
This is what causes runs on banks and companies.
Now, in a modern economy, companies have stopped carrying a huge amount of cash on the balance sheet, since it's nothing more than dead weight and wasteful. They depend on short-term credit to get through the lulls within weekly business. Right or wrong, this is how things work. Additionally, businesses use credit to finance long-term investments, how else would you finance them? Saving is a silly notion since you can't possibly plan for every eventuality in replacement or operation, thus, you borrow when you need to. Provided it doesn't get out of hand you're good. Also, as long as you match-fund your assets, you're good.
So, what happens when we combine banking chaos with business? We get no investment or credit in business. Everything stops.
Sure, it must be nice to sit on the sidelines and scream about how bad it is, but you've got no fucking idea how bad it is. You don't even have the slightest inkling how bad it could be. Take Wyndham for example. Since they couldn't get financing they laid off 30% of their people. Take that and apply it to most companies out there.
30% unemployment, overnight, sounds good to you?
Ohh yeah, your tough love is all great, until every 3rd person you know is out of a job. Think of that, every third person.
Then it wouldn't be some quick fix either. Nope, since humans are irrational they will over-correct, causing even more pain. The GD would seem like a cakewalk. It would take a decade, or longer, for any faith to be restored.
All because you don't want to come to the realization that an economy that lands softly is far more preferable to one that crash lands. Sure, we are prolonging the downturn, but we are also mitigating the severity.
If your knee gets busted up, do you simply amputate your leg to avoid having to have reconstructive surgery and multiple years of physical therapy? Isn't going through surgery and PT nothing more than prolonging the pain? CUT IT OFF!
Cut off your nose to spite your face?
I get tired of people who don't even work in finance screaming about "free markets", when they don't even realize that no market SHOULD be free.
What smart people are going to do better? What banks will replace the old ones when nobody wants to invest in banks (at least not for a long while). Who will trade stocks of brokers die?
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