Libertarians, help me out here. This question is not rhetorical, I sincerely want to be educated on this. I apologize if this has already been discussed too much but I think there hasn't been enough discussion of this specific topic. I've been reading about Peter Schiff and other purist libertarians like Ron Paul who believe we should have no government bailout for any industry whatsoever. No bailouts, no economic stimulus plans, nada. This is appealing in a vengeful sense because we finally see incompetence/evil rewarded. It is terrifying in another sense becuase, sh**, what would happen? So let's say we allow AIG, WaMu, Citibank, GM, and others fail. What happens? Somebody walk me through this, because I just don't know. When a bank "fails," what happens to it's remaining assets? And what happens to my money? Surely the FDIC couldn't possibly cover all of the losses. There would be a ripple effect and more banks would fail... would we have worldwide financial collapse? What does that even mean? Does money just disappear? In your opinion, what would the world look like right now if we had no bailouts? And what would happen in the future? Do we recover? How? Ron Paul and others say we need this "adjustment." This recession has to happen. Bailouts and stimulus packages just delay the pain. So, logically, that means that if we let all these companies fail, we would recover quicker? This doesn't make sense to me. How does that work? We hurt more, but for a shorter time.... why? This has been on my mind for weeks, your help is appreciated.
The current crisis has less to do with tangible assets then with the intangible; mostly everyone's trouble is that there is a confidence crisis after all those investment banks were caught playing with ridiculous debt levels and stupid risks. Trust me, that would get MUCH worse if well, everything collapsed. The main trouble right now is that the banks are tight as hell with their money. That would only get tighter, as you could imagine, if the current economic atmosphere gets even worse, which would lead to layoffs, less consuming, more layoffs...etc. etc...economic down spiral until we all live in caves, if you're talking about no intervention at all. Ron Paul is an idiot. Anybody with a working knowledge of macroeconomics knows you can't just let the economy dictate itself into disaster.
Libertarians have been deluded by the size of its support base when corporate shills and its lobbyists secretly propped up its cause to privatize profits. Now, when losses are socialized, those lone libertarians might look intellectually consistent, but that collapse of support isolates them into the fringe. My opinion is that our system was never purely libertarian, so pursuing one now wouldn't be politically or economically feasible. It takes a certain faith and culture to believe in an economic system. We think we can hang, but we really can't.
they will all fail eventually because the backstop for all this garbage won't be able to sustain itself.
Economy would collapse further down and faster. The regional banks would be buying out many other banks, laying off the employees, and keeping the assets. As we go through the 2nd great depression with massive layoffs in manufacturing and the service sector, there will be a surge in crime. The surge will be made even worse, because of cities laying off police due to the drop in tax revenue and lack of funding. AIG, WAMU, and Indymac's assets would be sold off in pieces to pennies on the dollar to regional banks and foreign investors. It would really suck.
Americans are used to a quality of life based on a functioning credit system and a relatively high wage for workers. In light of the global nature of competition for labor wages the model is probably not sustainable over the long run. With global competition, the worldwide standard of living will approach the mean; poorer countries willing to submit to exploitation will live better, richer countries with organized labor and health and safety standards will trend poorer. The common good of the American people will not be served by a calamitous failure or by the business as usual approach. We have to use out collective resources to save the system we have developed and that has served us fairly well up to this point. But we have to use the mood of crisis and leverage of government assistance to redirect our economy into a smarter, fairer, more efficient system. The old story of risk/reward in the private sector is probably dead in the macro scale. The future is probably more regulated risks and muted rewards; and a system wide reduced quality of life. If that sounds like an argument for socialism over capitalism it's not because I wish it to happen. I just think the at this point in history, the pendulum has changed direction.
Interesting comment about the typical old wealthy country club folks pushing libertarianism. It is certainly in their interests. The fanaticism of libertarians in devotion to their abstract theory of a utopia reminds me of the Marxist Leninists of the old communist system. . Just as it is a tough time to be a Marxist Leninist it is a tough time to be a libertarian. I imagine a few are losing the faith, though a few will undoubtedly claim we came to the present crisis because there was too much government regulation of the financial markets and the only regulation needed is to limit the money supply to the gold supply or somesuch.
You might be surprised in the case of bailing out AIG... http://www.economist.com/finance/displaystory.cfm?story_id=12607251
that all sounds great and all until you realize that all that great depression talk IS going to happen eventually whether you like it or not if we keep doing what we are doing. the fundamental question is: where is the money going to come from? either by borrowing (what we have been doing) or printing it (what we will be doing in the future if other countries lose confidence in our economy we can't borrow more. That is a big IF but it certaintly is conceivable given how much they've already lost). and hyperinflation here we come. Guess what that does to employment? until we get our import export ratio to something more even than it is now the problem is going to get worse. I blame China for fixing their exchange rate to ours which doesn't allow us to sell stuff cheaply in that market.
I don't know if I see Libertarians losing faith. If anything most I've seen are even stronger now. Many are in the "I told you so" category. When I see people like Peter Schiff talking a few years ago about how this country will be in an economic crisis (and ending up being right) and everyone else laughing at him, why wouldn't I trust him at this point in time?
I don't understand why cash is given to the people who played with debt too much. Shouldn't money go to those who were smart and did not? Shouldn't the ones who made a mistake cease to exist because of their incompetence? I really don't buy it. The problems will be delayed to the next generation. Inflation will eat them alive. In fact, the next guy who's dealing with too much debt will factor in the possibility of receiving bailout money in case of failure and take on even more risk/debt. Only banks require bailout money. Car manufacturers do NOT require anything. Banks are saving your money and lending other people money. They are an intermediary and they will come closer to that definition after all is said and done. GM, Ford and Chrysler should go down if they cant save themselves. The systemic risk exists in the financial sector only - specifically where retail banking is involved.
god forbid we have... capitalism? but but.. people CAN NOT be self-sufficient and rely on their local communities and state instead of the federal government. We must waste money on worthless federal programs which trickle up to the corrupt. but but.. Ron paul is a nutjob though. See you all in the soup lines.
The reason Libertarians never get any real traction in the political world is that the bottom line is that Libertarian ideology, would likely lead to economic totalitarianism. "There isn't much point arguing about the word "libertarian." It would make about as much sense to argue with an unreconstructed Stalinist about the word "democracy" -- recall that they called what they'd constructed "peoples' democracies." The weird offshoot of ultra-right individualist anarchism that is called "libertarian" here happens to amount to advocacy of perhaps the worst kind of imaginable tyranny, namely unaccountable private tyranny. If they want to call that "libertarian," fine; after all, Stalin called his system "democratic." But why bother arguing about it? " Noam Chomsky
If you think it is bad now it would be much worse if we have Libertarians in charge for a significant period of time.
Yeah no joke, we'd have to actually abide by the Constitution and cut down on frivolous government spending. We wouldn't have the Federal Reserve banks or the Income Tax and that would just be the end of the world. Turn your computers off and go back to sleep, sheeple.
