Well it seems I’m too much of an optimist lately, especially in light of the near panic we’re seeing on Wall Street, and how Bear Stearns is struggling to avoid a “run-on-the-bank”. After denying rumors all week about potential liquidity problems, Bear Stearns had to cry uncle and ask for help. Part of the problem is that after many rumors of insolvency and a rapidly declining stock price, they indeed faced liquidity problems after customers wanted their money back in droves.
It’s hard to understand how Wall Street traders and execs who make millions of dollars in salary and bonuses can lose so much money over time and the Fed bails them out? Yes, there’s lots of money involved and the Fed doesn’t want this to spread. But can they save everyone? Do all the banks and institutions that put themselves in this situation deserve a taxpayer bailout?
The government is going to spend billions to bail out these institutions, but Mr. John or Mrs. Sally Q. Public has to face a myriad of economic challenges without any help at all? Oh… wait, we’re having our bailout. It’s called the Tax Rebate.
I’m a fairly conservative guy with strong beliefs in free market capitalism. Yet it sure doesn’t seem like it’s working when the government’s bailing out the institutional folks who developed risky derivative financial products that have now blown up in their faces. But Bear Stearns is Too Big to Fail? Maybe so.
What happens if it’s just not enough? Who bails out the U.S. government? As the U.S. dollar continues to lose value, we simply can’t buy the same amout of “stuff” with it of course. It’s getting pretty tough on consumers out there.
I reached a “pain-at-the-pump” first today spending $49.00 filling up half of my car’s gas tank. If it ever costs me $100 to fill the tank, and we’re pretty close right now, I’m going to park the dang thing. At least more often. But fuel prices continue to rise and grocery, aka commodity, prices will rise further as well it appears.
When you have mass casualties, the rule of the day is triage. Save who can be saved, and say a prayer for the rest. Let’s hope we’re not there yet. But at some point the Fed’s going to have to conduct triage. Are they simply delaying the inevitable? I’m still hoping U.S. consumers can be saved. All this and the majority in Congress want to raise taxes? Now that’ll go over well.
But I’m still an optimist… I think the government does have a plan. The dollar will be supported, the credit crunch will fade over time, housing will bottom and rebound, prices will stabilize, the Bush tax cuts will be extended, inflation will remain low and markets will rally. That’s the rumor anyway.
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