The financial crisis -- bad banks, toxic assets and taxpayer bailouts.
Federal Reserve chairman Ben Bernanke is committed to the idea of bailing out large corporate financial institutions like banks and Wall Street firms. Bernanke considers himself an expert, a "student" of the Great Depression. His belief is that the Federal Reserve was a main cause of exacerbating the problems at that time. He feels they didnt react quickly and strongly to stem the economic collapse that soon followed. The idea - that the Federal Reserve would be a "lender of last resort" - was to have a central authority who would be able to step in during moments of financial crisis to inject some liquidity to prime the pump and get the system going again.
April 15th tax day "Tea parties" are a new grassroots phenomenon "sweeping the nation", protesting the bailouts, protesting the stimulus package, protesting congessional deficit spending. If there's governmental money involved, the tea parties are protesting it with homemade signs. The American Family Association says it is planning "Taxed Enough Already" (TEA) party rallies in 1,000 cities and towns on April 15.
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I listened to a radio conversation (posted on youtube), an interviewer interviewing Alex Blumberg and Adam Davidson from NPR's "Planet Money":
Interviewer: Why not just let the banks fail in the marketplace? Why would that trash the world economy? Wouldn't, then, the FDIC take care of the insured shareholders and then some other new banks would spring up and start all over again?
Alex: If you think of depositers at a bank, like - as most of us, like as a savings account, most of us have less than $250,000 in our savings account - and we are loaning that money to the bank when we have a savings account. That is protected money. So if the bank were to go under, the government would make us whole. But there's a lot of people who loan the banks money in much greater sums, like millions and billions of dollars at a time.
Adam: Pension funds... you know, institutional investors... and really rich people...
Alex: And that is the main way these really big banks sort of function, getting this institutional money, which if the bank were to fail, and these people were not made whole, this would set off an entire chain of events, because that would mean your pension funds - your pension fund is lending your bank a lot of money right now, million, billions of dollars - and if the bank were to go bankrupt and they were not able to pay it back, then your pension fund takes a hit... and that has consequences down the road, there's this sort of horrific spiral...
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The Christmas season was pretty bad. Consumers have not been shopping for a long time. Cash is needed to stimulate the recession economy. It's not coming from consumers. Banks have frozen, stopped lending. If consumers, businesses and banks cannot be counted on to start the stimulating of the economy, this leaves government. The billions in bailouts are to assist the banks it "thawing", lending again, to give the "liquidity to prime the pump and get the system going again". The stimulus package itself is to inject money also and to get people working again as a side benefit.
One of the leading republicans in congress, House minority leader John Boehner, has called for a "spending freeze", that is, for injecting no money anywhere via government, "until the end of this fiscal year". Many economists think he's got the solution exactly backward.
Alex and Adam from NPR were on Rachel Maddow's MSNBC cable show last week, and Alex was explaining a chart he'd just seen regarding U.S. household debt as a percentage of the GDP.
Alex: "There's a chart of household debt in this country... household debt is everything that you owe on your credit card and your mortgage and on your car, everything, and if you add up everything that everybody owes in the country and put it all together, that's what the household debt is. And this chart was a percentage of GDP.... it says that we collectively as a nation, as people, owe 13 trillion dollars."
If you look at this chart, this monsterous household debt started dramatically increasing around 2000, and crested around 2007:
http://creditwritedowns.s3.amazonaw...m/files/2008/10/household-debt-vs-savings.png
YouTube - Rachel Maddow Show: Planet Money, Explained
Federal Reserve chairman Ben Bernanke is committed to the idea of bailing out large corporate financial institutions like banks and Wall Street firms. Bernanke considers himself an expert, a "student" of the Great Depression. His belief is that the Federal Reserve was a main cause of exacerbating the problems at that time. He feels they didnt react quickly and strongly to stem the economic collapse that soon followed. The idea - that the Federal Reserve would be a "lender of last resort" - was to have a central authority who would be able to step in during moments of financial crisis to inject some liquidity to prime the pump and get the system going again.
April 15th tax day "Tea parties" are a new grassroots phenomenon "sweeping the nation", protesting the bailouts, protesting the stimulus package, protesting congessional deficit spending. If there's governmental money involved, the tea parties are protesting it with homemade signs. The American Family Association says it is planning "Taxed Enough Already" (TEA) party rallies in 1,000 cities and towns on April 15.
--------------------
I listened to a radio conversation (posted on youtube), an interviewer interviewing Alex Blumberg and Adam Davidson from NPR's "Planet Money":
Interviewer: Why not just let the banks fail in the marketplace? Why would that trash the world economy? Wouldn't, then, the FDIC take care of the insured shareholders and then some other new banks would spring up and start all over again?
Alex: If you think of depositers at a bank, like - as most of us, like as a savings account, most of us have less than $250,000 in our savings account - and we are loaning that money to the bank when we have a savings account. That is protected money. So if the bank were to go under, the government would make us whole. But there's a lot of people who loan the banks money in much greater sums, like millions and billions of dollars at a time.
Adam: Pension funds... you know, institutional investors... and really rich people...
Alex: And that is the main way these really big banks sort of function, getting this institutional money, which if the bank were to fail, and these people were not made whole, this would set off an entire chain of events, because that would mean your pension funds - your pension fund is lending your bank a lot of money right now, million, billions of dollars - and if the bank were to go bankrupt and they were not able to pay it back, then your pension fund takes a hit... and that has consequences down the road, there's this sort of horrific spiral...
--------------------
The Christmas season was pretty bad. Consumers have not been shopping for a long time. Cash is needed to stimulate the recession economy. It's not coming from consumers. Banks have frozen, stopped lending. If consumers, businesses and banks cannot be counted on to start the stimulating of the economy, this leaves government. The billions in bailouts are to assist the banks it "thawing", lending again, to give the "liquidity to prime the pump and get the system going again". The stimulus package itself is to inject money also and to get people working again as a side benefit.
One of the leading republicans in congress, House minority leader John Boehner, has called for a "spending freeze", that is, for injecting no money anywhere via government, "until the end of this fiscal year". Many economists think he's got the solution exactly backward.
Alex and Adam from NPR were on Rachel Maddow's MSNBC cable show last week, and Alex was explaining a chart he'd just seen regarding U.S. household debt as a percentage of the GDP.
Alex: "There's a chart of household debt in this country... household debt is everything that you owe on your credit card and your mortgage and on your car, everything, and if you add up everything that everybody owes in the country and put it all together, that's what the household debt is. And this chart was a percentage of GDP.... it says that we collectively as a nation, as people, owe 13 trillion dollars."
If you look at this chart, this monsterous household debt started dramatically increasing around 2000, and crested around 2007:
http://creditwritedowns.s3.amazonaw...m/files/2008/10/household-debt-vs-savings.png
YouTube - Rachel Maddow Show: Planet Money, Explained