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Why these bailouts must stop and other musings about the same.

Executive Summary – For those with short attention spans… here it goes:

The rash of so-called “bail-outs” are nothing more than a direct slap-in-the-face to capitalism, and threaten its very existence.

DISCLAIMER – This is just my opinion, and is not an effort to offend or otherwise make enemies out of people who would otherwise be my friends.

FIRST: Do me a favor… think back to late September/early October, 2008 for a minute…

  • The political campaigns were in full-swing.

  • The economy seemed to be in a bit of trouble, but nothing earth-shattering or anything to be overly alarmed at

AND THEN…

President Bush announced the first “fanny mae” and “freddie mac” bailouts…and so it begins.

BRIEF ASIDE – Fanny Mae and Freddie Mac are quasi-governmental agencies that the liberals use in order to provide government money to subsidize risky and high-risk mortgages for people who would not otherwise qualify for a mortgage…

Can you say OCTOBER SURPRISE ???

President Bush, whom I admire as a person but (like his friend McCain) is not a real fiscal conservative, had sabotaged his own partie’s chances for winning the election by pushing forward with the idea of the first bailouts! He made “it’s the economy, stupid” quote from previous elections once again relevant and in a BIG way!

This was an estimated $700 billion dollar amount of money to now further subsidize the already-subsubsidizing company who sub-sub-subsidized risky mortgages…do you see a common thread there? SUBSIDY = giving people money so they don’t fail; i.e. removing the risk. (you will need that definition again shortly).

Anyway, the floodgates were now open…McCain (in a bad move) came out in support of the bailouts, when he had a REAL CHANCE to distinguish himself from the unpopular Bush. So much for MAVERICK . :-)

Congress, after throwing in another several dozen BILLION dollars of pork-barrell projects into the mix, approved, and Bush signed gleefully the first bail-out.

Then came the AIG Bailout, the Bank Bailout, the proposed GM/Ford/Chrysler bailout, the city of Atlanta and state of California (thanks, Ahnuld!) are now lining up with their hands out….a new proposed bailout is announced seemingly every day.

American Express, the exclusive CREDIT CARD company, even got the government to agree to reclassify it as a BANK so that it could get a chunk of money from the BANK bailouts.

SO – Chuck – tie this together for me, you may ask. What does this have to do with CAPITALISM, the foundation of our entire economy???

Capitalism is defined as

  • an economic and social system in which individuals NOT governements can maximize profits because THEY OWN (NOT the government) the means of production

  • A large-scale system that allows private individuals, groups and corporations to operate as private entities for profit, i.e. NOT GOVERNMENT agencies

  • An economic system built upon the profit motive (which involves investing money and hopefully getting a profitable return on your investment)

CAPITALISM, you see, involves RISK! Without RISK you can not achive your goals.   

What is the risk?   The possibility of LOSING MONEY!

If you have no risk, you have no reward…that is the essence of capitalism.

In short, subsidizies and bail-outs

  • removes risk

  • no risk means no reward

  • suddenly, everyone is holding their hands out to take from the pot of money

  • no one is left putting money INTO THE POT!

  • wealth is transferred from the “HAVES” to the “HAVE NOTS” until there are no more “HAVES”.

ANOTHER BRIEF ASIDE -  Ask yourself – do you know anyone who ever got a job from a “HAVE NOT”? I didn’t think so…

Repeated and uncontrolled bailouts surely mean the death-knell of capitalism, and the beginning of years of MULTI TRILLION (with a capital “T”) dollar budgets and defecits.

And all these defecits are being financed by whom? Mostly the CHINESE. They buy more US DEBT than any other country in the world…but that’s yet another story.

In summary, if no one is willing to risk their money because the government will always bail them out, then no one will invest in spending and growing the economy, and jobs will be fewer and fewer. And risking money and capital, my friends, is the basis for a capitalist economy.

Many thanks for the indulgences of reading this, and as always, comments are welcomed and appreciated. Thanks also to Michael Gibson and Beth Willis for suggesting the subject of this blog.

Warm regards and Happy Holidays.