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Bad Economic Cliché #2: “So who’s gonna bail ME out?”
March 25th, 2009 by scaredpoet

bailout shirt

I gnash whenever people in one breath rant and rail against government bailouts made to some of these companies, and then demand to know where their handout is. You wanna know where your bailout is? It’s very simple: You need to bail yourself out. And in a way, if you’re a taxpayer, you kinda already are.

Bailout packages and financial assistance to banks aren’t happening just because the government enjoys throwing money at these entities. Bailouts are occurring because the perceived, predicated consequences of NOT doing a bailout are far worse and farther-reaching. If you drive a car, any car, you will be affected in a major way if GM goes bankrupt. Their bankruptcy means the risk of bankruptcy for supplier companies that make major components for both American and “foreign” cars, and the very least, it means that parts for cars – whether you’re repairing your existing heap or buying a new model – will be harder to find and more expensive to buy, assuming they’re still being made at all. And if you bought an American car within the last three to five years, then don’t expect a bankrupt GM or Chrysler to fix your car under warranty if something happens.

Some “experts” and pundits seem to disagree with this… a lot of them are the same talking heads who thought subprime mortgages were an excellent idea back in the day. When the fact remains that no one’s going to want to make parts that they aren’t sure they’re going to be paid for, a basic fundamental truth is exposed: driving – or even taking the bus – to work every day is going to be a little harder to do all of a sudden.

Clunker

What about banks? Certain banks are perceived as “too big to fail.” Media pundits want to sell the idea the the public that “too big to fail” means catastrophic repercussions through the banking system will occur of a Bank of America or Citibank ends up going under. And there’s a very good reason for this: our government promised they would insure common citizens against bank failures, and yet allowed these banks to get rather large to be sanely insurable.

You see, banks “work” on a simple principle: people are supposed to put money in banks because they’re supposed to be safe places to keep your cash. There’s just one problem with this principle: when word gets around (true or not) that maybe a certain bank isn’t so safe after all, people start to panic, and that panic can sometimes ensure that a bank that would not have otherwise failed ends up failing.

To help offset this potential for panic, the US government got in the middle of the situation and said “don’t worry! If a bank were ever to fail, we’ll make sure you get your cash.” And for decades now, this has been good enough.

This concept is just fine when banks are of a certain size. A few million in assets in this bank, a billion or two in that bank, and FDIC insurance looks quite viable. But over time, certain banks have started to get really big. Combine that with the fact that the exsting smaller banks are failing at a fast rate, with 18 already gone this year, totalling $17 billion ins costs since the start of the crisis, and I have to wonder a bit. If a bank with $2.88 trillion in assets fails, will the FDIC really be able to insure most of people’s deposits? I suspect that if the government weren’t able to absorb such a big one, we’d wake up and see lots of suddenly-nonexistent checking and savings accounts. By contrast, a few hundred billion spent now is a real bargain, sadly enough, when you consider the potential consequences.

So, where’s your bailout? It’s simple. If you happen to have money in the bank this very moment, you’ve already been bailed out at least once. And if you drive a car or ride a bus to work, you better HOPE the car companies get a bailout soon enough so you can continue enjoying that freedom with minimal interruption. In the meantime, feel proud that you still have cash of some sort, and that your savings, however large or small it might be, hasn’t been wiped out. Money is still money. Life is challenging, but it goes on. And people in the US aren’t lining up outside of grocery stores with wheelbarrows, bringing zillions of dollars to buy a single loaf of bread.

Zimbabwean Dollar

Our society, banal as it is, continues. There lies your stinkin’ bailout. I suggest you shut up and try to enjoy it.


One Response  
  • crocto writes:
    March 26th, 2009 at 9:14 pm

    i saw a retired navy guy with 2 bumper stickes on his car

    1. bail me out and support the economy: buy me a new car!

    2. One Big Ass Mistake America


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