Why Does Paulson Want Us to Keep Piling Up Debt?

BAD debt and falling wages is what got us into this problem and this genius thinks loaning out more is the answer? LORD help us. Can't these guys quit 2 months early?!?

Sooo true !! Agreed!! Im going to be the thriftiest person ever!!

So true, thank you for saying it. Grow up America! debt is not an adult position.

I agree with what you said about decreased standards of living. Our nation is full of spoiled brats who want new kitchens, big SUVs, and a lot of bling-bling. We are also unfortunately deluded into thinking that EVERYONE deserves to own their own home – NOT! The people that deserve to own their own home are the ones who are willing to work for it.

The credit crunch will only end when we revert back to a cash economy for about 10 years. This would definitely “shore-up” the debt problem, and it would give Americans a better perspective on where they really are in life.

Face it America – about 99.99% of us can't live like a rock star. We were never meant to.

my 2 cents.

Right, but not hard hitting enough. Living beyond our means is what got us into this mess, and encouraging the continuation of that is just 180 degrees insanely wrong. We have a model. We recovered from the Great Depression when everyone willingly sacrificed to a lower standard of living for the war. When you produce one loaf of bread, you can't eat two, period, no matter how much you think you are entitled to.

Agreed, agreed, agreed.

USA is the nation of credit card millionairres, people finding someone else to blame for their own problems, and crooks who feed off of those who are easily influenced to go into debt.

Here is an idea. Make quality product in this country by true Americans. Stop outsourcing to savwe a buck with your business, and solve the illegal immigrant problem which I think also is contributin gto this false sense of economy that we have. If much of what goes on in this country relies on illegal immigrants being paid nothing but pennies, then the economy is not a true reflection of the reality of life here.

Everyone needs to cut up their credit cards and buy what they can afford. The federal government could take a few lessons from that mentality as well. No more bailouts. Let the natural flow of free market do what it will do to fix the situation at hand, and people need to be prepared to adapt to the reality of life in this changing environment.

Well said! I am beginnign to think Mr. Paulson is not have a bright as people give him credit for. Apparently he can't remember that the bankaide he applied a couple of months ago was to a sore caused by the very action he is now recommending. Somethign doesn't make sense.

Amen!

You're very right to be concerned, but I'm not sure you get the WHOLE picture. The Federal Reserve literally depends upon people and businesses going into debt, because that's how the paper money supply is and was created. This also means that when people, businesses or the government reduce their debt levels, the money supply contracts. In fact, if every debt in the world were paid off tomorrow, there would be no dollars left! None! Zero!

This is precisely what is wrong with paper/fiat money. It is a monetary system that REQUIRES us to go into debt. As debt increases more and more, an inflationary effect occurs, and the economy booms (irrationally most of the time). When the wall is hit, like we hit the wall over the past two years, the “thud” turns into reduced debt (foreclosures, defaults, etc.). This causes deflation and slows the economy back down again. Those who invested in the economy during the boom times get crushed. This is almost everyone who invests.

Meanwhile, those who don't invest get crushed all along via the effect on prices. Things get more and more expensive to buy during the boom times, then they lose their value after the bust. Just ask all the homeowners who are currently “under water” or have seen their real estate investments turn deeply into the red…which is nearly everyone one way or another.

This boom/bust phenomenon is characteristic of money supplies based partially or solely on paper/fiat money, and we are all its victims.

Then, to rub salt into the wounds, the benefactors of all this debt…the big banks…get bailed out, because the Fed claims that they're “too big to fail.” What a crock! They're claiming that if all the big banks failed, there'd be no banks left to ever lend anyone any money for any purpose, and the whole economy would collapse. What they fail to take into account is that if all the large banks get wiped out, a bunch of small banks get their turn to become big banks, as the same boom/bust cycle would continue to reassert itself.

We've got to get off this merry-go-round. It's bad enough that they're dipping into the pockets of the taxpayers in order bailout the banks. It's bad enough that the big banks are being rewarded for their foolish lending practices. But what's worse is that the rest of us continue to be harmed, day-in and day-out. Boom/bust is slowly wiping us out.

Good article – this is what I thought… we need to actually produce something to justify an increase in wealth – I seem to remember that being a basic law of economics. We've been spoiled by living off bubbles, expecting it to continue, getting lazy with easy money, etc. I hope politicians (Obama etal) realize this too. Job creation will be good but I'm sure there is a proper way to do it – get bids instead of giving no-bid contracts to Halliburton and Bechtel, don't pay too much/get ripped off by the contractors ($400 bolts, etc), get the private sector involved, etc. I'll have to re-learn how the TVA was done – that seemed to work but these are different times.

I agree completely. America could go a long ways if we would pay off our foreign debt and simultaniously help each other to control our debt habits. Everyone born after the Great Depression has had to learn about management of individual debt. Why we (government) wants to entice more debt is beyond my simply mind to comprehend. Is this like giving an alcoholic a drink because you hate to see him suffer? Should we give a person who just overdosed more because they can not endure their withdrawls? I admit a person suffering from “the bends” needs to return to high pressure before they can be cured, but debt is not the bends and returning to high personal debt will only make matters worse.

I'm glad you mentioned feeling security instead of having a false sense of accomplishment by overextending by getting a big house, big SUV, etc. Sign said “Don't try to keep up with the Joneses, drag them down to your level” – this makes sense… Set an example by downsizing and others will follow.

Rock County sez that my house is valued at $140,000 (in round figures), but I don't think I couod get $100,000 for it. We got a GM plant closing that employs about 3500, so there's more houses on the market than could ever be sold. However, everthing in that house is my family's free asnd clear, including the motor vehicles. But if I am forced to ever sell the house, I'll have to take a loss and still ow the bank $20,000-$30,000. AND not have money to even rent another. So, who's gonna help ME???

An upside to the raiding of public treasure is affordable housing;-) Well, at least for those who have incomes. If records get kept, in a year or so it might be fascinating to learn who walked away with bundles of swag.

2 Months early?? The new Treasury secretary was among those who helped to engineer the bailout. The behavior leading to our current problems was encouraged by politicians of both parties. Obama's economists seem to be just as bad as the current crop.

What's funny is that for some reason “Bush” and his cronies are to blame for this debt mess that we are in. Ignoring the fact that over the last fifty years of both Republican and “Democrat” Corruption and horrible financial policy has created the problem that is now coming home to roost.

Obama, pulling most of his advice from the Clinton era doesn't seem the likely candidate for “Changing” the current situation. He is going to spend just as much on “Government” programs to get people hired and working. I guess saddling 7 Trillion in additional debt on the American People by feeding the Corrupt Corporate Machine or by Government Programs that put americans to work is different.

No, it's not it is still debt that will crash us with expansive new … What's the word “sacrifices,” that Obama likes to use… or is it the word TAXES.

The beast is feeding itself it's own tail and soon will consume itself and the entire system will collapse.

No fiat system ever printed itself out of disaster….ever!

Walt, I guess I do not understand the Federal Reserve. I understand the use of debt in business, to support manufacturing production, expansions, etc. I do not understand how individual debt is used by the FR to control the release or withholding of currency. Whether I purchase an item with cash or with plastic, the FR only cares that transactions occur and capital expands or contracts.

Heh, a certain man that ran for president this year been talking about this for a long while and people thought he was a kook. Do you want your country back? Don't like what the fed and the government is doing with your money?

If I was a journalist who didn't produce or sell anything tangible, I'd agree with this guy. The problem is that manufacturers and retailers are getting butchered by this lull in consumer spending. The best part is trying to get access to cash for operations with the credit market jammed up and banks are sitting on their hands.

It isn't fat cats and executives that will be losing their jobs when consumers glue their wallets shut. It's going to be your neighbors and friends. How do you propose your precious “consumers” pay off their credit cards and return to their simple midwestern roots when the only jobs left are entertainment (journalism) and public service?

Maybe I'm in the wrong industry. It's silly to be a brick and mortar business these days. I should probably get a job in the media so I can sit in my pijamas all day and sell bad news, it's the only thing still in demand and it's completely risk free!

I think these bailouts will artificially keep prices high. By giving banks money they can hold their assets longer. If the banks go under their assets are scattered to those few remaining enterprises that will pick the best options and let the remaining ones die. Also, these bailouts keep homeowners paying higher mortgages because banks are less willing to “forgive” us if they are getting money from someone else. However, a bank will crisis will forgive me and work with me and together we can arrange for me to continue making reasonable payments. I want to stay in my house and the bank does not want another empty house.

John, he spoke of consumer debt not industrial debt.

One boondoggle after another. Look at the CitiGroup deal. First they gave them a $25B “capital infusion”. Then they gave them another $20B for a mere 8% stake in ownership at a time when Citi's capitalization was down to $20B. PLUS, they gave them a guarantee to pick up any future losses exceeding the first $38-odd billion, up to a maximum of around $306B. Instead of canning the directors for malfeasance they allow them to stay on, including chief bozo Bob Rubin who, in cahoots with Greenspan, brought on the current crisis by refusing to regulate the derivatives market when they were running the show. As of 2008, Rubin's compensation as one of the directors at Citi added up to $17,000,000 plus $33,000,000 in stock…

Banks have made a concentrated effort to turn this into a nation of consumers so that they could issue more loans and make more money. Now, they want to blame everything on the consumers that they have created. The population that they are calling consumers generates 70% of the economy. When too much of populations' money is used to pay interest on money created out of thin air, the money goes directly to the banks and does not create commerce. The population has to have money, not loans, in order for the economy to be OK.

Now that everything has dropped in price, banks have lost or are about to lose a lot of money on gambles with securities and derivatives. The taxpayer is going to cover their losses. The very last thing that you should do is give someone who is addicted to gambling more money.

This also will not stop the foreclosures or the loss of jobs, which are the only things that the government should be concerned about.

http://ewebsmith.com/gov/BankBailOut.html

That's what I was reffering to as well. Businesses that are short on cash are in trouble if consumers stop spending altogether. Anyone who was using credit to make payroll for example is now on the hook to use cash reserves or to generate the cash through sales.

If people stop consuming, they will lose their jobs. Looney journalists need to realize that we can't all close our wallets at the same time because most of us pleeb worker bees are dependent on making or selling something and aren't part of the recession proof, know it all, media elite and public sector.

Consumer spending is NOT a bad thing. Too much unrealistic spending is. That's the banks fault, not manufacturer's and retailer's.

Where is this money coming from – is the Fed borrowing i.e. creating future debt, or is currency being printed?

The bitter truth is to live within budget. Why should US consume, especially by borrowing?

I think the US is well under way of a prolonged deflation. Reactions from the Fed and Treasury seem more out of panic, and are unlikely to prop up the shrinking economy, beyond a month or two. The GDP is probably shrinking from 13Tn to about 9Tn or so based on real situation. This would mean a massive correction. About 25% of the jobs and businesses will take a hit. Unfortunate, but has been in the works for a few decades. Its like a huge ship that is turning, and no amount of steering turn will have immediate effect.

How about really helping the consumer by making a very low interest loan from the the bailout monies to consumers with credit card or student loan debt of some set certain amount, say $25,000, with the criteria being you have to be able to repay the loan during within a certain period of time and agree to have only one available credit card with a small credit limit. Giving responsible people, who are still managing to pay their credit card bills, even if it's just the minimum payment for many, the opportunity to get out from under credit card debt legitimately and responsibility would go a long way to restoring a level of spending confidence this country needs. Spending NOT through credit, but pay as you go, once the burden of debt has been eliminated for the consumer. Would I sign up for a program that would allow me to repay my credit card/personal loan debt (I've managed to repay 3/4 of mine already) through very low interest (5%-6%) rates, while agreeing not to have but one credit card with a limit of say $500-$1,000, and while promising to pay as I go once I was out of debt? You bet. I think a lot of consumers would sell their soul and gladly walk the cash path if given that kind of opportunity.

The sooner it collapses the better off we'll be. I think the reason the politicos are fighting that fact so much is that in that world they won't get near as rich…

The people that that would serve would never be able to repay the new loan. They've shown a history of not being responsible with money.

How is a low interest loan going to change their behavior in a positive way towards being financially responsible?

If we continue to enable these folks they will never grow up financially.

Tough love – let 'em burn.

Well, we know that you don't build or sell anything for a living that relies on consumer spending.

Enlighten us as to the industry you happen to be in?

Realize that even if you're higher up in the foodchain in the b2b end of the pool, end-user mysery is going to trickle up and bite you in the ass… yes, even if you're in the public sector.

You're probably a teacher or something. I hope your levies all got voted down and you can't find a summer job in '09.

Are you a serious journalist? Or just another hack that managed to get a degree?

You KNOW why Hanky Panky keeps pushing more debt. As soon as we are removed from an income system, and live in a debt system, we have NO CHOICE. We'll have to keep working for whatever wage we can get, we'll be HAPPY to get our allotment of bread and milk. And we'll have zero inclination to do anything about the WHITE COLLAR CRIME PROBLEM that is our current dilemma.

Maybe you can redeem your apparent lack of intelligence by reporting on the CRIME SPREE that this supposed 'bailout' really is. Failure to do so will clarify for all that yes, Mary Kane, you ARE just another HACK with a keyboard.

And oh yeah- for all you armchair economists who think this 'debt' system is good? Wake up you rubes, you'll feel it just as much as those 'fiscally irresponsible' people who cannot 'repay their debt.'.

Can you not see how your weak arguments about 'personal debt responsibility' are completely and foolishly misguided? We should be talking about REMOVING the debt based economy and REINCARNATING the asset based economy. You bumblers will get us ALL in hock for life if you keep singing the tune that you are currently.

All I can close with: You are an IDIOT if you believe these problems are the result of people who don't pay their home loans. It's a drop in the bucket… why are big businesses using DEBT to pay salaries? Huh? Think about it before you want to blame an individual who took a bit too much home loan, or cashed out some equity. Personal debt is DWARFED by federal and business debt, and THOSE are the ones with the real problems. But you just keep repeating the meme that it is a few thousand private individuals who brought the world down because they bought the McMansion.

Positive Change For – We The People

The current Bush Administration and the possible coming Obama Administration need to be about positive change for We the People if this nation is to survive this economic malady.

The current Bush Administration and the possible coming Obama Administration needs to avoid at all costs any continued rape, extortion, and destruction of a nation with traditions and redeeming heritage like no other in the world.

America stands for more than the pillage and intimidation of other nations. America stands for freedom, human rights and development of individual dreams.

If America wants change; wants to save We the People; wants to grow We the People; seeks to encourage We the People; and continue to protect, defend and preserve We the People; and wants the following outcomes:

• Boost and stimulate the economy,
• Decrease and eliminate current consumer debt,
• Decrease the national debt and save America from certain economic demise,
• Encourage national consumer saving,
• And fund a more transparent bail out than the current one offered Wall Street, and Citibank -

Then I recommend that the United States Treasury offer every working United States citizen a $1500 voucher per month for one or two years to be applied towards just their debts such as current outstanding:

• Mortgage loans,
• Auto loans,
• Credit card debt,
• Medical expenses,
• And verifiable personal debt.

If the employed United States citizen does not continue working then the voucher stops until they are employed again:

• Each month that the United States citizen is employed, the individual will receive the $1500 voucher.

• The United States citizen must be working 35 hours a week whether fulltime or part-time. United States citizen must always be working to receive the $1500 voucher.

• United States citizens who are self employed must show that they are earning a living each month working 35 hours per week to receive the $1500 voucher.

If the United States citizen is in college or technical training fulltime, they too receive a $1500 voucher paid to them, the parent, or their guardian:

• As long as they maintain a “C” average grades each reporting period and

• United States citizens cannot double dip and get $1500 for being in school and $1500 for working.

Each United States citizen child under the age of eighteen who lives at home with their biological parents, foster parents, or guardian will receive a $500 voucher each month which is to be used towards schooling, meals, school related activities, tutoring, school supplies, etc.

• The $500 student voucher will continue for one or two years as long as the United States citizen child remains in school.

• If the United States citizen child leaves school, is expelled, drops out or is excessively absent from school, then the $500 voucher will cease until the student returns to school, fulltime and carries a average “C” grade each month/quarter.

It does not matter that the United States citizen is in the military. The same voucher options apply to the United States citizen active duty member and their dependents:

• Each active duty military personnel will receive a $1500 voucher each month and each dependent will receive a $500 voucher a month.

The following United States citizens will receive a voucher option each month:

• Retired over 65 years of age
• Disabled
• Certified seriously mentally ill, as determined by national standards.

Will be eligible for a $1500 voucher each month to augment or supplement any earnings the individual receives from retirement funds or disability funds to be applied to pay down any and all debt. If the above United States citizens are also caring for a minor United States citizen child then that child is eligible for the same $500 voucher afforded other children stated above.

By initiating the above vouchers, the United States will save money, save assets, save consumers the loss of their homes, prevent bankruptcies, promote economic growth within the nation and significantly decrease the national debt saving our great nation from another Great Depression.

**Voucher fraud, black-marketing in vouchers, and extorting individuals using vouchers as a weapon could result in racketeering charges, loss of property and long-term, irrevocable community service commitments.

Why don't they understand that if people have money they will spend it. If people do not have money there in no spending. These bailouts do nothing for people (consumers) people don't want more ability to get into debt further, they want to get out of debt and have extra money to spend on goods.

Did they miss this in economics? No, I assume this is just a way to have the Banks horde away some assets before the system fails.

It's not about us. It's about how the rich can get richer.

Learn to live with it or revolt.

It's not about us. It's about how the rich can get richer.

Learn to live with it or revolt.

It's not about us. It's about how the rich can get richer.

Learn to live with it or revolt.