President Bush addressed the nation tonight and in 12 minutes, laid out the causes of the financial calamity the market is facing and the dire consequences if we don't give the culprits $700 Billion tax payer dollars. But he assured the public, that the FDIC has been insuring bank depositers for over 75 years and nobody has ever lost a dime in an insured account (insured up to $100,000) and that noone will lose a dime in an insured account in the future. That's technically true. What he didn't mention was that if the government has to pay claims on thousands or millions of accounts, the inflation rate will skyrocket and your $100,000 will buy you a used car if you act fast. Why? Because your deposited money didn't disappear. It's just no longer in the hands of the people you entrusted to keep it safe for you and there's no legal way to get it back. The recipients were suppliers, employees, brokers, other financial institutions, etc. The bank just spent and invested more money that it had, lots more. Reimbursing depositers from the federal treasury will balloon the money supply. Supply goes up, value goes down.
So here's the essence of the proposed solution: You go to work and make money. The government takes a chunk of your money for its own expenses and now will give a big chunk to the banking community. The banks need this money so they can loan it to you. After all, you're going to need it. Taxes, inflation and interest rates are all likely about to go way up. Of course you'll be paying interest on the money, so the banks get healthy and everybody's happy. Let's review. More of your money will be taken from you, given to somebody else, who will loan it to you for a fee. This is the system we're supposed to be upset about collapsing.
If the government were really primarily concerned with protecting the taxpayer and not the infrastructure that enables the ponzi scheme, they could simply give every man, woman and child in the country $2,000 in return for a national sales tax of say, 7% (24% if you throw in the elimination of all other taxes). In other words, instead of giving the money to someone else to loan to us. Just give us the money, cut out the middle man, we'll even pay it back with interest.
I heard Joe Kernan on CNBC empathizing with a poor former CEO who's net worth went from hundreds of millions to a mere 10 million. I have no qualm with being filthy rich. If you come by it honestly, more power to you. But when I lose money due to bad luck or poor judgment, nobody from the media or the government shows up to ask if they can help, and I don't expect them to. Believe it or not, one can scrape by on $10 million dollars in this country, maybe even a little less. Let the chips fall where they may. Learn what you can. Move on. If we have to endure a prolonged recession or even depression to preserve the principals of capitalism and individual accountability, let's do it. It'll be well worth the price.