When is it going to end?

So the Fed is jumping in with hundreds of billions of dollars to “help” the financial crisis. At what point do we say enough? I see two big problems with these ongoing debt raising shenanigans. First, there is the issue of how the economy is going to react. The whole point of this is that many people do not like the way the economy (of the world) is reacting to the current mess. Paulson actually commented on “… mitigating the correction..” The key word here is correction. The market is trying to get back to a stable point, and that’s going to mean less spending and less credit than we had before. It is quite possible that the market will over correct, after all, there isn’t a single thing that does this correcting, it’s millions of transactions trying to figure out what to do with money. I’ve said it before, but market forces are a lot like water flowing downhill. You can try to divert it, or dam it, but that water will eventually get downhill. If you don’t like what the water is going to hit and divert it, you can be sure it will hit something else, and maybe get around to hitting the original thing anyway. Damming can work for a while, but when it overflows or breaks the dam, watch out! Both the Treasury’s and the Fed’s actions are very blunt attempts to “correct” a very complicated correction. Collateral damage, here we come!

Another big problem is how these actions are continuing and deepening the fall in consumer confidence. Think about it, if people hear the the financial system is collapsing and we need to pull out all of the stops to rescue it every day, do you think they will want to go spend money? Ultimately, people spending money is what makes things happen, but with so much uncertainty, the spending continues to dry up. “But what’s the alternative Isaac? There are big problems..” Yes, there are problems, but I blame people in DC for fanning the flames and making everyone shoulder the load through taxpayer money. I would have preferred that the institutions that screwed up be allowed to fail. That way, the more conservative ones would have been in a position to profit, and that’s the way it should be. Now, we are in a weird situation where the companies that took risks and got burned are being rewarded. With this sort of bailout, what incentive do you have for being conservative with money?

You can think of it as pulling the bandage off quickly. There would be pain, but things would be primed to correct much more quickly and more accurately than this government led fiasco. Yes, it’s a fiasco, the careless and stupid companies that caused this whole mess are being kept alive and at everyone’s expense…

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