A Reflective Christian

All for God’s Kingdom

Why this economic downturn is not another Great Depression

Adjusted to 2000 dollars, the GDP of the US in 1930 was below $1 trillion. Most recently, the 2008 CDP (also adjusted to 2000 dollars) is a little above $10 trillion. We would have to lose 90% of the economy for it to begin to become the same situation.

October 10, 2008 Posted by | Uncategorized | | 4 Comments

More thoughts on the bailout bill

I have heard people counter the argument that we should just let the economy fix itself out, that if we do not bail the economy out, there is going to be a crunch on us financially, so we really need to pass the bailout bill. And there is truth to that statement, but I still don’t think it should be passed.

The fact of the matter is, for the vast majority of people and families, they will still have a roof over their head, be able to provide three meals a day for their family, will have basic clothing, and will have an adequate mode of transportation (if not even the luxury of convenient transportation). Sure, the American consumeristic lifestyle won’t be as feasible. We may not be able to have the luxuries we may think are needs that we currently enjoy. But I fail to see where that is a problem that requires a bailout of the economy.

There will be a group of people that are genuinely put into a bad situation. But you know what. Lets say it is the lowest 20% of the US population that will not be able to afford to do basic things mentioned above (a very very generous estimate). That gives us 60 million people who will have trouble supporting themselves. You know what that $700 billion could do? It could provide approximately $12,000 per person in that situation, which if needed can be stretched a long way. And if you make that a family for four, that is $48,000. And again, this is based on a very generous estimate of how many people would genuinely be in need.

Spending that money on a bailout bill may in the short run help the economy. However, all the government would be doing is saying “You can engage is risky activities and we will finance it if you fail.” So you can expect in the future other corporations and markets would expect a bail out if they practiced risky economic activites and failed. They got little to lose and a lot to gain if the succeed. But the economy as a whole would have a lot to lose and little to gain in the long run. Matter of fact, if big bailouts were a government policy, I would dare say we would get into this mess fairly frequently.

Forget the majority of consumeristic America that complains when it will have to cut back on the luxurious lifestyles that they have enjoyed up to this point. Forget the mortgage industry that took risky and manipulative bets. Forget the people that felt they had to have their own home, even if their money was tight (and took part of the consumeristic ideal and made a big risk themselves). If the government wants to help, to help the country endure this crisis it helped facilitate, the government can get out of the economy, which it has never shown the ability to be able to make work much better, and give the money they would give to bail out the mortgage industry to those people who are going to be genuinely affected by the government’s own policies that allowed us to get into the mess as it is. Tis a pipe dream, I know.

October 3, 2008 Posted by | Uncategorized | , , | Leave a comment