What's the Definition of Bailout?

# 013 March 24, 2009

Definition of “bail out”:

1. obtain somebody’s release, help, rescue, save, assist, aid, come to somebody’s aid.

These definitions sound reasonable and certainly what any normal, empathetic person would do to help out another person, right?

Let’s look another set of definitions for “bail out”:

2. Escape, run away, desert, flee, evacuate, abandon, duck out.

Which one describes the givers and takers in our current government bailout fiasco? An ordinary person that reviews the facts and situations would most likely make the same decision the market made, AIG deserved to grow broke. AIG is not one big company. AIG is a holding company that controls multiple corporations. If AIG had been allowed to fail, the smaller companies would still be viable businesses. These business groups would have been put on the market by the Bankruptcy courts and sold. This did not happen. The only group that was sold was the U.S. taxpayer… we were sold a “bill of goods”: [that] government could spend our way out of this crisis.

To quote Henry Hazlitt, in his book “Economics in One Lesson, “There is no more persistent and influential faith in the world today than the faith in government spending.” He wrote this in 1946.

The USG had “to do something”… something, anything, action is required! Forget the fact that something, anything was the wrong thing to do. Based upon this supposition, what else could they do but inflate the money supply? Will it work? It depends upon what you mean by “work”. In some ways it is working. The financial markets are up… so far.

Our federal government has shown it has no problem inflating our money supply. Investors are buying gold and they are selling the dollar. The Fed knows, if it can inflate our money, they can cause the debts they are accumulating to drastically reduce. Our economy cannot grow again until this debt has been dealt with. The USG has decided to use inflation to deal with this debt. If it gets out of hand it could completely destroy our economy, financial systems and political stability.

America is a land of plenty. We are not accustomed to massive inflation or hunger on the scale of a third world company. We are the best armed and most independent (so far) people on this planet. I don’t think we will stand by and accept $10 loaves of bread, $15 gallons of gas… do you? As the saying goes, “somebody’s going to whip somebody’s A**”.

Again from Henry Hazlitt, “Everything we get, outside the free gifts of nature, must be paid for…The world is full of so-called economists who in turn are full of schemes for getting something for nothing. They tell us the government can spend and spend without taxing us at all; that it can continue to pile up debt without ever paying it off because ‘we owe it to ourselves.”

Normal ordinary citizens like you and I can look at the truth today and say, the companies that have been bailed out deserve to grow broke. Give someone a degree in economics, or elect them to political office and they decide to help any and everyone with … someone else’s money. Our money, our children’s money and the future of our country.

Per the definitions above, bailout is giving a helping hand when someone needs it, or it is evacuate, abandon, flee… where are the former heads of AIG, Countrywide and Citibank? I think definition 2 fits more aptly!

Goldman Sachs states that they would not have lost “that much money” if AIG had not been bailed out, yet they were “at the table” to accept a check in the tens of billions from AIG after the bail out. Is it lost on anyone where our past and current Treasury officials worked prior to their Treasury positions? Things that make you say hmmm….

And to top it off, as a result of the worldwide economic slowdown we may get buried beneath our own trash! From The New York Times:

“U.S. and European waste dealers who sell to China are finding that their shipments are being refused by clients when they arrive in Asia.

“The ultimate victim may be the environment, already overrun with enough trash in places to threaten people’s health, now further burdened with refuse that until recently would have been recycled. “The effect is being felt acutely in China, the world’s largest garbage importer. The U.S., for example, exported 11.6 million tons of recovered paper and cardboard last year to China, up from 2.1 million tons in 2000, according to the American Forest and Paper Association… “The United States xported $22 billion worth of recycled materials to 152 countries in 2007. Now [the
Institute of Scrap Recycling Industries] estimates the value of American recyclables has decreased by 50-70%. Western dealers say they are grappling with mounting stockpiles whose value in many cases continues to sink.“To make matters worse, Chinese importers have been demanding to renegotiate contracts drastically downward. In some cases, they are refusing to accept shipments they already have a contractual obligation to take.”

Oh well! Maybe we can “bail out” the garbage industry… print a few trillion more dollars!

With warmth and regards (as always),
Allen
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