What would have happened ,,if george bush had not rescued the failing banks by his bailouts?

What would have happened ,,if george bush had not rescued the failing banks by his bailouts?

what really would have happened ,,,,if president bush had not bailed out ,,,,,,the banks and financial institutions ,,,,,what would have been the consequences of inaction ,,,,,,suppose bush had not ,,,intervened and bailed them out ?


People would have learned a valuable lesson about personal finance, it would have hurt for awhile, and then the market would have corrected itself.


There are two lines of thinking here.There first line follows the Austrian School and libertarian philosophies of minimal government. This was the tradition the Geo. Bush administration followed until the collapse of Lehman Brothers caused the markets to seize up. The underlying idea is that government should do no more than provide police protection against violent crime and collect no more taxes than are absolutely necessary. Allow financial firms to do whatever they want- if they stuff things up their reputation will suffer, they will go out of business and more successful firms will get than business. LIfe will go on. Allow anyone who wants to be a doctor to take that title, open and office and perform medical services- if they stuff things up their reputation suffer, they won't get patients, they will quit and the sick will find other doctors. Life will go on. OK, it won't go on if you are patient the doctor killed, but you get "self-regulation" idea.The other traditions are either total control by the state (say Saddam's Iraq,Stalin's Russia, or India in the 1970's)where virtually nothing can happen without a government license OR mix of the free market and some level of state monitoring and support.I lean toward that third, mixed, tradition. A key component of any functioning society is faith. When you buy a kilo of rice you have faith that the bag is honest or that the scale is correct. When you put money in a bank you have faith that the managers won't flee to Brazil with your money. But who checks the scale, the bag's state weight, or the bank's balance sheet? Without a certain level of "policing" by the state you'd wind up spending much of your shopping time checking out the honesty of the counter party. For certain things you do that anyway. If you are to have an operation you spend time on the internet checking out the reputation of a hospital and its doctors- or you ask friends who have had similar operations. But what it it's a road accident emergency? You'd really like to know that the doctor fixing your artery knows her business. There are "doctors" who have "faked it" and been hired by hospitals.When Lehman Brothers collapsed the public lost faith. And banks lost confidence in each other. The most famous banks and insurance companies in the world were afraid to lend to each other -- and with good reason. When banks like Washington Mutual (a top10 US bank) have so many real estate losses, or Citicorp (one of the world's biggest) have so many setbacks (real estate, credit cards, auto dealer finance), and AIG, the largest insurer in the US (suddenly discovers it can't possibly keeps its promises to pay) then no one trusts anyone. If you don't trust your bank, or the bank of the person paying you, won't accept a check as payment. In fact, you won't take a credit card and maybe not a debit card either. Life just stops.At that point the Geo. Bush administration, without admitting that its fundamental economic view might have been totally false, stepped in and supported AIG, Citicorp, and other banks. Washington Mutual was sold to another bank at a bargain price while the CEO was in an airplane and had no idea the bank was being sold.Without those rescues, and promises by the Fed and the Obama administration that they would rescue and rescue (though selectively) until things improved we would now probably have 25% unemployment, twice as many abandoned homes, and a few million more children in the US going hungry most nights.Libertarians will counter that without the rescue some banks would have kept paying and the public would have understood that there will be no Nanny state. But a Nanny is watching you all the time. The Mom and Pop lets you study on your own, go out on dates and drive the car. When you get in trouble they help you out -- and follow that with grounding or some other punishment to give you the idea that you did wrong. In the Libertarian state you would be an orphan with few friends. And you friends might be broke and out of work. So would you. And hungry. Eventually things might sort themselves out. Want to go hungry and be broke for those nine years?Source(s):Senior Economist for US Treasury.Regional Economist for a New York bank that did not go broke.


google hyper-inflation in the weimar republic



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