Posted by: jcardillo | 29 October, 2008

Understanding the Financial Crisis

I’m sure all of you are smarter than me, but you might still have a hard time figuring out how so many banks and financial institutions have lost so much money that we have to pony up $750B to bail them out.  Well, never fear, Marketplace is here to explain to us all what the F is going on.

So, unless I completely misunderstand what he’s saying, the real cause of this problem is that too many people went on buying things they couldn’t afford, and when their chickens came home to roost, they couldn’t pay and that screwed the banks, etc. (who never should have loaned them the money in the first place). That means at this juncture, the only way to keep this entire house of cards up (or, more accurately, rebuild it), is to help people continue to buy things they can’t afford.

If that is in fact the case, then the $750B shouldn’t be going to banks, but should be going to us. Perhaps the best way to do that is to invest in infrastructure, which is crumbling anyway. Give thousands of folks jobs, better roads and trains to get to jobs, and the knock-on effect keeps us all in our homes and in the green.

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Responses

  1. And now they want to bail out GM, Ford, Chrysler because they made a horrible bet and didn’t have a fall back strategy. If they are too big to fail, aren’t they too big to exist?

    Here’s a good article today http://www.nytimes.com/2008/11/12/opinion/12friedman.html?hp


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