Parenting is a tough job. One has to find a balance between letting kids learn life’s lessons through painful experience (natural consequences), and keeping them safe. The parental path through the child-raising wilderness is not always well-marked.
Fire is hot. Should we let little Janey touch a flame so she learns that it’s dangerous? Guns can kill people. Do we teach little Johnny how to handle them so he doesn’t make a fatal mistake through ignorance?
Life’s perils are endless: marbles don’t belong in noses, mulch is not nutritious, humans don’t have gills… I’m continually amazed by how many children actually make it to adulthood.
All of this has been playing through my mind as I’ve contemplated the massive intervention being proposed for the economy. And I’m not the only one using life analogies. Paul Krugman writes:
Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.
So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge?
But is that really the grown-up thing to do?
Without the bail-out, are we looking at the equivalent of a Mack truck barreling through a crowd of people milling about in the street, leaving death and severed limbs in its wake? Or is this more like a failing grade late in high school, that will keep the US out of a top university?
Certainly something’s going to happen. But what? The general consensus seems to be that no matter what the government does, there’s going to be a painful economic contraction. It may very well be more like blowing one’s GPA so badly that there’s no chance for college at all, and the goals will be reset for the next generation.
Maybe.
But even if that’s the case, is the looming economic problem terminal? Or is it a life-changing event that will affect decision-making for decades to come?
I think it’s probably the latter.
Painful? Yes. Preventable? Possibly… but only for awhile, because rescuing the financial system and increasing regulation won’t keep everybody from playing in the street if they’re really determined.
Bailing everybody out is like saying that if you play with fire, you get burned. Fire is hot. Keep your hands out. But inside, grown-ups know that painful lessons aren’t truly learned until there’s a scar.
I think we should pass on the bail-out.
(Cross-posted to The Moderate Voice.)
Sorry but I think you are grossly mistaken and naive about the consequences. I think America WILL sink in to a deep depression because the vast majority of Americans are in EXACTLY the same kind of fiscal distress that both Wall Street and the Federal Government are in.
Americans have ZERO SAVINGS and that is a fact, what REAL ASSETS they have are in their plummeting home values and investment portfolios, there is no real liquid cash to fall back on when people lose their jobs in droves.
You’re in wishful thinking land if you think the average American is financially sound enough to absord the effects of major job losses and a glut of credit in the market when the very core of Americans’ purchasing power is CHEAP CREDIT.
“the very core of Americans’ purchasing power is CHEAP CREDIT. ”
Thank you for making my point so succinctly.
Yesterday the US experienced the largest bank failure in US history with WaMu going under and it was under the headlines of the bailout. I would be inclined to take a more populist view of this and demand economic justice if banks weren’t going to continue to fail. Eventually people are going to panic, credit will freeze, regular middle income people like you and I will be unable to buy a home, buy a car or get a loan to send our kids to college. I think Sijui exaggerates the point a bit but unfortunately although many may think that credit is something you only need sometimes to buy a big screen TV, many people use every day to continue economic growth. They use it to start new business in distressed neighborhoods, they use it to buy larger homes to create more space for their families, they use it as a tool to allow them to wield more financial muscle as an outlier rather than in the moment. To take that away or to create a situation where ONLY people who have lots of cash on hand can get credit will hurt our country and certainly raise unemployment. To me, as a father, I want to be able to send my daughter to college no matter what. I don’t care if I have to work 10 jobs but she, like me, will go to college. What about those kids who need loans, scholarships, aid who wouldn’t be able to go because of a 10 year economic recession? I think people wish an immediate guillotine of economic justice will hurt the Wall Street fat cats, but ultimately, I think it will hurt our country far more deeply with the weakest and those with the lowest economic status the worst.
Punditdad —
I hear you. As a mom, I’m terribly worried about the what the future will hold for my child also. And I’m also committed 110% to her attending college.
But my concern for her (and her generation, and those to follow) goes way beyond that. I’ve spent the years of her childhood fighting back as hard as I can against the rampant consumerism, as the parents of her peers buy their children televisions for their rooms, and iPhones, and cars. (Did I say cars? I meant… NICE cars. NEW cars.) Worse, these families are extending themselves, financially, to the sharp edge of disaster to realize these things for their children — who neither appreciate these things, nor actually need them.
In my own neighborhood, I’ve seen more than one family go over the edge and have to move, and another is about to join them. Does it matter that my neighborhood is expensive, with outsized houses and inflated self-worth?
I think it does. In fact, I think it typifies the problem.
All across America, people have been making choices like these. We’ve got an entire generation coming up now with outlandish, unreasonable expectations, and all the propping-up in the world won’t save us from ourselves.
But, I thought that we were supposed to “shop ’til they (the terrorists(=) drop”! Wasn’t that the plan, post-9/11?
{/snark}
In the ’80s, it was the S&Ls, as they got into risky investments (commercial real-estate) in pursuit of ever-higher returns for their shareholders.
In the ’90s, it was the dot-coms, as they entered financial fantasyland in pursuit of ‘eyeballs’ and ‘hit counts’ and the next round of VC financing.
In the ’00s, it was the banks and investment houses, as they got tied up in risky investments (sub-prime loans, CDS, and a whole mess of alphabet soup) in the pursuit of higher returns for the investors.
In all of the cases, real people also got hurt, as they learned (again and again) that ever-escalating home values and cheap credit are NOT a Constitutional right.
Those who fail to learn from history…
~EdT.
Well, it looks as if you got your wish. I don’t know about you, but I didn’t sleep so good last night – and right now I am more than a little PO’d.
~EdT.
EdT — We’ve been moving investments around for some weeks in preparation for this, but even so, our portfolio also bled copiously yesterday. Did you think I was kidding when I said this would hurt?
But the dizzying heights to which the DOW (and other indices) had climbed were, imo, akin to the housing prices. And even helium balloons eventually come back down.