Rant – US financial crisis

Here’s the startup blog view on the $700b bailout plan.

In a free market private profits should also result in provite losses – not public sharing.

If the crisis didn’t happen the US taxpayers would not have shared in the upside – so why should they bail them out? The fact is – the hard economic lessons need to be learned. The USA economy needs the pain of a recession to re-calibrate the market mechanics and the ‘philosophy’ of the market participants. Unless reality hits – more events of this nature will occur.

4 Comments Rant – US financial crisis

  1. Tim Rueb

    Unfortunately, the pain of failure is trying to be sheltered from our system. You are correct that our economy will repeat this event several times before we are strong enough to admit that we the people must take responsibility when we try and manipulate the free market system.

    As you state, the economy can’t reallocate it’s limited resources correctly if the government (we the people) are in there stopping the very thing we need to cause a true correction.

  2. dr.dre

    I agree that this bailout represents a substanital moral hazard problem (i.e. if I know I will be bailed out then I can chose to ignore downside risks). Howver, you are somewhat incorrect in saying the US taxpayer would NOT have benefitted from any upside of this behvaiour. Profitable firms and profiteering individuals pay more taxes. These taxes should flow through to more public services, or lower tax burdens for all. It’s not the same quantum as the (negative) impact of the bailout, but it is an impact.

  3. Tim Rueb

    @dr.dre – I agree that companies that perform well, and by that I also assume they show profit, provide a community more benefit then simply lining the pockets of the risk takers. The services and products they provide are the benefits, not the governments ability to fleece them of their gains so others don’t require as much fleecing.

    The very fact that congress meddled in their role of providing funds for purchasing houses under the guise of ‘affordable housing’ only amplifies the question, “How is this bill solving the root cause?” People will still be foreclosed on. Banks will continue to be forced into providing loans to those that can’t or have no interest in paying them off. And congress will continue to prop up weaker companies that should be allowed to die off or demand strong companies perform activities that they would not normally undertake.

  4. Pingback: Short memory « Start Up Blog

Leave a Reply