Economic Tip For January 2013

Improperly Structured U.S. Government Bailouts Have Only Made America’s Second Great Depression Worse

Special Note: The following article is an excerpt from Phil Mitsch’s America's Financial Crisis Solutions Book, which he wrote in the Spring of 2008.

Now let’s analyze why improperly structured bailouts, which is an example of a crisis management business practice on the part of the government of the United States, will not solve the real estate market and overall economic Financial Crisis. In fact improperly structured bailouts during the existence of a 30%-70% Economy will be no more effective in stabilizing the U. S. real estate market and overall economy and getting them back on positive tracks then taking 1 drop of red ink and putting it into the blue Atlantic Ocean and expecting all oceans of the world to turn red.

Improperly structured bailouts, which are coming in record breaking amounts for the: 1) lending, 2) mortgage insurance, 3) investment, 4) automobile, and 5) a few other industries as well, will not solve the current U. S. real estate market and overall economic Financial Crisis. Giving massive and unprecedented amounts of money, directly to and without proper guidelines and restrictions, to the lunatics who ran the asylum irresponsibly, immorally, unethically, and illegally the first time and then allowing them to potentially run it the same way a second time is not only another example of a crisis management business practice on the part of the government of the United States but it also represents gross negligence on their part as well. Of course the government has a moral, ethical, and legal responsibility to assist critically important U. S. industries, who are experiencing severe financial and psychological difficulties during the existence of this Financial Crisis, but they also have the same responsibility to Americans and their businesses who are experiencing these types of difficulties during this time frame as well. Approving improperly structured bailouts, which is exactly what the government is going to do, will only result in the Culprits Of Wall Street And Main Street keeping their doors open for a little while longer and continuing to help themselves to irresponsible, immoral, unethical, illegal, excessive, obscene, and very unfair salaries, bonuses, perks, and benefits. Approving improperly structured bailouts will not stimulate the U. S. real estate market and overall economy in positive directions if the majority of Americans and their businesses are still unable to borrow and spend money. I guarantee you that within a few months of being improperly bailed out these temporarily saved industries will come right back to the government again and ask for even more money because they will still be losing money. The reason is that the majority of Americans and their businesses will still be unable to borrow and spend money that will enable them to purchase the products and services that these bailed out industries produce and offer. Yes bailouts are now necessary in order to solve the existing Financial Crisis but if and only if they are properly structured and result in helping: 1) the financially distressed bailed out companies, 2) the millions and millions of Americans and their businesses who are also currently financially distressed, and 3) the U. S. real estate market and overall economy. I cannot begin to stress how important it will be to structure the upcoming government bailouts properly because if they are not then tragically and unnecessarily the U. S. real estate market and overall economy will continue to deteriorate indefinitely courtesy of an increase in massive payment delinquencies and the spreading economic aids virus continuing to flourish.

What Good Does It Do To Have Improperly Structured Bailouts If The Majority Of America Can’t Borrow Money?

What good does it do to have improperly structured bailouts during the existence of a 30%-70% Economy if approximately 70% of Americans and their businesses are still not financially and psychologically capable of borrowing and spending money? It does the majority of Americans absolutely no good whatsoever to watch improperly structured bailouts unfold before their very eyes if they are not capable of being able to borrow money because they are still facing the following types of financial and psychological problems:

1. Losing their jobs

2. Taking pay cuts

3. Losing their benefits

4. Can’t find new jobs

5. Getting lower paying jobs

6. Have less income

7. Have less disposable income

8. Have higher expenses

9. Getting sued for outstanding receivables that they can’t afford to pay

10. Losing their homes, cars, motorcycles, boats, planes, etc., etc.

11. Can’t borrow and spend money

12. Are in sub-prime credit rating positions, and