Bailout 101

[Whitlock]

I could unstand this-


http://www.backwoodshome.com/articles2/silveira115lw.html

[MountainDon]

Nice find Whitlock

[harry51]

Best exposition of the "bailout" I've read yet. I'm going to circulate it far and wide. We need need to develop some serious righteous indignation about this, and communicate it effectively, meaning face-to-face conversation, to our elected reps.

Thanks, Whitlock!

[Sonoran]

Good article Whitlock.

I heard some things in their that my economics teacher lectured in class. 

One thing he talked about was the Laissez Faire policy, which is where people believe that the economy will self-adjust.  The President in office when the great depression came believed in Laissez Faire.  When the economy didn't self-adjust instantly people believed that it was not a good policy.

Then FDR came and "fixed" the great depression. 12 years later, and the economy still wasn't that good. But this helped people rule out the fact that Laissez Faire policy didn't work.

Also, he mentioned how it's hard to put a time-line on economic policies.  A recession  is generally blamed on the President in office, but it may have been caused by policies that date back before he became President.  So, Bush could have made good decisions, yet he is still going to get blamed for the bad economy, and if his policies worked, we may not find out for another 4 years, but then the credit will go to Obama. And the bad economy now, according to this article, can be blamed slightly on Clinton...and look who's advisors are working with Obama. Yet, he will get credit if the economy gets better.

But then the trick is that the economy isn't in the hands of the President as much as it is in the hands of the Federal Reserve.  The Fed chooses reserve requirements for banks. This is the percent of money they are required to keep in their vaults. If they set a low reserve requirement then the bank is able to lend more money. But a low reserve can be dangerous.  They can also set the interest rates that they lend out their money to other banks which determines how much those banks will lend their money out for. And they also control inflation because they can choose how much money to print.

Generally speaking, inflation and unemployment are like a teeter-totter.  When inflation goes up, unemployment generally goes down and vice versa.

Anyways, the Fed hasn't a lot of power to control the economy and it isn't controlled by the government.  A president generally gets to elect 2 or 3 chairmen depending, but the Senate has to approve them. So that is really the only thing that the President can do in this situation.  I'm sure that their is some things that happen between the Fed and the government.  Just like in this story from Whitlock, Democrats would sway the Republicans to not vote on a Subprime loan restriction policy. Everyone is in everyone else's pocket.

[glenn kangiser]

Yes, and some of the pockets have holes in them.