As you probably know, if exposed to any news at all in the past two months, the Federal Government is bailing out the financial industry to the tune of $700 billion (or more…much more). With respect to the banks, their plan is to buy up bad debt with the hope of resolving the financial crisis and perhaps some day recovering that money.
No government estimate has ever come in on time and on budget, so don’t bet your life on that $700 billion being enough. In fact, Citibank already demonstrates that unexpected emergencies loom around every corner.
Now everyone is looking for a bailout. Home owners want a bailout. Cities want a bailout. Auto manufacturers want a bailout. The fact is, we want a bailout too. Don’t you? Fair is fair. If you give a dollar to Agnes you have to give it to John. You cannot reason why John is in trouble versus Agnes? Right?
Actually, wrong. It really has nothing to do with whether Agnes or John deserve to be in trouble or not. It is like justifying a war, it is whether bailing them out, as seen by government, is in the public interest.
We will likely spend trillions of dollars bailing out businesses, banks and some individuals. The initial $700 billion just won’t be enough. And to put that $700 billion in perspective…with that same amount of money, we could have followed Boone Pickens plan and erected enough wind power facilities to generate 20% of the US energy needs with wind power!!! Instead, we are buying BAD MORTGAGES!! Think about that. Instead of burning coal and oil, we could use wind for 20% of our energy, but we are buying bad debt instead!
But as is so often the case, we tend to think of the bullet as the root cause of the problem. We forget that a bullet gets fired from a gun, and the smoking gun is key to our understanding of the problem, the determination of the true source. There is a clear explanation of why this problem occurred. For more on the true source of the problem, click here for Part 2.