But How How Does The Bailout Affect Me?

In the comments, I spotted an average consumer with no skin in the Wall Street game wondering about how the meltdown and bailout affects her. Another commenter responded rather cogently so I thought everyone should share in the exchange. Commenter rockergal asks:

I wish someone could just explain this whole thing to me. How does it affect someone who has no stocks, investments etc. and just does the old fashioned “saving” I’m serious I don’t understand.

Commenter Secret Agent Man responds:

Basically, you will not be directly affected by these most recent developments because you have no investments. What you will feel is the slump on the economy…

This bailout will force the federal government to borrow and print money, which will erode away that nest egg you have through inflation. Basically if your savings account pays you 2% and inflation is 3.5%, you are losing 1.5% each year by keeping your money in a relatively safe place. Using treasury bills as an example, with the recent ‘flight to safety’, yields will likely continue to fall and inflation will likely continue to rise.

If all of that wasn’t enough, the recent problems will likely cause the economy to spin its wheels in the short term, making it tougher for you to switch jobs or negotiate a raise because your employer is feeling the squeeze of having to raise prices in an economy where people’s real wages are falling.

Additionally, if you want to start a business, or buy a home, it will be difficult to qualify for a loan unless you have sterling credit.

My advice is, if you can stand it, do what you are doing now and hang on. Things will shake out, and the problems always look the worst at the bottom of a cycle.

(Photo: Getty)

Comments

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  1. no.no.notorious says:

    great answer. it seems like everyone is in a tizzy, while this probably will shake itself out during Christmas season. that’s my guess.

  2. ninabi says:

    How will the bailout affect me? Hmm.

    My house will smell like old people afterward.

    “That nice man at the bank” convinced my mother in law to put all her life savings, bonds, stocks, into an annuity. “The man said it will make things so much easier for my children when I pass away because all my money will be in one place.” Ah, deregulation- it brings the family closer together.

    • yasth says:

      @ninabi: An annuity should be fine. Actually one of the safest investments around as it is backed by a lot of regulation and is effectively accepting a fixed rate of return.

      So I am not quite understanding the hate reason for the hate?

    • FrankReality says:

      @ninabi: Did the “nice man at the bank” disclose how much (upwards of 12-15%) of your mother-in-law’s savings he got in commission for selling her the annuity?

      That’s an awfully high price to pay for “bringing the family closer together”.

    • Quantenmechaniker says:

      @ninabi: How nice of him to recommend selling stocks at this time …

  3. magic8ball says:

    So ultimately, does the bailout get paid for by the taxpayer, or does that money magically appear from somewhere else? Where exactly is the government borrowing money from?

    • shadax says:

      @magic8ball:

      The government borrows the money from anyone who will buy government securities. Who will repay the debt is the real issue here. Unfortunately, we will, as will our children. Servicing the national debt will become a larger part of tax revenue, so we will either be in a larger annual defecit, cut government spending, or raise taxes (or a combination of these). As for the debt being paid off? Probably never going to happen. If we were actually able to run on a balanced budget for long enough while servicing our debt, the debt would become less and less a percentage of tax revenue (assuming tax revenue increases in the long run). This would make it theoretically less of a burden to pay down, but who knows at this point? If the taxpayer is so easily called upon to go into more debt over greedy/stupid corporations’ practices, my guess is we’ll always be bailing someone out. Now if you’ll excuse me, I’m off to buy some gold.

      • mac-phisto says:

        @shadax: Who will repay the debt is the real issue here.

        really? is our banking sector that f-ed up that they don’t understand the concept of how a loan works?!??!

        you know what? don’t answer that. >:(

    • B says:

      Sounds to me like the cure is worse than the disease. What are the negative consequences of not having a bailout?

      • lightaugust says:

        @B: Sounds like over the last 24 hours a lot of people are asking that very question.

        • sir_eccles says:

          @lightaugust: I’m sure if this wasn’t an election year, the answer might not quite be the same.

          • econobiker says:

            @sir_eccles: I personally love how this is exploding less than two months before the election. It FORCES the news media to pay attention to the issue.

          • lightaugust says:

            @sir_eccles: I agree with the sentiment, but I don’t know… it seems that any principled conservative who’s been screaming about the free market and taxpayer money and any democrat who’s been for responsible, well regulated capitalism have been forced into an uneasy alliance against this this. I’m dangerously close to respecting any politician who says we just can’t take the easy way out on this, regardless of party… since there are plenty on each side who would take it. Not to mention an inept president with a power hungry set of friends.

            • @lightaugust: I think Dodd’s doing a pretty good job, but I”m also afraid that the other party will wait for this to pass – even with Dodd’s stipulations against executive compensation and other protections – and then they’ll beat the Democrats over the head with it for the next 44 days, screaming that the mean ol’ Democrats gave corporate welfare away and that they hate little kids with American flags.

              Never mind that Republicans made the entire mess possible by deregulating investment banks. Removing well-considered regulations enacted by Democrats. In the 1930s.

      • humphrmi says:

        @B: Well what Paulsen and Bernanke are saying is, if we don’t bail out banks now, the credit freeze will continue to prevent an upturn in the housing market. Furthermore, banks will continue to lose ground on their so-called “Tier 1 Ratio”, which is basically the amount of money they have to have on their books to cover deposits. Most banks need around 10% of their deposits in cash to survive a run, Bear and Lehman were both substantially below that number when they failed. So as long as banks keep writing off bad debts, their Tier 1 Ratio keeps falling, then other banks refuse to do business with them, and it becomes a downward spiral. One domino falls, then the next, then the next.

        Again, this is the argument that Fed and Treasury are making; there is of course slivers of truth and fiction in everything.

  4. ironchef says:

    You can also expect all the treasury bonds, money market, and municipal bonds go down into the toilet.

    It will mean a tougher time for local governments to get their debt serviced.

    Oh yeah…those troops in Iraq might not have the funds to stay regardless if McCain wants them there. Good luck finding the dough to keep this war going on past this year.

  5. Fujikopez says:

    Um, this might sound like a silly question, but what happens to the $500 in savings bonds I’ve had since I was a kid? Are they depreciating in value, or is there going to be a problem redeeming them?

    I know it’s only about $500(ish), but my poor grandparents faithfully bought a $50 bond for me each year as a christmas present and I’d be pissed for them if their gift is worthless.

    • Illusio26 says:

      @Fujikopez: I’d hang on to them unless you need to spend the money right now.

      • JustThatGuy3 says:

        @darkjedi26:

        Depends on the bonds themselves. Some of them stop earning interest once they reach maturity – if you have those, you should cash them in if they’ve matured, since you’re get 0.0% on them.

        This calculator will tell you what your bonds are worth at the moment: [www.treasurydirect.gov]

        • TheFlamingoKing says:

          @JustThatGuy3: Seconded. Money sitting in a matured savings bond is wasted money. Even in the simplest scenario, sell the bond to buy 2 more of the same type. You’re money’s tied up for another 7 yrs, but who knows, that may turn out to be a really safe place with the current market outlook…

    • no.no.notorious says:

      @Fujikopez: hang onto them. i just cashed some in recently (they were past maturity) and you definitely get more than you paid for. you pretty much get the inflation plus some small risk, since the government had your money for a period of time (which you could have used to invest in other things.)

      every 10 years, the economy is supposed to have a recession/restart itself. it was supposed to happen in 2000, but it didn’t. economy has cycles and things will pan out before you know it, then we’ll all be saying ‘omg remember when we were freaking out for no reason?’ kind of like y2k

  6. justbychance says:

    Fuji

    If you bought Series E bonds, then it’s half value that gains interest until 10 or 18 years (depending on where you got it). The rates on savings bonds are guaranteed based on the date when they were purchased.

    If you bought Series I bonds, then it’s already worth face value and is gaining interest.

    Either way your safe, but for people buying bonds now – they’re screwed b/c the rates will be very Danny Devito (…low to the ground).

  7. RStewie says:

    So should I start putting money in my 401k, or should I save it myself, and dump it later when the market is better?

    Also, how are mutual funds affected? Should I look into that as opposed to the 401k for now?

    My company does matching on an annual basis, which is up to 5%.

    • JustinAche says:

      @RStewie: I would only contribute up to the match point. Consider that your free money, anything else is a fools bet. Also, check out where your 401k is being invested, and if you have any say about it.

      • RStewie says:

        @DemolitionMan: I have several options, by risk. Gov’t funds, stable funds (domestic), stable funds (some foreign), not-so-stable, and foreign. They’re suggesting, based on where I’m at in my career (Not close to retirement age) that I go all out.

        • MercuryPDX says:

          @RStewie: Not sure if “all out” holds true “today”, but the justification is you’re young and have enough years ahead of you to weather a few downturns.

          I’ve always been told to assess the level of risk I am comfortable with and diversify across funds within that risk level.

          @All: Please do chime in.

    • MercuryPDX says:

      @RStewie: I’m not a finance expert, but (if you can) I would contribute what it takes to get that match. That’s “free money”.

      I am also wondering if people are taking advantage of the market… “Buy low, sell high”, right?

    • m4ximusprim3 says:

      @RStewie: AT LEAST do the matching. Right now is actually a great time to throw the kitchen sink at your 401K, espescially if you’re young.

      Since the market is so down, your money is buying you more vested shares, which will eventually appreciate in value. The more shares you can pick up on the cheap early, the more compound interest you are going to see in the long run, which is really what makes the 401k so wonderful.

  8. battra92 says:

    My whole view is that the ecomy will be down but not necessarily down for everyone. Sure a sinking tide lowers all ships but NEVER be afraid of looking for new opportunities. Heck, I just got a raise and I just joined the investor class this week so many people will ride this out just fine.

  9. parkavery says:

    I’m so glad to see this article/thread here!

    I would like to know about mutual funds too. I was surprised when my mutual funds didn’t completely dive over the past 6-9 months (though they did go down). Is it time to get out and stick the money under the mattress or is it too late? (We’re also planning on buying a house within the next 6-18 months.) How long before mutual funds might recover?

    Thanks, everybody!

    • @parkavery:
      Hi Park,

      Unless you absolutely need the money–your best bet would be to stay with the funds you have–you haven’t technically “lost” anything until you sell. And now is NOT the time to sell.

      I am not sure who you have your funds with, if you are paying a load/no load, and what kind they are (sector, index, etc) but if history is any judge–they could return to their value within 1-2 years. Its just a matter of time, and if you can wait.

      I hate to sound Pollyanna about it, but this is a great time to actually purchase real estate/funds etc because there are some real bargains.

      Just my opinion.

      • parkavery says:

        @CreativeLinks: Thanks a lot for the advice. I appreciate it.

        We have some savings squirreled away in the bank but we were hoping to add the mutual fund money (it isn’t a lot, but it’s something) to the down payment too. We may have to hold, though; I guess we’ll see what happens when the next statement comes.

        Anyway, at least I got something right: I’ve been telling my better half that now is the best time to buy a house. :)

  10. He says:

    One real effect on people is that their vacations will suck ass as dollars become Uncle Funbucks in many countries outside the USA.

    • @He:

      But in a reverse way, it has helped Tourism in this country–just got back from Disney where 80% of the guests seemed to be visiting from other countries.

      I spoke with one from England who said they could never afford until now since thier pound is worth twice as much as our dollar.

  11. tricky69 says:

    Is there really a crisis though? I pretty much bought it that there is – I’m not very savvy about all the intricate financial stuff; and I have been trying to read up on all the issues to better educate myself. I do have some investments and I will be hit a little bit but I think I will be able to weather it; And then I see this video:

    And this post [openleft.com] and I get to wondering just what is going on – I am getting lost as what is going and why this quickly. Is this one last scam before Bush moves on?

    • tinmiss says:

      @tricky69: Ha! Marcy Kaptur gets her condescension on. Thanks for sharing that video; I have ties to Toledo. I would agree that things seem really rushed, and I would not put it past this administration to take advantage of a public panic.

  12. I was planning on starting my retirement investments this year, probably a Roth IRA. I’m 26 and have always heard “earlier the better”, but, in light of the news, should I NOT do that now?

    • m4ximusprim3 says:

      @LastVigilante: see my comment above. Now is the best time to invest _if you’re looking to make a long term profit_

      The market will eventually turn around, and the more you invest in a low market, the farther ahead you’ll be when that equity appreciates.

    • tricky69 says:

      @LastVigilante:
      Quote from Warren Buffet: “Be greedy when others are scared and be scared when others greedy”. IMO, morbidly, this is good time to invest. You should talk to someone more professional that seems to know what they are doing though. Here is a great blogpost I read recently on it:
      [www.getrichslowly.org]
      Always do your due diligence though before investing in anything.

    • Notsewfast says:

      It is interesting to see your own comments as a topic…

      @LastVigilante:

      I wouldn’t advise anyone to try and time the markets, but honestly if you get in now, you’ll be buying a heck of a lot closer to the bottom than the top. Also, at 26, you’ve got many years to see great returns that will average you out even if we see another 18 months of rough waters.

      Look at it this way, would you rather buy in before the Dow tanks 700+ points or after? You have to think of investing in the financial markets in the same way you’d think of real estate: When lots of people have been wiped out, those with the cash can buy at extreme discounts and see fantastic gains in a short amount of time.

      As cliche as it sounds, the best way to make money is to diversify (health care stocks are up almost 5% in the last 3 months) and to invest with a long term outlook (check your portfolio no more than once a week, once a month if you can stand it).

      I had a client cash out his entire investment portfolio (against my advice) last Thursday morning. Had he not looked at his investments until Monday morning, he might not have noticed anything had happened.

      • @Secret Agent Man: Thanks for all the input everyone. I’m going to go ahead with my original plan to start retirement investing as suggested.

        Honestly, I’m going to go with as much a “Set It and Forget It” plan as possible, so your suggestion to check it no more than “once a month if you can stand it” is more than plausible, as I’d probably only want to have to check it no more than once a year if needed.

    • @LastVigilante:

      If you are truly concerned, you could always get a Traditional IRA. That way, you’ll immediately “get profit” by saving taxes for the year.

      So a $2000 IRA should net you a savings of $300 you won’t have to pay in taxes. So you will already be 15% ahead.

      Of course, you will have to pay taxes on that income when you retire, but its a way to have peace of mind in the short term–knowing that the market (and your fund) would have to drop 15% before you even started “losing” money.

  13. Opie says:

    If you have a credit card, and the card issuer runs into financial issues, you could also face a situation where, despite your own credit being shiny and clean, your credit transactions are rejected by merchant processing systems because of your issuer’s problems.

    • pecan 3.14159265 says:

      Lucky for me, I’m planning on shedding most of my spending anyway. Nothing like a car payment to kick you in the shins and steal your money!

      I hope this won’t affect my car loan – I have great credit, I have no substantial debt (student loan) and this is the first loan I’ve applied for in my whole life. I promise, I’m not stupid.

  14. Blue says:

    I would like to know the names of the CEOs who have said they would not “…….cooperate with the bailout if they are forced to yield to a salary Cap…….”!

  15. TheSpatulaOfLove says:

    One question I have that has yet to be addressed:

    What do I get for being a responsible adult and paying my bloated mortgage on time? I’ve lost $50k in value on my home and have been forced to stick with a smaller house than I need because it’s impossible for me to sell. What’s stopping me from buying a second home, moving in, then short-selling or sticking the bank with my current home so I can get into the size home I need for my rapidly growing family?

    With all this chatter about bailouts, I want to know what is being done to correct the bloated values that created this mess and forced many people into paying much more for a home than it was worth.

    $225k is what I was able to afford, but it forced me to move 50 miles away from work and family or be faced with living in a ghetto or a shack falling in on itself. In my case, I didn’t buy more than I needed or live beyond my means, but the distance sacrifice I had to make to live in something decent because of bloated home values.

    Can anyone shed some light on this aspect? Will bloated home values be reviewed in this bailout, or will wall street be only ones who get a safety net?

    • kingmanic says:

      @TheSpatulaOfLove: I think the inability to borrow the money for the second home would stop you. Right now credit is tight. I’m not 100% certain, but I think the bank would reject your application now that there aren’t many lenders looking for a risky proposition.

      What the bail out is doing is taking a 700 billion dollar water drop and dropping it into a 48 trillion dollar bucket of mortgages. They figure as much as 15% of those mortgages will default. I’m not sure what effect that 700 billion will have on the 7 trillion dollar defaults or how that will interact with the housing market. I know it’s going to devalue the US dollar and I know this inflation won’t come with a comparable wage hike. So their stealing from all of you to possible blunt the problem a little or at least put a floor on the losses. Property values are going to continue to tank for the near future (next 1-2 quarters). Until epople feel the market has hit bottom.

      • TheSpatulaOfLove says:

        @kingmanic:

        I’m not sure what to think of this… We investigated selling back in Jan08 and I spent two months talking to realtors and mortgage brokers about our possibilities. The buy a second/shortsell the first option was brought up by one mortgage broker and he explained the caveats under normal lending processes, but he also threw his hands up back then saying that weirder things were happening.

        I even came up with the idea of calling my mortgage holder and asking for foreclosure listings and offering to take an abused, larger home in unsaleable condition and swapping my saleable smaller home, even out – I keep my mortgage the same, they get rid of an albatross and gain a home in good condition, and I get the bigger house to throw some sweat equity into. Everyone thought I was nuts, but I thought it was a good deal for both of us…

        Living in Metro Detroit, I don’t have many options – as evidenced by the negative attitudes towards American cars – I fear that your prediction of the bottom being within the next few quarters won’t apply here – the downturn has been running strong in MI since the Bush administration took office.

        I appreciate your input and explanation.

      • TobiasAsteria says:

        @kingmanic:
        I’m in the same boat with you, and Chase (my 80%) mortgage company is offering me a “modification” to my ARM…It’s in underwriting right now, so I don’t know how it will turn out, but from what I understand there are no fees associated with it (actually theres like a $250 processing fee) but then if approved they will switch me to a fixed rate forever or for a few years…something like that…Basically, to keep from getting one more foreclosure. The hard part is we are trying to prove that we can pay our bills but not the adjusted rate…so if they think we have enough and wouldn’t default, I don’t think we will get approved. Our first request was flat out denied, now a specialist at Chase is trying to help us and is gathering more documentation.@kingmanic: @kingmanic: @kingmanic: @kingmanic: @kingmanic: @kingmanic: @kingmanic:

    • Norcross says:

      @TheSpatulaOfLove: honestly, there isn’t much you can do. the cold reality is that the home you purchased was never really worth what you paid for you. the values were artificially inflated due to the demand for mortgage debt on Wall Street, and now that market is all but gone. Given that your area (metro Detroit) isn’t in good shape, there is a chance that home may never be worth that amount again.

      depending on what the final version of the ‘bailout’ bill is, you may or may not have the opportunity to refinance your mortgage reflecting the new, realistic value of your home. but that remains to be seen, and honestly I wouldn’t hold your breath. however, i do believe there will be some sort of relief for the average homeowner.

  16. jimmydeweasel says:

    Th jk s n vryn tht vtd fr “W”. Y hv bn hd. H lvs th nbrn nd hts fgs s y vtd fr hm. Nw h’s gnn shr y lk th shp y r. Bt hy dn’t wrry, Thr’s nw ssn f Dncng wth th Strs……pss th prtzls hny.

  17. The original bailout plan did not. However some Democrats have insisited on it, holding up the bill:

    “Despite strong opposition from the banking industry, Democrats insisted on granting bankruptcy judges the power to restructure bad home loans or adjust monthly payments as a way to keep people in their homes. And lawmakers included provisions to cap CEO severance payments, mindful that chief executives of failed mortgage companies Fannie Mae and Freddie Mac were in line to get severance packages worth tens of millions of dollars.”

    Entire article at Boston.com
    [www.boston.com]

  18. mwshook says:

    I just started my first real job, and have no money invested in anything. I do have lots of student loans, but their interest rates are dropping.

    I don’t plan on retiring for 35-40 years. Am I wrong, but isn’t this a good time for me to put a lot of money in the stock market, while prices are low?

    Wouldn’t it be good for me to buy a cheap house pretty soon?

    I could be wrong, since I don’t know much about these matters. But it intuitively seems like starting out during an economic downturn is good luck, giving one the opportunity to buy low.

    • Skankingmike says:

      @mwshook:

      This could be a good time, but realize some companies rely on loans from investment banks. And some companies may go under or change hands go private or anything else.

      I would say if you want to invest in stocks, is do the research and invest in small amounts.

      But as far as housing I would hold off, they may be cheap in some area’s but remember a lot of people are scared of this market and are still trying to unload over priced houses on the market.

      Plus you would need amazing credit to get a mortgage now.

    • FrankReality says:

      @mwshook: I’m not a financial advisor, but in your situation, in my opinion your first objective should be to build up an emergency savings fund of at least 6 months pay. Easiest way to do that is to pay yourself the first 10% of what you make – that’s probably not a bad thing to do for the rest of your life.

      Once you have that emergency fund established, go after paying off any high interest debt such as car loans, credit cards, etc. then the lower interest debt such as school loans.

      After that, start saving up a down payment for a house. After all this bad mortgage stuff, the no-down payment mortgages are hopefully a thing of the past.

      Some will encourage you to contribute income to a 401K plan up to the company match, however due to restrictions on what you can do with that money, you may not want to do that until you have that emergency fund built and are well on your way to building a down payment on a future house. That 401K will generally give you exposure to the stock market via a variety of mutual funds. One point of note about your 401K, it is not a good thing to have more than 10% of your 401K invested in your employer’s stock.

      I think a key bit of wisdom is to save and invest yourself into a position where the only debt you have is your mortgage – that when it comes to taking vacations and buying cars you have the financial assets such that you can pay cash for them.

      Good luck.

  19. cinlouwho says:

    Spatula…doesn’t life stink!! I have had it with these CEO’s and other people who have TONS of money and don’t pay back loans!! Darn it all! I paid back all my student loans, 1 car loan, now working on another car loan, and a current mortgage. What do I get for being honest??? I don’t have much money in my savings and I haven’t gone on a vacation in years. But look at these CEO’s ripping off their companies and Doctor’s not paying back their loans or following through on their obligations. It just stinks to high heaven.

  20. fredmertz says:

    Actually, the whole point of the bailout is to make borrowing easier, not harder. If the banks get the crap off their balance sheets, it stands to reason that it will loosen the vice grip that has been on the credit markets. The rates might be higher, but lending should be easier.

    • stevejust says:

      @fredmertz: So we can have another bailout? Dude, you’re super smart. You want Bernake’s job?

      • Grive says:

        @stevejust: Actually, that would be the point. Thank you for your needless snark.

        Debt drives the economy. Well, good debt does. Bad debt causes this.

        Debt is not a horrible boogeyman under your bed waiting for the lights to go off. Debt is a useful tool.

        The problem with loaning now is that issuers went crazy accepting debt, confident in that everything was well insured. Now, the proverbial feces have hit the fan, and everyone got burnt – so now nobody is willing to lend to anyone.

        What we need is responsible lending practices, not the destruction of lending. This bailout should be to help the financial sector recover from a nearly tragical error.

        So yes, repairing the system so lending happens once again is super smart.

        • redkamel says:

          @Grive: the way we should get the crap off the balance sheets though isnt just by paying it off, but by getting the money from the people who put it there (CEO, bankers, irresponsible loan takers) and then firing them.

          • Grive says:

            @redkamel: And I fully agree – well at least for partial recovery. I’m not sure that’d be enough.

            However, that was not my point. My point was that steve insulted fredmertz’ comment – and fredmertz’ was right.

            Actually, my point is completely unrelated to the method of fixing the financial sector. My point was that lending is not bad. Lending in itself is not the problem, and that the existence of a financial sector will not irrevocably lead to a crisis like this one.

  21. yesteryear says:

    this is a scam. no oversight? paulson (former head of goldman sachs) gets complete control? he demands that he gets it all up front?? where are the riots in the streets?

    • Norcross says:

      @yesteryear: believe it or not, Paulson knows what the hell he’s doing. he has worked for numerous administrations in the past, both Republican and Democrat. the system has become fundamentally flawed, and without someone having absolute power to make the necessary changes, those in Wall Street will be content to find new, fun, illogical ways to make money that will explode.

      it sucks, yes, but there aren’t many other options.

  22. Invective says:

    CNN just now reporting FBI investigating Freddie, Fannie, Merill Lynch & company for fraud. DUH! Let’s bailout all the American criminals while we’re at it. It’s going to be a very merry Christmas… (For some.)

    Which is why they want to rush the bailout through, so the ‘Immunity From Prosecution’ clauses can be written in.

    Can we PLEASE throw in some Senators, say the one who deregulated the things too. Oh yes, let’s not forget the Exxon cover up while we’re at it…

  23. How come I just read from the AP that they are producing four new penny designs? Isn’t that kinda dumb considering… everything?

  24. EditorinChief says:

    Good posts. I myself knew this already, and a bit more in depth actually, but I think this information needs to be out there for more people to realize not to panic and to try and make the best out of the situation.

  25. Bryan Price says:

    I guess my question is, are we sure we are at bottom?

    Yes, the sub-prime loans are folding. What about the primes and the commercial paper? I’m afraid that we’re only looking at the tip of the iceberg.

    • johnva says:

      @Bryan Price: I don’t think we’re even close. Read up on the situation with credit default swaps. THAT is absolutely chilling, and is beginning to make me believe that this whole crisis was intentionally engineered in order to generate profit. Who knows how deep the rabbit hole goes with derivatives and CDS? We’re in uncharted territory now.

  26. megaradjenni says:

    Would it be a big mistake to consider buying a house during all of this? I’m sick of my noisy neighbors….

  27. grapedog says:

    I’m sorry, I’m with the above poster…if two middle class people, productive, stable, contributers to society, can’t afford to purchase a home because of over-inflated home/land values…then the system is broken.

    I’m all about letting this whole thing crumble and letting prices reach more reasonable levels. Let credit wither away and die, and be reborn into something much more sensible. Lets remove Reganomics…

  28. Erwos says:

    It’s too bad that “Secret Agent Man” is assuming an inflationary scenario, because bonds are very much pointing to deflation.

  29. rockergal says:

    Thank you for clearing this up for me!

  30. tworld says:

    Here’s another piece of information you should know. When the Government borrows money from China or whoever, do you think they just give us the money? No, they don’t. Just like when you and I go to the bank to borrow there is the little matter of collateral.

    So, what collateral do you think Bush & Company has been putting up? It’s the Grand Canyon, all our National Parks and the Washington Monument, to name a few. So, if China ever decides to call in the loan, and the good old U S of A doesn’t have the money, you and I will be paying with yen to see the Grand Canyon and vacation in our, oops, their National Parks.

    Welcome aboard suckers, the Bush Train leaves in a few short months, and if we have enough morons out there voting Republican, we’ll be boarding the McCain Train to disaster. All aboard.

  31. Anonymous says:

    I disagree. There will be devastating effects in the long run. Increased foreign debt means increased foreign reliance. We will also have a depreciated dollar which means increase cost of food etc. Take a look at this post. It has a pretty organized display of what to expect.