What a day! Not only did Citigroup lay off 20% of its employees, Dallas Mavericks owner Mark Cuban was accused of insider trading and Paulson announced that the administration would leave half of the allocated bailout money-350 billion- untouched when they leave office January 20th.
What the hell is going on?! Well, it looks like we are in a very disconcerting situation. The economy is not getting better, as witnessed by the layoffs and the roller coaster highs and lows of the stock market. Greed and corruption are constantly being unveiled. Although being one of the richest men in the world, Cuban couldn't bear to lose $750,000, so he engaged in illegal insider trading. And then we have Paulson revealing that the White House will not use half of the bailout money. Perhaps this is because they have absolutely no idea what they're doing or perhaps it's because they haven't used any of the money the way they said they would when they proposed this panicky, ad hoc plan.
So what is coming? Well, although pessimistic, my predicitons reflect the seriousness of these turbulent times. We are going to start to see way more layoffs from all kinds of corporations- not just financial institutions. The economy will continue fluctuating, but eventually will tank. Just today, I watched a segment on the news about how manufacturers are decreasing the portions in various products, but charging the same price. Everyone is in shit right now. And although I am excited about Obama, I don't know what he really will be able to accomplish- we've dug ourselves way too deep.
People keep arguing, "Oh, it's going to be ok. The economy is cyclical. It will bounce back." Really? If the government believed that, we would have seen many similar bailouts in the past during turbulent times, such as the recession of the early 1980's, which is often viewed as one of the most serious economic conflicts since the Great Depression. But that did not occur. These are scary times. Definitely scary.
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While the economy is looking pretty dire, it will bounce back. There have been bailouts in the past maybe not as large as the most recent bailout package but its not something new that the government has never done before. I don't agree with the most recent bailout, but what's done is done I guess.
In the 1980's the US government bailed out Daimler Chyrsler and it worked up until about two years ago. During the Savings and Loan crisis the government set up the Resolution Trust Corporation (RTC) to take over the hundreds of failed S&Ls and try to sell their assets. The bailout cost the equivalent of $300 billion in today's money. BBC News ran an interesting story about past bailouts. Here's a link to it: http://news.bbc.co.uk/2/hi/business/7648330.stm
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