Wednesday, September 24, 2008

More On The Financial Crisis

Normally I would have waited until Thursday or Friday to post, but there is alot going on.

This link at Yahoo Finance has a good basic set of questions and answers about what is going on and is pretty clear.

The Wall Street Bailout Plan, Explained.

There is also more at Freakonomics (links below). The first one is about a letter to Congress signed by over 100 economists, urging Congress to be careful and deliberate on whatever they do. Then Steven Levitt questions how the government can make a profit buying these assets if the private sector does not want them. The only thing I can guess is that by buying these mortgage assets and restoring things to normal and restoring confidence, their prices will go back up and the government will make a profit. The alternative is not doing anything and see the financial system shut down (at least that is what Fed chair Bernanke and Treasury secretary Paulson say). But no one has stated how much doing nothing will cost while we know the cost of the bailout is $700 billion.

Economists on the Bailout

Bargain Prices?


Anonymous said...

I, as a young person, am terrified at the current state of our economy, I feel that it is a travesty what has been done and feel that much of the burden will be carried on the backs of my generation. Is it safe to say that no matter what the outcome, it will be this generation that will pay dearly in the end?

Cyril Morong said...

Thanks for dropping by and commenting.

I don't think any one age group will pay more for this bailout. It will come out of general tax revenue so that means we are all forking something over.

If the bailout is $700 billion, it works out to $2,333 per person. But the hope is that once the government buys these assets they will then sell them later and get some money back.

No one has stated this, but they imply that the cost of doing nothing will be more costly if we go into a recession.

We will all suffer while we wait for this money to be paid back. While we are waiting the government will have to raise taxes or cut spending or borrow more or some comination.

I think the bigger problem for young people today is the growing payments to social security and medicare.