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Thread: What will you do, if you have power?

  1. #1
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    What will you do, if you have power?

    The purpose of this topic is to take a major current issue (facing any govt. or big power) and invite innovative suggestions from hubbers as to what is the best course.

    To start with, let's take up the $700 bn issue.

    The problem is well-known, US financial institutions are in big trouble as they faltered by lending to those not-credit-worthy and now the homes they possess out of short-closures cannot help them recover the money. Big loss / bankruptcies / fed investments / fed-managed-take overs etc. On top of these, fed wants to pump in $700 bn as otherwise the whole economy is expected to get into a major depression.

    Imagine you have the $700 bn (or you're the sole decision making authority in the fed), what will you do to fix the economy?

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  3. #2
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    Just for reference, three proposals on "how to use $700 bn" that I read in different articles recently on WSJ:

    1. Buy assets from banks (not just those troubled ones, any that the fed seems fit) using this money and help them stand up. I think this is the current fed proposal.

    Fixing the prices for assets , managing the purchases etc. could be the major objections and that's probably why it didn't fly today.

    2. Buy preferential shares of these failing corp and help them stand up. That way tax payers don't get penalised but the shareholders of the co. Only those institutions in trouble will be targeted (means healthy ones linke Bank of America won't get a cent from the $700 bn)

    3. Mix & match - buy some assets and some stocks.

    Now what are some out-of-the-box suggestions, hubbers?

  4. #3
    Senior Member Platinum Hubber ajithfederer's Avatar
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    A layman's attempt

    App_engine

    First of all what are the consequences of not giving the money: Recession, job cuts, lowered investing confidence, stock market plunges, less government spending and no economic activity.

    Who are the benefactors?. Struggling financial companies and I can't really think of many others. Please add them if i have missed anybody.

    What is to be done: They say that they will buy out all the bad debts. What about the executives who were responsible for this mess?. What about thier himalayan compensation?. What are all the banks and how much each has sinked in terms of $ value, God knows .

    How did they arrive at the 700 billion $ number and mind you this doesn't include the 85 billion$ buyout of AIG and 25 billion $ buyout of fannie mae and freddie mac. And there was another 29 bil $ buyout of someother bank, god knows who is that, Too many defaults to remember, i say . Will this really help revitalize the cringing fin system, on paper yes, but in reality depends on execution.

    Who is going to bear the brunt?. Here comes the biggest upset. A normal taxpayer for no fault of his in the present crisis will bear the brunt and how by how much terms in percentage . Thalayae suthudhu.

    what are the opportunity costs of this money?: Too many to be listed.

    Whomever is elected this november, as kannan pointed out sometime before they have a situation from stress developed to panic and now to chaos. :P

    Saying all that i would give the money

  5. #4
    Senior Member Platinum Hubber ajithfederer's Avatar
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    App_engine

    The market lost 3 billion$ a minute today because of this failed bill. On a whole the market lost 1.2 trillion$ today. Do we need a bigger reason. This country will go into a recession if the bill isn't passed .

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    AF, Obvisouly there has to be support from the "powers" to tide over the crisis. Say the 700 bn is to be pumped in. If they decide you are the policy maker, how will you spend it?

    Some option other than the popular ones being discussed...

  7. #6
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    Although I am not for pumping tax payers money (that too $700bn) to save the financial industry, one seems to be left with no clear options.

    If banks can't lend money (which currently is the situation) then slowly business after business (small to big) would fail bringing the whole economy to stand still.

    Worst is yet to come I believe. However the failure of the $700 bn bailout bill would atleast let them think in a different direction. Seems like the Bush administration was hell bent on getting this passed, however it was his own partymen who brought about its downfall. No wonder 9/29 has been termed as "Economic 9/11".

  8. #7
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    I think hubbers are getting serious as to "whether tax money should be pumped or not"

    That is not the topic of discussion at all)

    It's a hypothetical situation of one getting all authority to fix an issue (not totally imaginary as in the film 'mudhalvan', but similar to what we have seen happening in history - the one in my lifetime was when Rajiv Gandhi got power after his mom got killed and the overwhelming majority he got in the next election).

    It's like this - tomorrow you get a 'varam' that every decision maker in U.S. powers - president / both presidential candidates / congress/ senate / financial institutions etc will listen to YOU as to how this "xxx billion dollars" will be spent.

    What will you do, other than those that are getting proposed in the current plans / media suggestions?

  9. #8
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    Saying all that i would give the money
    To whom? How? What are the advantages & disadvantages?...that's what I was hoping to discuss (the proposals could even be hilarious)...

  10. #9
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    ஓகே, ஒரு சேம்பிள் (அடிக்க வராதீங்க, சொந்த ஐடியா இல்லீங்க, நம்ம ஊரு தலைவருங்க கிட்ட படிச்சது தாங்க):

    -மேற்படி பணத்தை (அது தாங்க 700 பில்லியன்) கடன் கட்ட முடியாமல் "ஷார்ட் க்ளோஷர்" செய்பவர்களுக்கு வருஷத்துக்கு 1% வட்டியில் கொடுத்து, எல்லா லோன்களையும் அடைப்பது. (இதுக்கு வேண்டி ஒரு ஸ்டேட் பாங்க் தொடங்கலாம், வேலை வாய்ப்பும் பெருகும்). இது பணமாகக்கிடைக்காது, கடன் அடைப்புப்பத்திரமாக மட்டும். கொண்டு போய் பியர் அடிக்க முடியாது என்று அர்த்தம்.
    -இந்த உதவி "உச்ச வரம்புக்குள் இருக்கும்" வீடுகளுக்குத்தான் செல்லுபடி (ரேஷன் கார்ட் ஸ்டைல்)
    -ஏற்கனவே "ஷார்ட் க்ளோஷர்" செய்தவர்களின் வீடு இன்னும் பாங்க் வசம் இருந்து, அவர்களோ / பாங்க்கோ திவாலாகாத பட்சத்தில், அவர்களும் திட்டத்தில் பங்கு பெறலாம் (ஆளுங்கட்சி உறுப்பினர் அட்டை காட்டினால் ரொம்ப நல்லது )
    -இப்படி மீட்கப்படும் வீட்டை 10 வருஷத்துக்கு விற்க முடியாது (கடன் கட்டாவிட்டாலும் பரவாயில்லை, சில நிபந்தனைகளுக்குட்பட்டுக்குடியிருக்கலாம் - விற்க மட்டும் முடியாது. )
    -நிதி நிறுவனங்களுக்கு அவர்கள் கொடுத்த கடன் மட்டும் திருப்பிக்கிடைக்கும் - அநியாய வட்டி விகிதமெல்லாம் கிடைக்காது. வெறும் கட்டடம் வைத்துக்கொண்டு திவாலாவதை விட இது மேல் அல்லவா?. கடன் அளவு தற்போதைய விலை மதிப்பு அடிப்படையில் தான்.
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  11. #10
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    Very interesting perspective on why fed should not spend the $700 bn:

    http://patrick.net/housing/contrib/nobailout.html

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