What Would Have Happened If The Banks Were Not Bailed Out?

Dead Wall Street Bull

With the economy in the state it is in, and the actions that our Government has taken to protect the rich, it may be fair to say that capitalism is dead.
Failed businesses are supposed to be allowed to fail and in their failure other entrepreneurs step in and replace them. However, rather than allowing the banks to fail our government was convinced to bail them out, to protect the rich.


What would have happened had the Bailout NOT occurred?

Had the bailout NOT occurred, what would have happened is.... Well we don't know, but theories regarding what would have happened depend on which economist you talk to.

Scenario 1

Top Bailout Recipients

Not all banks would have "collapsed", you get a depression as banks won't be able to give credit since they will have a 'real' approximation of how much money they have to give out.
Mortgage payments would spiral while companies cut back or went bust unable to take loans that are used to cover costs.
In the long term you'd get massively lower spending causing further economic contraction leading to a depression lasting years, similar to that of 1929. The major worry in the event of a depression is that there may be a run on the dollar which would deepen said recession.

Lets Break it down: (paraphrased from: Why the Bank Bailouts Were Necessary, by: James Altucher)

• Banks would have gone bankrupt. Forget about fault for a second....
  Morgan Stanley (MS) would have definitely gone bankrupt. Then Wachovia. Then Citigroup. Then Goldman Sachs. Then Bank of America (BAC), etc.

Would this have been a good thing or a bad thing? NO! Very bad.

• Many Fortune 100 companies would have gone bankrupt If the company did not go bankrupt, they would have had to scale back all of their operations drastically. General Electric (GE) is a prime example. They would have lost their access to the commercial paper and short-term financing that they have used to finance their business on a day to day basis for decades. The entire commercial paper market was frozen and would have remained frozen for months, in turn putting companies like GE out of business.
  
• Many small businesses (20-1000 employees) would have gone bankrupt.
  Not only are large fortune 100 companies reliant on short term lending, but small businesses are able to operate only because of Short term lending. Many small businesses do not get paid for their work until it is completed, because of this simple fact, they need
• Millions of people would have lost their insurance. Companies like AIG would have gone out of business, millions of people would have been without adequate healthcare coverage. Not to mention life insurance, property insurance, and other insurances that would have been lost, and obligations that would never have been paid or would have taken years to settle in bankruptcy courts. Sure, AIG’s competitors could have picked up the leftover business. But anyone with an outstanding obligation or a preexisting condition would have been in trouble. Pain would have occurred to tens of millions of people.
• Unemployment would have instantly gone to 20-25% or much higher. Not this mythical “U6” that everyone keeps talking about but real unemployment, as 50%+ of businesses would have had to close down or drastically scale back.
  
  
  

Scenario 2

Wall Street Drowning Taxpayers

• Banks would have possibly gone bankrupt.
  Morgan Stanley (MS) would have definitely gone bankrupt. Possibly Wachovia. Then possibly Citigroup. Then possibly Goldman Sachs. Then possibly Bank of America (BAC), etc.
• FDIC
  The FDIC would have covered the individual accounts from being completely wiped out. Although banks would have failed, middle class Americans would not have lost all of their savings.
  
• Credit unions and solvent banks would have stepped up
  With some banks unable to provide the credit businesses need, credit unions and solvent banks would seize the moment and begin lending. The beauty of CAPITALISM is that entrepreneurs are able to CAPITALIZE on OPPORTUNITIES. Many opportunities would have arisen that would have enabled groups of people to collect there money together and start their own bank, like Gateway Bank in Florida.
• Toxic Assets Would Have Been Liquidated
  Toxic assets, like homes that were underwater, would have been liquidated. Homes that are liquidated would have been sold at a severely discounted rate and bought by families who could afford them. Other liquidated assets would have been sold to various individuals or businesses that could use and afford them at the discounted rates. Supply and demand would have created market prices for the toxic assets, the assets would have become affordable again and the economy would recover.
• Millions of People Would Be Fine
  Even though we may have experience a year or two of hardship, programs like unemployment security, social security, food stamps, medicaid and medicare would have kept things from getting unbearable. 

Legalizing Marijuana, Lets Go Green, Reduce the Deficit, and Stimulate the Economy in one move

    A major complaint lately with the Government has been overspending, budget deficits, and with the spending comes taxes and with taxes you have less money to spend. Annually, the Federal Government spends over $20 Billion, that’s billion with a B, on the enforcement of marijuana laws. In 2007 1,841,182 arrest were made, that is 1,841,182 people who instead of working and making our society more productive, are being incarcerated at an average cost of 49,000 a year, how is this helping our economy? Not to mention the Health Benefits of Marijuana, but that will come another time.

"That is not a drug. It's a leaf”

    - Arnold Schwarzenegger about marijuana, 2007

    Imagine now if we were to legalize Marijuana and then allow for the creation of hemp farms as well as the sale of cannabis in a professional manner where it can be regulated in the same fashion as alcohol and tobacco. Instead of wasting resources on senseless arrests we could essentially reverse it and begin bringing in money to pay for law enforcement of violent crimes, as well as for infrastructure; due to this observation, police, sheriffs, and judges are pushing for proposition 19. Proposition 19 is a law coming up for vote in California, a law that would legalize marijuana for recreational use to those 21 and older.

"Prohibition goes beyond the bounds of reason in that it attempts to control a man's appetite by legislation and makes a crime out of things that are not crimes. A prohibition law strikes a blow at the very principles upon which our government was founded."

-Abraham Lincoln, December 1840

    How can legalization of marijuana stimulate the economy? Well, lets start a list and touch on each one at a time…

• Reduction of the deficit
• Instant Job creation 
• Reduction of gang revenue
• Use of hemp to go green and make more products at a cheaper price.

Reduction of the Deficit.
    As earlier stated, the federal Government alone spends $20 Billion annually on marijuana enforcement, what I failed to mention was the upwards of $30 billion the states pay each year. If legalized, their would be no need to waste money on frivolous cases and law enforcement would be able to focus on more important crimes. Furthermore, if legalized, the Government would be able to regulate it in the same fashion as alcohol and tobacco,  keeping it out of the hands of children as well as bring in a tax revenue.
    How will it be regulated, you might ask? Simple, in the same fashion, and with the same people who already regulate the sale of Alcohol Tobacco and Firearms, the ATF. Perhaps with the new addition to their regulation authority we could change it to MAFT, or AFTM, or what ever arrangement they deem necessary. The point being, their would be no need for the creation of some new government organization, one that can handle the job immediately is already in place.

 "If the words "life, liberty and the pursuit of happiness" don't include the right to experiment with your own consciousness, then the Declaration of Independence isn't worth the hemp it was written on."

- Terence McKenna

Instant Job Creation and Reduction of Gang Revenue
    It is amazing how the legalization of one product can create jobs, take alcohol for example, how many bartenders do you know of? Better yet, how many bars are in America and how many people do each of those bars employ? A lot right? Imagine if we put the dealers out of business and replaced them with legitimate business people, people who are not going to sell to minors, lace the products with chemicals, or use the money to fund a gang. Hash bars could be created, waitresses and waiters, cooks, marijuana tenders, hosts, and an array of other restaurant staff would be hired.
    With new establishments popping up the ATF, or new MAFT, would hire new agents to inspect and make sure that everyone is operating within the guidelines established. The array of newly hired employees and agents would begin to spend money, as they begin to spend money the domino effect will begin to stimulate the economy.
    As new bars open, the need to go to a dealer on the street will be eliminated, the drugs will become cheaper from the bars and other legitimate sources and the dealers will be unable to compete in an open market. As people cease going to the illegitimate sources, gangs will lose a large portion of their income and lose the ability to operate.

"Why use up the forests which were centuries in the making and the mines which required ages to lay down, if we can get the equivalent of forest and mineral products in the annual growth of the hemp fields?"

- Henry Ford

Use of hemp to make fuels, clothing, paper, and more products and at a cheaper price
    Wouldn’t it be great if we were able to produce hemp at an industrial scale? The uses of hemp can only be described in a separate laundry list.

• Hemp Fabrics
• Biodegradable industrial products
• Biomass Fuels
• Replacement to some wood products
• Paper
• Body Care Products
• Pet Food
• Detergents
• Art Supplies
• Food Products

Those are only the tip of the iceberg with hemp, sadly, many do not know that hemp is THC free, the chemical that gets you high when you smoke pot. Due to the inaccuracy of the news media, many people associate hemp growing with cannabis growing and are unwilling to give our struggling economy a boost in the right direction and are also perfectly fine with their liberties being trampled every second of everyday.



With this blog I am calling for everyone who reads it to write, call, or email their senators and representative to push for legislation to stop the invasion into our personal lives.
If the information sounds simple, thats because it is.


“Why is marijuana against the law? It grows naturally upon our planet. Doesn't the idea of making nature against the law seem to you a bit . . . unnatural?”

- Bill Hicks

http://www.drugsense.org/wodclock.htm
http://www.reference.com/motif/Society/what-is-the-average-cost-to-incarcerate-an-inmate
http://www.hempusa.org/hmps/articles/hemp-uses.html