Hate to break it to you but if it wasn't for the bail-outs the economy, as we know it, wouldn't exist. Like it or not almost the entire economy is operating with a purchase on credit and working a JIT (Just In Time) supply system. If the banks would have folded the entire credit system would have folded.

No major business, and very few small ones, maintain enough cash on hand to run for more than a few days. Which means that if the credit system tanks all the grocery stores close their doors in three days. When the gas station runs out of gas they can't order more.

Contractors typically make payroll by maintaining a loan that tides them over until the contract pays off, either quarterly or upon a set stage of completion. If the credit system fails the loans either come due immediately or, if collateral covers them, they complete their term but cannot be renewed pending more collateral. This is where you see small time contractors selling off their personal assets to cover payroll or selling off the tools used to do business.

In essence the entire US economy would have frozen solid. Estimates vary from 25% to 75% unemployment inside of a month.

Contemplating collapse:
http://cluborlov.blogspot.com/2008/02/five-stages-of-collapse.html

Of course if the economy locks up the guys who got us into this would suffer. They would shed a bitter tear as they flew off to Aruba on their Gulfstream. Yes, they would lose their five homes and most of their physical assets but most of their money is off shore.

What your missing here is that the nation is like a ship. No matter how incompetent and feckless the passengers in first class may be they will always get a seat in the lifeboats. You and I, down here in steerage, are the first to get wet and drown. Sure I could live off of stored food, wild game and danelion greens but it is a misserable life. I'm getting too old to think roughing it is fun. And there is no guarantee we rebuild. There are conditions that can slide and just keep on sliding.

I would love to see the financial geniuses who got us here suffer. Allowing the ship to sink so those who are to blame are punished sounds good. A noble act to maintain justice and accountability. But are you really willing to drown so that the owners of JPMorgan have a bad day?

They set up the system so that they couldn't lose. In theory it shouldn't be possible for credit and market system to fail. Greenspan and all the other Randians had accepted on faith that a free market would always self-correct to optimize resource allocations. This was based on the idea that investors are rational actors. That people would always do the right thing with their own money. That people can see through scams and bad actors would be shut down before they could seriously effect the markets.

The thing is that, as anyone following cognitive sciences knows, people are not rational actors. That the wisdom of crowds, and the wisdom of markets, works fine right up until it fails to work at all.

Of course the question comes around to why these financial shenanigans have so much effect. Used to be, back in the 60s, we had a fairly diversified economy. If the financial sector failed we could ride out the storm working in manufacturing, or farming or industry. It would have worked that way except that in the mid and late 70s we started to consolidate. They aren't separate any more. They are all combined into huge corporations and all interactions are controlled by finance. Finance is better than a third of the national economy.

Free markets sound good but even if they work like a Randian dream there has to be actual competition. Walk into the local big box store and you see tooth and nail competition, right?:

"In the health aisle, the vast array of toothpaste options on display is mostly the work of two companies: Colgate-Palmolive and Procter & Gamble, which split nearly 70 percent of the U.S. market and control even such seemingly independent brands as Tom’s of Maine. And in many stores the competition between most brands is mostly choreographed anyway. Under a system known as "category management," retailers like Wal-Mart and their largest suppliers openly cooperate in determining everything from price to product placement."

Read about consolidation and the effects:
http://www.washingtonmonthly.com/features/2010/1003.lynn-longman.html

Well yeah, that's the point. We're giving a treat to the guys that chewed our shoes. It's not like someone else wouldn't have stepped in and picked up the pieces.

Its not a left/right, liberal/conservative thing. The political class has one direction. More. Government grows, rights recede, period. And of course cable news and talk radio do their best to make everyone think we're an irreconcilably divided electorate. Truth is, middle class conservatives and middle class liberals have far more in common with eachother than they do with any members of the political class. People don't want to believe that though. They'd rather be fooled by the illusion of progress whenever their team is in power. I suppose its always been that way though.

Precisely why small business has been and will always be the jewels of freedom and capitalism.

I agree with you, but you're talking about the large and moderate center, of which I am a member. I'm referring to the far end of the spectrum. Economic survival cannot be ensured until megalithic business and government alike is beaten back into it's proper place.

Art,

I would tend to agree with you for the most part, but for the one glaring inequity; that being that we have turned to the worst of the worst offenders to fix what was broken. The federal government has been and will continue to be the most inefficient, bureaucratic, incompetent, self serving organization in the free market, both as supplier and consumer. To have to turn to them as our only salvation indicates we have lost the war already, and the bailout did nothing but delay the inevitable, and quite probably make the eventual outcome that much worse.

We haven't avoided a calamity, we've only forestalled it, and the premium we are going to pay for that little respite will likely compound the adverse effects of tanking our economy by perhaps an order of magnitude now. By allowing our government to sell out our GDP as they have, we have converted what would've been a burden born on the backs of today's workers and extended it to encompass the lives of our children's children. In a very short time from now, we will be paying more in interest on our debt than the whole of the remaining budget, and more than our GDP. How do we recover from that? The answer is that we won't. It is fatal, and the most likely outcome will be that, just like the ruble and 1980s mexican peso, our dollars won't be worth the paper they are printed on.

Even if the current government were willing, I doubt there's anything they can do now to prevent our collapse. When the rebound from the bailout finally hits (and you can't expect to put that much more money into circulation and not have it seriously devalue the currency) and inflation takes off, bartering will be all that is left for us simple folks to get by on. That, and whatever you have stocked up beforehand. It won't be a temporary hit we take. I fully expect to die broke and in debt.

This is getting a little too hot for ETS. Perhaps we should take this to PM?

Okay folks, I have a hose and a stray cat, don't make me combine the two.

-The Sheriff

"... a hose and a stray cat ..." hmmm, must be a Texas saying

My last word on this thread: whatever the people in power see fit to do, the results are going to be bad, so PREPARE as best you can.

Sue