Business advice

Should we have had bailouts?
April 12, 2009, 8:16 pm
Filed under: Uncategorized

There are many citizens greatly worried about the debt the government created because of the bailouts.  The worry is citizens will be taxed unfairly in the future to pay down the debt.  Keep in mind, however, taxes aren’t the only way the government raises money.

Other countries lend the US money and then there are government bonds and securities that the Fed sells to the public.

This worry is this debt will be passed on to other generations.  It’s not good, but the various government bailout programs were born out of necessity.

I have heard some who think we should be content with living on wages that the Third World Countries, dream on.  Not likely.  One of the reasons the economy expanded since the 50s and 60s is more people. More people means an increased in demand, which requires more goods and leads to higher prices.   Our current economy can only shrink so far before it collapses.

Now, I am not claiming huge debt is good under any circumstances.  I am saying without the bailouts you would have seen riots in the streets.  It would have been a worse scenario than your wildest nightmares.  If the Feds hadn’t stopped the bank collapses, what would have happened the next day when you wanted your money?  True, it was insured to a point, but if you had to wait for an insurance to pay out while the bank was shut down, just imagine for a minute what your world would have looked like.  How many times in a week do you stop by the ATM machine because you are running short of cash?  They would have been shut down and no, you can’t use another company’s ATM because there is no longer an active account in your name through the bank that collapsed. It would have been chaotic.

If banks were allowed to close, it would have created a panic for the other banks.  There are still copies of photos around of people in line waiting to get their money from the banks during the 30s.  God forbid we have to live through something like that.  Our grandparents weren’t hooked on ATM machines.  It was easier for them to revert to barter than this spoiled generation.

Ok, we have had the bailouts, There are billions floating companies that would have collapsed if left alone.  All of this has to be paid back some day down the road.  What are we as individual consumers doing as responsible citizens in this whole picture?

In order for consumers to be ready to deal with a better balanced economy, they have to live with less than they ever thought.  Suze Orman has been predicting we are going to have to live on half.  If you have a two income family, you need to learn to live on one salary and put the other check away.  Hard stuff to grasp.  Not likely, anyone is actually going to be able to meet those guidelines in the next few years.  We live too far out on the limb.

However, if we don’t start somewhere, we’ll not see the end of this mess for a long time.  We still have companies who find it efficient to outsource a portion of their workloads.  It’s a sad fact.  We need to take a look at why and try to encourage corporations to leave the work here in the U.S.. But, if they feel they can’t afford us, that isn’t going to happen.  Agreeing to work as a temp might land you a job with a company who would have outsourced the position..  Let the temp agency pay the benefits.  These days if you work for 90 days in a row, temp agencies pay health benefits.

No one is going to bank one spouse’s total check.  We have spending patterns ingrained to the point it takes the threat of being homeless to make us change.  However, you can take a good percentage of one partner’s check and stash it.  The other new recession advice from Orman is, “…stash the cash.”  Do any thing that will make that happen.

Start changes in your family and take any chance you get to talk about the changes you are making with your personal finances to friends, family and business colleagues.

Is there a chance that some of the bailout money will be misused by the recipients?  Of course, there is.  We already saw the incident with the AIG bonuses.  Thankfully, the flack from the press, etc., created enough pressure to correct that mess for the most part.  Every human when it comes to money makes mistakes. We can’t change the government and its decisions unless we are willing to run for office.  We can write about the problems and hope someone out there listens.

Take care of your own house and hope that the Federal government doesn’t run out of resources from which to borrow money in our life time.  We can only change the financial mess one person at a time.



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