Ron Paul says all bailouts are bad

[Unregistered]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes. In 2008 financial reform was not what was immediate, what was necessary however was to save the scraps that were left behind in order to save the economy from further stress and try to begin a recovery. Do I think the bailouts had too loose terms? Absolutely. That was absolutely a wrongdoing by the government and a big black mark in my book.

Discuss.

[oyarde]

All bailouts are bad .

[LibertyEagle]

It shouldn't be the government's role to choose the winners and the losers. Consider Lehman Bros, who was allowed to go out of business in 2008, while Goldman Sachs was bailed out by the government with yours and my money. Why is that exactly? It was Goldman Sachs who created the bad housing loan derivatives that failed miserably. Yet, instead of allowing the bad debt to wash out of the system so that our economy could begin a real recovery, our illustrious government reimbursed Goldman Sachs for their bad choices and guess who now owns all those rotten derivatives? As I recall, the Federal Reserve holds them. They have not been allowed to wash out of the system even now. Back in reality, they would have been allowed to sink to the price that the market would buy them and guess what... low price houses would have been available to buy. But, noooooooooooo.

You also cannot lose track of the fact that this whole thing was caused by the government in the first place.
http://spectator.org/articles/42211/true-origins-financial-crisis

[Chester Copperpot]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes. In 2008 financial reform was not what was immediate, what was necessary however was to save the scraps that were left behind in order to save the economy from further stress and try to begin a recovery. Do I think the bailouts had too loose terms? Absolutely. That was absolutely a wrongdoing by the government and a big black mark in my book.

Discuss.

You only believe this because you don't fully understand economics. When you really understand your jaw is going to drop.

[dannno]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes. In 2008 financial reform was not what was immediate, what was necessary however was to save the scraps that were left behind in order to save the economy from further stress and try to begin a recovery. Do I think the bailouts had too loose terms? Absolutely. That was absolutely a wrongdoing by the government and a big black mark in my book.

Discuss.

This is the argument made by the banks, communicated through the media owned by the banks, in order to rationalize taking your money to continue to prop up their phony system.

[Sola_Fide]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes. In 2008 financial reform was not what was immediate, what was necessary however was to save the scraps that were left behind in order to save the economy from further stress and try to begin a recovery. Do I think the bailouts had too loose terms? Absolutely. That was absolutely a wrongdoing by the government and a big black mark in my book.

Discuss.

So banks that engaged in recklessness should be rewarded for their recklessness with confiscated money from hard working people? That makes sense.

[Cleaner44]

If there wasn't a bailout done to the banks we'd have a much faster recovery.

I win.

[CaptUSA]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes. In 2008 financial reform was not what was immediate, what was necessary however was to save the scraps that were left behind in order to save the economy from further stress and try to begin a recovery. Do I think the bailouts had too loose terms? Absolutely. That was absolutely a wrongdoing by the government and a big black mark in my book.

Discuss.

You used a lot of words to say, "Too big to fail". Did you miss 8 years or so of the debate?

[Occam's Banana]

Ron Paul says all bailouts are bad And just as he so often is, Ron Paul is absolutely correct ...

[erowe1]

If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes.

1) Why do you believe this?

2) Given that you do believe this, you would still be free to donate your own money to Goldman Sachs without using the government as a middle man.

[puppetmaster]

Once you said you weren't going to defend it and then proceeded to defend I knew it would be a waste of time.

[erowe1]

Once you said you weren't going to defend it and then proceeded to defend I knew it would be a waste of time.

Yeah, that was kind of weird.

[Occam's Banana]

Once you said you weren't going to defend it and then proceeded to defend I knew it would be a waste of time.

"... nothing someone says before the word 'but' really counts ..."


Now I'm not going to defend the bailouts. I didn't like them either, but [...]

[Harmonica]

It shouldn't be the government's role to choose the winners and the losers. Consider Lehman Bros, who was allowed to go out of business in 2008, while Goldman Sachs was bailed out by the government with yours and my money. Why is that exactly? It was Goldman Sachs who created the bad housing loan derivatives that failed miserably. Yet, instead of allowing the bad debt to wash out of the system so that our economy could begin a real recovery, our illustrious government reimbursed Goldman Sachs for their bad choices and guess who now owns all those rotten derivatives? As I recall, the Federal Reserve holds them. They have not been allowed to wash out of the system even now. Back in reality, they would have been allowed to sink to the price that the market would buy them and guess what... low price houses would have been available to buy. But, noooooooooooo.

You also cannot lose track of the fact that this whole thing was caused by the government in the first place.
http://spectator.org/articles/42211/true-origins-financial-crisis

You have to be realisitic though. The winners and losers in 2008 were not exlusively bankers and banks. If they banks didn't catch a break in the midst of the crisis the American economy would probably have not recovered yet, and the Euro crisis would probably be still raging on. The bailout plan was essential to maintain stability, keep credit markets open, and insure normal operations of financial markets and liquidity worldwide. Providing stability to the banking and financial systems was paramount during the crisis. Without government intervention, fear and panic would've seized control of most financial markets worldwide causing over-extended catastrophe to otherwise already "stressed" marketplaces. Creating stability in the U.S. allowed other distressed countries to take refuge in the dollar and financial instruments here to avoid or lessen risk.

I'm frustrated too by the way it was handled but it was a necessary evil because the big banks were too integral to the economy. The concequences for backing away from this would have been far too great on the global scale.

The government did cause this, but you have to keep in mind that it was hugely in part due to the government deregulation (Glass-Steagall Act, Bush cuts). Amongst these factors were in my opinion also the goverment allowance of the deregulatory standards on mortgages which allowed anybody to legally be lent money with almost no securities backed by the loaner, this happend in 2004 when the SEC relaxed the laws concerning net capital and its credit worth ( https://en.m.wikipedia.org/wiki/Net_capital_rule ).

Similarly earlier in 2000 CFMA ( https://en.m.wikipedia.org/wiki/Commodi ... ct_of_2000 (https://en.m.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000) ) was introduced and passed by a Republican congress that allowed OTC derivatives to be handled freely which would later turn into the infamous spark that set the fire namely credit default swaps, or CDOs.

It is clear to me that the goverment had blood on their hands with the 2008 financial crisis, but I'm not blaming its regulatory practices but its deregulatory practices.

[TheNewYorker]

Ron Paul is wrong.

Bailouts for me are good.

Give me monies

[erowe1]

You have to be realisitic though. The winners and losers in 2008 were not exlusively bankers and banks. If they banks didn't catch a break in the midst of the crisis the American economy would probably have not recovered yet

1) Why do you believe this?

2) Given that you do believe it, why couldn't you and others who believe as you do just give your money directly to the banks, without the government as the middle man?

[Harmonica]

1) Why do you believe this?


Due to the rest of my post, but I'll dwelve deeper.

The economy would not have been able to recover because of the loss of short-term finance. General Electric is a prime example. They would have had zero access to the commercial paper and short-term financing that they had used to finance their business on a daily basis for decades. The entire commercial paper market was frozen and would have stayed frozen for months, too long for a company like GE to survive in its current form. They would have exhausted their funds and been liquidated to pay creditors. Such a shutdown would have been devastating, wiping out over one million jobs in the motor vehicle industry and likely taking Ford down as well. Today, Chrysler and GM have restructured, paid back their funds ahead of schedule, and appear to be on the road to recovery. Study by CAR covered by WSJ about the GE recovery
( http://blogs.wsj.com/deals/2010/11/17/g ... tudy-says/ (http://blogs.wsj.com/deals/2010/11/17/gm-ipo-auto-bailout-saved-more-than-1-million-jobs-study-says/) )

This does not only effect the Fortune 500 either, it would deeply wound new and future businesses too because these businesses mostly if always rely on leverage to get where they are going and with no short-term finance and probably preexisting credit lines shot up skyhigh these businesses would have had to shut down.

Millions of people would have also lost their insurance. Companies like AIG would have gone out of business and millions of people would have been without adequate healthcare coverage. Not to mention life insurance, property insurance, and other insurances that would have been lost, and obligations that would never have been paid or would have taken years to settle in bankruptcy courts. Sure, AIG's competitors could have picked up the leftover business. But anyone with an outstanding obligation or a preexisting condition would have been in trouble.

The problem of a ''bank run'' could have very well escalated. The result would be that the government would suddenly be liable to make good on all the banks' deposits, which could easily have exceeded the value of their assets by more than 1 trillion (840 billion was agreed on in TARP but later on was lowered to 350-something billion by the Dodd-Frank deal). It was better, in my opinion, to have costly bailouts than to deal with a massive collapse.

A study done by Zandi and Alan Blinder of Princeton in 2010 determined that without TARP and the Federal Reserve’s monetary easing, GDP growth would have been 4.7 percentage points lower and unemployment would have been 4.0 percentage points higher in 2010 ( https://www.economy.com/mark-zandi/docu ... ession.pdf (https://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf) ).

I don't think it was perfect though, Home Affordable Modification Program (HAMP) in my opinion was a very flawed program that wasn't very efficient at doing what it was supposed to be doing. It attempted to save mortgages through temporary reductions in interest rates and monthly payments. But even with these lower payments, many homeowners were still underwater at high risk of default, making it pointless to make any effort to save.


2) Given that you do believe it, why couldn't you and others who believe as you do just give your money directly to the banks, without the government as the middle man?

Because of its impopularity, in 2008 I was not very comfortable with TARP either but in foresight it was a controversial but necessary deal made to keep the dollar strong and have the American economy atleast be at a halt for a moment.

[BV2]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery because the banks are so influential and so big that they have to exist as of right now or else we'll see even greater financial crashes. In 2008 financial reform was not what was immediate, what was necessary however was to save the scraps that were left behind in order to save the economy from further stress and try to begin a recovery. Do I think the bailouts had too loose terms? Absolutely. That was absolutely a wrongdoing by the government and a big black mark in my book.

Discuss.

Even if what you say is true, which you can discuss, Ill go ahead and put it this way: Better withdrawals and healing, no matter how painful, than continued addiction...every time, and for everyone involved.

[Harmonica]

Go through my latest post.

[The Gold Standard]

Go through my latest post.

There is no doubt without the bailouts the economy would have been devastated. But guess what? It is anyway. Employment numbers and aggregate economic numbers, neither of which mean a fucking thing in the real world, all look better because these companies were propped up. But the consumer was robbed of better products and services, not to mention the money to bail out these losers, and the increase in value of their money that would have been restored with massive deflation.

That's the whole point of liquidating failed companies. So that better companies can buy up their assets cheap and put them to better use. Instead we get fucked, the government's friends get taken care of, they continue as they were, and when the next crash comes they will need to be bailed out again.

[angelatc]

Now I'm not going to defend the bailouts. I didn't like them either, but what I will do is rationalize it, if you take a look at Goldman Sach's bankruptcy in relation to the global economy the dollar sunk to an all-time low in relation to their crash. If there wasn't a bailout done to the banks we'd have a much slower recovery .....

What if instead of reallocating the assets, we had let the banks go under and just forgiven all the debt they were holding? Business loans forgiven, workers suddenly owning homes and cars free and clear...with all that money freed up, why would the recovery take longer?

Hint - another country did exactly that.

[Harmonica]

There is no doubt without the bailouts the economy would have been devastated. But guess what? It is anyway. Employment numbers and aggregate economic numbers, neither of which mean a fucking thing in the real world, all look better because these companies were propped up. But the consumer was robbed of better products and services, not to mention the money to bail out these losers, and the increase in value of their money that would have been restored with massive deflation.

That's the whole point of liquidating failed companies. So that better companies can buy up their assets cheap and put them to better use. Instead we get fucked, the government's friends get taken care of, they continue as they were, and when the next crash comes they will need to be bailed out again.

Well, Banks have no real liqudated value. They are propped up by a federal reserve.

[The Gold Standard]

Well, Banks have no real liqudated value. They are propped up by a federal reserve.

They had assets with some value. But if that is the case, they don't need to be around anyway.

[Harmonica]

Okay so you just want the entire global economy to fail on the basis of a moral prinicple? Sending millions into poverty and unemployment and foreclosing even more homes by letting interests stay high. This is thread sounding more and more like revolutionary arguments to me.


You have to be realisitic though.

Was my argument, you can preach all you want but at the end of the day the bailouts were generally good for the much needed recovery of the American middle class. Now there are many things that were wrong with TARP that is true but the alternatives at that time were far more severe.

This is the same problem with the debt ceiling, raising the debt ceiling is generally not a positive sign for the future of the American economy but it is necessary so it doesn't collapse. Many countries rely on the same mechanisms. I personally believe in slow gradual reforms of these issues and not immediately reverse the economic thought that has stood central and that has become so necessary for the economy to function.

[The Gold Standard]

Okay so you just want the entire global economy to fail on the basis of a moral prinicple?

No, I want the entire global economy to fail because it needs to happen and will happen eventually. Then we need to replace it with something real, like a free market, where the people are the most prosperous. The longer we put it off, the harder the collapse is going to be when it comes.

[Harmonica]

Economic collapses occur all the time due to deregulatory measures by the government. I can't see how this hasn't already happend?

[Danke]

What if all that bailout money was given back to the taxpayers. Would that not have stimulated the economy?


http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104?page=3

[angelatc]

Okay so you just want the entire global economy to fail on the basis of a moral prinicple? Sending millions into poverty and unemployment and foreclosing even more homes by letting interests stay high. This is thread sounding more and more like revolutionary arguments to me..

So many logical fallacies in that paragraph I thought it deserved to stand alone.

[Harmonica]

Can you elaborate?

[Harmonica]

So many logical fallacies in that paragraph I thought it deserved to stand alone.




So please elaborate as to why I'm wrong instead of just stating such. This started as a sound discussion but now you're just being disrespectful by not properly addressing my argument. That's just rude lol. if you agree with me on something acknowledge that instead of dismissing it so I can better understand your perspective. Sanders and Paul audited the fed together so don't believe we're from different universes here because we probably got more in common than you think we do.

[TheNewYorker]

Can you elaborate?

To put it simply, while business failure of any kind is always painful for investors and employees alike, it’s a happy sign of economic revival for revealing in living color that capitalism is working. Business failure hardly constitutes business disappearance, and the beauty of failure is that it ensures that poorly managed assets are released at frequently low prices to managers with a stated objective to develop those human, mechanical and financial inputs more effectively on the way to growth.

[oyarde]

All bailouts are bad .

[Harmonica]

I wanted elaboration on these so called "logical fallacies"

[GunnyFreedom]

If there wasn't a bailout done to the banks we'd have a much faster recovery.

I win.
This is the correct answer. The primary reason the American economy is still struggling is due to bailouts and quantitative easing. Ron Paul is right. All bailouts are bad. They create malinvestment which distorts the economy, depriving growth sectors of the capital they need to create jobs.