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)