Another explanation of the current financial crisis
Posted by Mike Sylvester - 9/25/08 @ 3:47 pm - Filed Under National Politics
Several people have asked me to explain the current financial crisis in simpler terms and I am going to attempt to do that.
Our economy is based on debt and consumption. Our companies rely on American consumers to take out loans and use that money to purchase their products. Without loans Americans will spend less money. When Americans spend less money they eat out less, they buy fewer new cars, the less often hire a CPA to do their taxes, they buy smaller houses, they buy less furniture, etc.
If the banks do not keep lending money to other businesses and to American consumers the economy will shrink. When the economy shrinks employers have to lay off employees as their sales drop.
As employees are laid off they in turn spend less money and the economy shrinks further.
This is what the Bush Administration is arguing and their argument is certainly true to a point.
The problem is that our economy is growing due to debt; be it Government debt, business debt, or consumer debt.
The bailout package being considered would basically force the taxpayers to buy sub-prime mortgage debt that on one else wants to buy due to the number of loans in foreclosure. The Bush Administration believes that this will allow American consumers to keep incurring more and more debt since the banks will keep loaning ”easy money” and this in turn will prop up the economyl at least for awhile.
They are right in that their plan would prop up the economy somewhat in the short term; however, what it really does is make our economic problems worse and pushes them down the road for future taxpayers.
I am a fiscal conservative and I am sick of pushing problems onto my kids and grand kids.
We need to stop thinking about today and think about the next few years.
I oppose the 700 billion dollar bailout package.
Mike Sylvester
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Amem!! Stop this tax paided funded bail-out.
Washington D.C., listen carefully get out of the way.
Contact your senators and representative. I have. There is still a chance to stop this atrocity.