Now I’m Scared

September 23, 2008 at 6:18 pm | Posted in Economics | 9 Comments

I am now officially scared.  I was on my way home, listening to the news of the Big Wall Street Bailout.  Maybe, since I was on vacation last week, I just hadn’t been paying attention until now.  But the enormity of the situation just dawned on me.  This is Bad.  Real Bad.

By any accounts, seven hundred billion dollars is a LOT of money.  I can’t even conceive of how much that is.  And, this amount may not even be enough to shore up the banks and keep the credit flowing.  That scares me.

Think of this:  What if we all woke up tomorrow morning, and none of our credit cards worked.  That’s all, suppose we had no access to easy credit.  A minor inconvenience?  We’ll just stop at the ATM.  But, everyone else had that idea.  Now there is a big line.  In fact, people are pulling out as much cash as they can, because they will need it.  Remember the run on the “old savings and loan” in It’s A Wonderful Life?  Welcome to the 21st centure version.  But will Jimmy Stewart still have Poppa Dollar and Momma Dallor at the end of the day?

It doesn’t matter.  Most people don’t have much accessible cash in their bank accounts anyway.  We all might muddle on, but what about the small businesses?  Many of them don’t have much available cash, either.  Housepainters, plumbers, lawnmower guys — they all charge their purchases of paint, pipe, and gasoline.  Without this capital, they don’t work.  And then they stop patronizing 7-Elevens, ‘McDonald’s, and Exxon.  This means that more businesses scale back, and more people are out of work.  I don’t know how much of my own employer’s business are credit card transactions, but I know that credit card purchases on the Internet lead to lots of shipped packages.  Once the snowball is rolling, it’s hard to know where it will stop.

Maybe this is all doom and gloom.  This is largely a therapeutic post, so I don’t drive my family and friends crazy sulking about it all night.  Maybe tomorrow I’ll be upbeat and cheerful, and I’ll go ahead and decorate the post with lots of cute little Internet links as I am wont to do.  We’ll see.

But meanwhile, Congress continues to dicker away on trivialities instead of actually doing something.  The Democrats have managed to turn this crisis into an election year issue, which will probably carry them the White House.  Too bad that there won’t be any money for them to do anything once they get there.

Seven hundred billion dollars is a LOT of money not to have.



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  1. I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.

  2. […] Exxon Mobil news by JTK […]

  3. While the media and Paulson are selling this as catastrophic, I don’t think it’ll mean that our daily lives will grind to a halt.

    I think their concern is that there will be less credit available for big ticket items like houses, cars, and college… this just means that companies will grow slower (or contract).

    honestly, I don’t think that Paulson’s $700b bailout will do much.. and the critical eye that the senate banking committee is giving it is a good thing.

    To put it into perspective, thoughtlessly signing over $700 billion dollars to one person with absolutely no accountability, won’t solve any fundamental problems, as much as Paulson would like us to believe it would.

  4. Thanks for the comment! Yeah, I agree — the whole “bailout” idea doesn’t give me a whole lotta confidence, and the idea of some unregulated Treasury office doling it out makes me rather uncomfortable. I keep thinking back to the scene in the third Star Wars movie (I think), where JarJar gets manipulated into calling for Imperial powers to be given to Palpatine so he can take on the Trade Federation. It’s a panicked reaction to a clear and present danger, only doing nothing would be worse, and piling on lots of useless “earmarks” for election year gain is just as bad, IMHO.

    Our daily lives may not grind to a halt if the whole pile of sand collapses, but the American economy runs almost entirely on credit these days. Whole industries (automobiles, construction, education) run on free availability of credit. If credit is not available, then these businesses will take it on the chin, and the ripple effect will be substantial.

    I agree with your own blog post, though, that our government doesn’t seem to be looking into credible ways to fix the problem. That’s probably what scares me the most, but I’m getting over it now. Thanks again!

  5. @Susan — Hey, thanks! I appreciate the appreciation. I have a couple of posts in the cooker, and I’ll publish them when I finally get around to finishing them off. In the meantime, you might enjoy reading my wife’s blogs (listed in my Blogroll). She’s more insightful than I am, and usually funnier too.

  6. I’m scared too. Not emotionally; I haven’t managed that, but in my head.

    Everything you said is scary. But what’s scariest of all is the power grab attempt by the Treasury Secretary. Seven hundred billion dollars (at least, for the first installment anyhway) to try to bail out our financial system in an unspecified way, with no accountability, no oversight, and no review? Isn’t centralized, no-accountability, government management of the economy what Communism does? Or any form of totalitarianism??? What is going to become of the American Way?

    And aren’t Republicans supposed to be AGAINST big government?

    Oh, and since Mr. Paulson, the Secretary of the Treasury, comes from Wall Street, didn’t he see this coming? Others did, a long time ago.

    All very frightening. That’s how power grabs work. You scare people into giving you power they otherwise never would.

  7. Great post. Dave and I are trying to take solice in this: “It doesn’t matter. Most people don’t have much accessible cash in their bank accounts anyway.” If our bank goes under, we linkely won’t lose much anyway. Since everything has gone up in price so drastically recenly, our savings has shunk to nearly nothing. There’s a silver lining in that, right?

    Here’s a helpful graph to brighten things:

  8. Oh, but it isn’t just a question of our own, personal bank accounts. It’s business bank accounts, affecting whether they will be able to do business at all. That in turn affects prices, so we’re hit yet again smack in the pocketbook. And there begins to be shortages of things… and on and on. (Right now, in some of the South, some gas stations are CLOSED because Hurricane Ike destroyed so many refineries.)

    This thing threatens to bring down the whole house of cards, not just our accounts.

  9. Hi Meg! When are you going to allow OpenId holders to comment on your blog? 🙂

    Anastasia is right — the problem is the ripple effect of frozen credit markets affecting businesses ability to remain in business. We are so interconnected, that if enough businesses fail, we all are out of a job. Not having savings is one thing — not having a paycheck is another.

    So, it remains to be seen if this megabillion dollar deal can restore enough confidence to keep the money flowing. This would not fix the problem, but just keep the patient from bleeding to death. One would think that the credit markets would be scared straight, but if they were capable of this, then why are we in the mess in the first place?

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