Do not resuscitate

 In an unexpected and welcome display of leadership under duress, the people's house rejected a fool hardy scheme to borrow extraordinary sums of money to forestall an inevitable market correction. The economic stabilization act, otherwise known as a bailout was destined for failure because it was based on the same failed economic policies that set the stage for this economic crisis without addressing the behaviors in the public that exacerbated the philosophical flaws.  Let's for a moment assume that this situation is completely the fault of one sector of the economy, for the sake of argument let's say realtors are 100% solely responsible for this market meltdown. If it weren't for those awful realtors tricking innocent consumers into buying houses outside of their budgets, then all of this could have been avoided . . .

   

NOT TRUE, the evil scheme of this malicious industry would have actually worked out just fine by and large had there not been a perfect storm. And no matter who you choose to blame for this collapse (HINT it's pretty much everybody's fault)  the malfeasance would have sorted itself out in an organized fashion had not the following things all happened at the same time.
 

 1. Stagnant to declining wages

  2. Skyrocketing consumer price index, particularly in the energy sector 

  3. Devaluation of the dollar  

  4. Stagnant to declining property values
  

   The economic stabilization act sought to return liquidity to the market by introducing large sums of cash. Sure the government would be "buying assets" of which no one is truly sure about the value, but the point is that there would be a lot more cash in the system. This would have only exacerbated the devaluation of the dollar issue, thus driving up the consumer price index, effectively offsetting any increases of wages, forcing more foreclosures, which adds to the housing stocks and devalues  property. This bailout effectively hits everyone of the problems and makes them 700 billion dollars worse. Of course there are other externalities such as those who defaulted on their mortgages because health care issues, student loans, bad luck . . . However the market simply cannot survive this perfect storm. The bailout does not address the fundamental flaw of deregulated markets, financial illiteracy. If Americans were financially literate they simply would not have entered into bad mortgages, (or car loans, or credit card agreements) in the first place.

   There is no doubt that without a bailout our economic climate will continue to deteriorate however congress should not attempt to rescue this bill. The only possible benefit of this bill passing would have been the psychological effect on the markets. However that ship has now sailed as well. Congress had no good options but they made the wise choice. Trickle down economic policy, coupled with financial illiteracy in the public has finally born it's fruit and the only practical solution is to let the cards fall where they may.   

  That is not to say there is no role or responsibility for government intervention, but the financial markets need to learn consequence. Free markets can work provided there is not the distortion of a government bailout should we get too greedy. This will be a painful lesson but one that must be taught. This financial bailout was simply more trickle down economics, pouring 700 billion taxpayer dollars into the top of the financial market with the hope that it would free up credit and bolster jobs. If there is a role for a socialized rescue it would make more sense to bailout individuals. I would not support that plan either but the rising tides model could actually work. If we offered qualified distressed homeowners a mortgage buy down, that would also return liquidity to the market, while keeping people in their homes. However with the assistance would come mandatory financial training. It's easy to blame someone else but any financial mistake requires a seller and a buyer. It's too difficult and not even necessarily wise to overly regulate the sellers. When rules are too stringent it removes the ability of folks, particularly in the lower economic classes to take a calculated risk on themselves. The reason why prosperity follows depressions is because through hard knocks an entire generation learns the hard way about personal fiscal responsibility.

   Let's take the opportunity of this crisis to return financial education to schools, and relearn the concepts of saving and living within our means at all ages. In terms of our economic crisis now, the blame game will not help. There are very few if any innocent players in this drama. That message is not one you're likely to hear from leadership in an election year because no one wants to hear about what part of their problem is their fault, particularly the electorate, however without every sector of the economy owning their responsibility, any "solution" will be a band aid on a cancer.