What is Hank Paulson claiming is going to happen?

[jbuttell]

Can someone please clearly explain to me what Bush and Hank Paulson think is going to happen?

So far, I've heard the following:

Homeowners with bad mortages may loose their homes. (poor choices)
Personal/Car loans will be much more difficult to get. (yawn)
Edu loans will be more difficult to get. (yawn)
As a result of limited credit, businesses won't be able to operate efficiently. (this sounds bad, but I don't understand the dynamic here) Resulting in loss of jobs.

Can you please elaborate? Surely I'm missing something. While I don't doubt this is serious - I just haven't had a clear picture painted with regards to what happens if government doesn't intervene. They obviously claim to at least know the situation is dire to start throwing out bailout numbers, so it has to be based on some sort of apocolyptic vision. What is it exactly? Have they really spelled it out?

Because of that, when I weight it against the $700 billion bailout, I understand it to lead to an extreme devaluation of the dollar and a slight postponement to the problem we face now, but potentially even worse in the years to come.

 

[Mister Grieves]

No matter what they try to tell us, we can survive without Wall St.

They cannot survive without us. They're parasites.

 

[olehounddog]

They want to keep easy credit going. If I remember correctly, the first car my wife and I bought, the loan took about 4-5 days to be approved.

The frikkin idiots don't realize that easy credit got us where we are today. In the poorhouse.

 

[cheapseats]

Can someone please clearly explain to me what Bush and Hank Paulson think is going to happen?

What they think will happen, or what they're SAYING they think will happen?

They SAY, in a nutshell, that they think the sky will fall. But I think they think something rather different, and I would remind my countrymen that we have NO reason to believe these men who disappear behind closed doors and emerge with Solutions that THEY, who got us into the mess, deem Right.

They cannot have it both ways. The word on the street is that Bernanke and Paulson are both brilliant men. You wouldn't know it by me or the economy, but it is eminently believable. Henry Paulson has a personal fortune of over SEVEN HUNDRED MILLION DOLLARS. That's nearly a billion. Stupid people rarely have personal fortunes of nearly a billion dollars. Conversely, if they didn't see it coming, they are the very last people whose advice we should take now.

How 'bout an Uber Patriot Collection, eh? Couple hundred million from one guy, a billion from another, half a billion from that guy who's got one foot in the grave, couple hundred million from that guy who gives less than one percent of his wealth to charity. It adds up.

It's a one-shot deal. I'm noticing that America's Uber Rich take to the privilege part of stuff with more enthusiasm than they take to the honor part of stuff.

At this terrible juncture of American history when, embarrassingly, Greed is the most defining characteristic of our time, the Uber Rich are substantially more likely be adversaries than friends of the People.

 

[cbc58]

what we are not being told (IMHO) is what the people with the purse strings in other countries are saying to the Treasury Secretary and others. They invested in the US and will pull out if this bailout doesn't go through. Truth is that they are pulling out anyway... just not as fast.

we don't need wall street... they need us, and consumers control the entire economy. time for us to take it back.

 

[jbuttell]

Ok, thanks for the reply - just checking. I thought they were being very vague. Ugg, a few ambiguous threats and they want us to sell our souls.

 

[Knighted]

This is what I can picture happening. It's impossible to say what all the implications would be, but here are some that I can see.

Right now the average American is buried 6ft under with debt. The nation as a whole spent more than it earned (a negative savings rate) in 2005, and close to that in 2006-2007 too. That was the first time since the Great Depression that had occurred. Credit has been inflated up to ridiculous levels, and now, as inflated prices on real estate, etc. try to fall, it pushes those people even further into debt.

A trigger is needed, like the end of the housing bubble, and people begin defaulting en masse as prices attempt to fall and they are overloaded by credit card and other debt. They no longer have money to spend and every dollar is going toward getting out of debt as they struggle to make ends meet. The inflated demand in the economy from the credit bubble falls rapidly due to the decrease in spending, and as a result companies dramatically scale back production of goods. The companies, due to demand falling so severely, no longer have a need (and can't afford) to have so many employees, and so the firing spree begins. As more and more people enter unemployment or take wage cuts (probably the former as wages are thought to be sticky), the ability of those fired to pay off their debt goes up in smoke, and it ends up amounting to a huge chain reaction where defaults lead to more defaults. Think of it like lining up dominos in a row. The more in debt the average person is, the more dominos there will be to fall, until a bottom is finally reached at the end and recovery begins.

 

[vote4ronpauleeze]

Can someone please clearly explain to me what Bush and Hank Paulson think is going to happen?

So far, I've heard the following:

Homeowners with bad mortages may loose their homes. (poor choices)
Personal/Car loans will be much more difficult to get. (yawn)
Edu loans will be more difficult to get. (yawn)
As a result of limited credit, businesses won't be able to operate efficiently. (this sounds bad, but I don't understand the dynamic here) Resulting in loss of jobs.

Can you please elaborate? Surely I'm missing something. While I don't doubt this is serious

Are you kidding me? I'll address these for you then.

1. Homeowners with bad mortgages may loose (sic) their homes --

That's fine. The ones who shouldn't have been qualified SHOULD lose their homes. However, without a system that has available credit, there is a strong possibility that NO ONE would be able to obtain home loans and that commercial real estate would not be able to acquire financing. This would negatively impact credit-worthy individuals because credit would be tightened to the point where they may qualify, but funds would not be available. What happens if commercial and residential real estate cannot be financed? Many construction jobs are lost. Many office and retail jobs are lost. Tax revenue is lost through property tax. Etc.

2. Personal/Car loans would be difficult to get--

First of all, transportation has and will continue to be a main component of our economy. People need transportation and as our population grows, the need for automobiles grows too. But more importantly, if people can't buy cars, what happens to the supplier of cars and their workers? If Chevy and Ford cannot sell, they need to cut production. Who does that affect?

3. Education loans will be difficult to get--

I'm surprised that I even need to address this point. Not only do we need an educated workforce, but now that we enter a global economy, white collar jobs are becoming the only jobs that are housed in the US. With cheap overseas labor, America has and will become a nation of corporate workers versus laborers. If we have a large fraction of our workers without education, we will have a lot of unemployed workers because the only jobs that they will be qualified for are now overseas.

4. Businesses won't be able to operate efficiently--

You answered it yourself. It will result in a loss of jobs and the perpetuation of a depressed economy.

I can't believe how uneducated this board is... I'm a huge Ron Paul supporter, but this is one issue that needs to be resolved before we enter a huge economic crisis.

 

[Indy Vidual]

no matter what they try to tell us, we can survive without wall st.

They cannot survive without us. They're parasites.

+700,000,000,000

 

[Mister Grieves]

I can't believe how uneducated this board is... I'm a huge Ron Paul supporter, but this is one issue that needs to be resolved before we enter a huge economic crisis.

I hope you are at least intelligent enough to realize that this bailout, or anything the government proposes that will continue us down the road that created this mess is not going to fix it.

 

[vote4ronpauleeze]

I hope you are at least intelligent enough to realize that this bailout, or anything the government proposes that will continue us down the road that created this mess is not going to fix it.

The path of no action leads to a depression. The path of credit interjection gives us a chance to sort this out and keep business going.

A depression is something that our economy would have problems bouncing back from, especially as we slip with globalization occurring.

 

[Mister Grieves]

The path of credit interjection gives us a chance to sort this out and keep business going.

Going where, exactly? More of the same is only going to give more of the same, perhaps it will put off the inevitable outcome a little later, but it makes it exponentially worse with every artificial delay.

 

[vote4ronpauleeze]

Going where, exactly? More of the same is only going to give more of the same, perhaps it will put off the inevitable outcome a little later, but it makes it exponentially worse with every artificial delay.

We'll absorb some of the bad debt, raise interest rates, and only lend to credit worthy individuals and businesses.

 

[wizardwatson]

Going where, exactly? More of the same is only going to give more of the same, perhaps it will put off the inevitable outcome a little later, but it makes it exponentially worse with every artificial delay.

Don't bother Grieves, vote4RonPauleeeze has joined the dark side.

We've been trying to set him straight on this thread...

http://www.ronpaulforums.com/showthread.php?t=157944

but I'm afraid the disease of "believing credit creates wealth" has infected him beyond hope.

It may be too late.

 

[vote4ronpauleeze]

Don't bother Grieves, vote4RonPauleeeze has joined the dark side.

We've been trying to set him straight on this thread...

http://www.ronpaulforums.com/showthread.php?t=157944

but I'm afraid the disease of "believing credit creates wealth" has infected him beyond hope.

It may be too late.

Yeah because companies like Chevrolet, Google, Microsoft, GE, et. al never used credit to expand business. Credit as a tool for small business, according to you, is wrong. Credit as a means to finance commercial real estate must also be wrong. Credit as a way to leverage one's education and become a more valuable, knowledgeable worker must be wrong also.

The fastest way to lose out on the growth of China and India is to stagnate our economy.

 

[wizardwatson]

Yeah because companies like Chevrolet, Google, Microsoft, GE, et. al never used credit to expand business. Credit as a tool for small business, according to you, is wrong. Credit as a means to finance commercial real estate must also be wrong. Credit as a way to leverage one's education and become a more valuable, knowledgeable worker must be wrong also.

The fastest way to lose out on the growth of China and India is to stagnate our economy.

You can straw man me all day long if you want. All I'm saying is you don't prop up firms with no capital with 'real' capital just so they can loan back capital to make money. Let the bad ones fail and let solvent firms issue credit.

 

[vote4ronpauleeze]

You can straw man me all day long if you want. All I'm saying is you don't prop up firms with no capital with 'real' capital just so they can loan back capital to make money. Let the bad ones fail and let solvent firms issue credit.

That's no straw man... That's the realization of what happens with an economy with no credit. If you're willing for that to happen to hard working people, then you let it all crash.

 

[wizardwatson]

That's no straw man... That's the realization of what happens with an economy with no credit. If you're willing for that to happen to hard working people, then you let it all crash.

When you said "Credit as a tool for small business, according to you, is wrong." you were using a straw man argument, as I did not say that.

I'm saying credit is not a means to create wealth when the money is stolen from another sector.

If I have money and I loan it because I'm a saver and I can't put all my capital to productive use, then yes, it allows others to use it as a means to be productive.

But if I steal that money and loan it out, I'm creating a zero-sum situation AND creating a malinvestment, because the investment of a thief promotes the industry of thievery.

These are not complex arguments.

 

[cheapseats]

No matter what they try to tell us, we can survive without Wall St.

They cannot survive without us. They're parasites.

That is correct.

A Servant Class that finds itself without a Ruling Aristocracy will suffer less, I think, than Aristocracy and Ruling Classes that find themselves without Servants. The Aristocracy from generations of indulgence, and the Ruling Elite in the hurried manner of the Nouveau Riche, are not so adroit with the nuts and bolts of survival as the put-upon rank and file who foot their bills.

 

[LibertyEagle]

That's no straw man... That's the realization of what happens with an economy with no credit. If you're willing for that to happen to hard working people, then you let it all crash.

Since I am not a SOCIALIST, ok.

Handing the economy over to the FEDERAL GOVERNMENT does not exactly sound like a banner idea to me. I'm surprised that it does to you.

The free market needs to be allowed to operate.