KingCondanomation
New member
The article makes a lot of sense, one of the reasons we are where we are is financial companies are in bad shape, yet by propping them up temporarily with bailouts, they become dependent on the bailout cash and then when they are cutoff, you still have the same looming failures to face or really a 2nd recession.
"WASHINGTON (Reuters) - U.S. companies, consumers and communities may grow so addicted to government financial help that cutting them off could trigger another recession soon after the current one ends.
"Between the U.S. Federal Reserve's trillions of dollars in lending programs, the $787 billion stimulus package and $700 billion -- and counting -- in bank bailout funds, no one can accuse officials of soft-pedaling their crisis response.
But there is increasing concern that when the flow of public money subsides -- beginning next year when much of that stimulus package is spent -- the economy still won't be strong enough to stand on its own.
"The stuttering attempts to repair the banking and lending mechanisms so far by the new administration suggests that by late 2010, the specter of a second dip into recession will be looming large," said Merrill Lynch economist Sheryl King.
The latest evidence of the government's ever-changing plans came on Monday when insurer American International Group Inc got its third bailout, each with different terms.
That did nothing to improve confidence on Wall Street, where investors dumped stocks amid fears that the financial crisis was worsening.
The longer it takes to stabilize the financial sector, the more the economy suffers, and that feeds back into bigger loan losses and the need for even more government intervention.
John Silvia, chief economist at Wachovia, said the government's success so far in shoring up markets and reviving the economy resembled the pattern of police patrols.
"At each corner where a policeman is stationed, we witness a decline in crime," he said. "In every market where the Fed focuses its liquidity facilities," credit conditions improve.
Unfortunately, where there is no direct government support, conditions are grim. Merrill expects unemployment to hit 10 percent by the end of 2009, with house prices losing 10 percent to 15 percent more and the stock market dropping another 20 percent.
That could erase $6.5 trillion off of household wealth, on top of the $12 trillion hit consumers have already taken, Merrill's King estimated.
SECURITY BLANKET
Those losses are a key reason why it is proving so difficult for the government to get much traction with its rescue plans because consumer spending accounts for more than two-thirds of economic activity.
Data released on Monday showed that Americans were rapidly rebuilding savings that they had run down in recent years when it seemed like rising home values and healthy stock markets would be enough to pay for retirement."
http://www.reuters.com/article/ousiv/idUSTRE52168Y20090302
Stop these bailouts and waste of money, why would we spend trillions to add to out debt to only delay the inevitable?
"WASHINGTON (Reuters) - U.S. companies, consumers and communities may grow so addicted to government financial help that cutting them off could trigger another recession soon after the current one ends.
"Between the U.S. Federal Reserve's trillions of dollars in lending programs, the $787 billion stimulus package and $700 billion -- and counting -- in bank bailout funds, no one can accuse officials of soft-pedaling their crisis response.
But there is increasing concern that when the flow of public money subsides -- beginning next year when much of that stimulus package is spent -- the economy still won't be strong enough to stand on its own.
"The stuttering attempts to repair the banking and lending mechanisms so far by the new administration suggests that by late 2010, the specter of a second dip into recession will be looming large," said Merrill Lynch economist Sheryl King.
The latest evidence of the government's ever-changing plans came on Monday when insurer American International Group Inc got its third bailout, each with different terms.
That did nothing to improve confidence on Wall Street, where investors dumped stocks amid fears that the financial crisis was worsening.
The longer it takes to stabilize the financial sector, the more the economy suffers, and that feeds back into bigger loan losses and the need for even more government intervention.
John Silvia, chief economist at Wachovia, said the government's success so far in shoring up markets and reviving the economy resembled the pattern of police patrols.
"At each corner where a policeman is stationed, we witness a decline in crime," he said. "In every market where the Fed focuses its liquidity facilities," credit conditions improve.
Unfortunately, where there is no direct government support, conditions are grim. Merrill expects unemployment to hit 10 percent by the end of 2009, with house prices losing 10 percent to 15 percent more and the stock market dropping another 20 percent.
That could erase $6.5 trillion off of household wealth, on top of the $12 trillion hit consumers have already taken, Merrill's King estimated.
SECURITY BLANKET
Those losses are a key reason why it is proving so difficult for the government to get much traction with its rescue plans because consumer spending accounts for more than two-thirds of economic activity.
Data released on Monday showed that Americans were rapidly rebuilding savings that they had run down in recent years when it seemed like rising home values and healthy stock markets would be enough to pay for retirement."
http://www.reuters.com/article/ousiv/idUSTRE52168Y20090302
Stop these bailouts and waste of money, why would we spend trillions to add to out debt to only delay the inevitable?