Financial Crisis

I’ve been reading voraciously about this financial crisis facing our country, and there’s a lot of quality econ blogs out there with good information about it.  My instincts tell me that a government bailout of people who made poor choices is bad.  But the financial system grinding to a halt would also be bad.

So is this something to not really worry too much about, or should I be pulling all of my money out of the bank and stockpiling ammunition?

UPDATE: I was mostly kidding about the last sentence.  I always have a healthy stockpile of ammunition on hand.  These days, most of it I loaded myself.

20 thoughts on “Financial Crisis”

  1. There are plenty of reasons to have a few spare rounds lying around, even if the financial stuff is nothing at all to worry about.

  2. Stockpile that ammunition. There could be mass riots on November 5th. If they loot – then you shoot.

  3. Look, either it will be fine, or it won’t. Either way, I find it incredible (as in literally incredible, unable to be believed) that transferring control of 5% of our GDP to the same knuckleheads that caused the problem in the first place will be in any way an effective strategy.

  4. I don’t think that the entire system will grind to a halt. Not everybody or everybank is affected. Look at JPMorgan (Chase), they just bought WAMU for 1.9bn.

    In fact I think the market will sort this out a LOT faster if we force them to by not bailing out the problem companies.

    Still, it doesn’t hurt to have a little cash on hand, and some ammo. maybe a little food, some gas, . . . :)

  5. Oh, and make sure you pick up ammo in calibers for which you don’t own firearms… in the event of TEOTWAWKI, ammo will be more valuable than gold.

  6. Always buy ammo.

    As far as pulling your money out of banks well there are many theories.

    If the economy comes to a grinding halt it really wont matter where your money is because the dollar will be worthless….however some folks are saying to drop some money into silver and gold investments because they have been going up since the 30’s.

    I heard a few days ago that a lot of CEO’s etc are putting there money into money market accounts and the such.

    I personally think that your money will be just fine apart from the current devaluation of the dollar.

    It could not hurt to have some cash on hand and ammo is always a great buy!

  7. Buy ammo, but leave your money in the bank. If everyone can just take a deep breath and sit tight for a couple weeks, this will largely blow over. If we all panic and mob the gas stations, grocery stores and banks, we’ll all be screwed with a quickness.


  8. 7%? feh. Wake me up when it goes 25% Seriously, the biggest danger was that those clowns would pass their gigantic boondoggle.

    This is the market in action, people. You can only distort supply and demand so far before there is a correction. The answer is not more distortion. The answer is to ride baby ride it out.

  9. A little off topic, but I’m curious: I’ve found EconLog to be a pretty interesting and mercifully concise source of economic commentary, but have had a hard time coming up with too many other economics blogs (especially ones from the Democratic perspective). Care to share your list, assuming there are others besides the two in your blogroll?

  10. I cashed out $15K about 6 months ago. I wonder what that’d be worth today? $4K

    They often tout that if you were invested in the stock market thru the great depression even, you’d still come out rich. They’ll show you the DOW, etc.

    But something to note, when a company goes bankrupt, you lose everything. It never regains. Companies fall off the DOW, SNP, etc. So if you had $100,000 and the market crashed and you lost $98,000 in companies that ceased to exist. Guess what, you’re not going to recoup that money over time. But they never like telling you that.

    It’s always better to be diversified. Have a few good long term stocks, a few mutual fund/index funds, and some hard assets. Land enough to grow your own food. And precious metals (gold, silver, and copper-jacketed lead).

  11. The catch is, the banks were basically required to make bad decisions to avoid accusations of institutional racism… Any bailout MUST reverse the government mandated loosening of lending restrictions. Those lending ‘guidelines’ are the disease that needs to be eradicated. The huge sums of cash are just getting thrown at the symptoms and won’t make phuck-all difference long-term.

    What Congress _should_ do:

    1) Let the banks decide who they loan money to.
    2) Shore up the FDIC as necessary to cover the bank failures.
    3) Hang those responsible for the failed liberal policies.

    Nothing more.

  12. Thanks, Sebastian. I’ve added Calculated Risks to my reader, and I’ll try out Krugman for a bit too.

  13. There was a huge demand for MBS( mortgage backed securities) so banks. mortgage co, investment banks, Fannie Mae and Freddie Mac raced and lowered the loan standards to provide to this demand. The investors were buying these securities for high prices and big money was made by all based on securities that were over valued badly.

    All was predicated on the assumption that the real estate boom would continue.

    The problem right now is with the failures and Fed actions banks and co with cash will not loan in overnight transations because they are afraid they wlll lose the money if a freeze or fed take over happens to the company.

    So we have a credit confidence failure in the banks and Wall street for commercial credit. So no money is changing hands.

    My solution would be insured the transaction accounts and the immediate problem solved. Then go back to prior standards for good loans .

    The Fed started this with having the Fed Funds rate under 1 %. after 2001 to keep liquidity in the market. The banks had such money available with such a low cost that they searched for loans to make to take advantage of cheap money.

    The MBS became a furious fad and any who did not get onboard lost money, But it was a confidence scheme and a sham and the bubble burst after 7 years and now the banks are in trouble with bad assets.

    Those that got out early got their profit and is holding steady for good investments in this downturn, like Warren Buffet who did not get into the MBS market at all.

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