The Credit Card Bailout

The Bush-Pelosi bailout has now officially jumped the shark.

Hank Paul, empowered by George Bush and Nancy Pelosi, now present: The Credit Card Bailout.

What is disturbing about our President, and our even worse Congress, is that we are throwing good money after bad in a way that is not only wasteful, but also foolish.

The purpose of the credit card bailout is obviously to increase spending. The credit card bailout does so by socializing the losses that individuals and banks have taken because people bought things they could not afford, while allowing the individuals to keep those toys and the bansk to keep collecting interest payments.

Without the credit card bailout, less bad offers would be made, and more people would forced into bankruptcy by institutions desperate to get whatver cash back is possible, as soon as possible.

However, instead of rewarding bad behavior, this money can be spent on ways that will help our country and our world.

For instance, while the government maintains a large fleet of flex-fuel vehicle, 92% of them consume pure gasoline because they are too far from E85 stations. We could spend money to subsidize nearbye stations putting in E85 pumps, which would immediately create work and then reduce the flow of capital from us to petro-states.

Instead, we do a credit card bailout.

We subsidize men like Hugo Chavez, who recently threatened to send in the tanks if a friend lost an election, in order to bailout credit cards.

The financial crisis is an opportunity: money will have to be spent to limit the pain, and this money can be invested in mediating the destructive influence of oil and natural gas. However, the same forces make alternative energy sources (ethanol, wind, etc) less attractive in the short term.

The Democrats may be ready to do their part.

Unfortunately, with Bush we get more of the same: a credit card bailout.

Update: While I was writing this, the fed announced a $500 billion plan to bailout bad mortgage-backed securities. The quicker we can get the Bush financial team out of office, the better.

13 thoughts on “The Credit Card Bailout”

  1. I am trying to imagine how King Paulson could get worse. Should we brainstorm on the depressing possibilities or is the thought of even more robbery of the US taxpayer and the financial future of their children too negative on this holiday week?

  2. it would be easier to name who won’t be bailed out. seriously. paulson et al have been astonishingly prodigious in throwing around money. the only way this makes sense is that it wont be paid back (certainly not in 08 dollars) and everyone knows it, so who cares? btw, geithner is a continuation of present policies. transition will be even more seamless than keeping gates on. also, you might want to grab one of those obama collector plates now, before he and his team gets run outta town on a rail. they’ll be worth something, in the same way an edsel is valuable, about 60yrs from now.

  3. a good long-term short play, if one has the nads to ride the roller coaster, is the healthcare industry, with the coming abolishment of medicare and ss. think of all of the $$$ thats going to get sucked out of that sector. the paired long would be the infant care industry, as making babies will be both necessary and the only low-cost recreation left.

  4. One way occurs to me that this could be done sensibly–the government could spend that money to buy up the debts of consumer borrowers (selected by biggest impact on the economy) who are closest to default. Having taken them on, it could use its lower interest rates to help them stay above water while teaching them better habits–and use its greater influence to find and punish those who try to skip out!

    It would be expensive, and you’d have to combine it with strict new rules and oversight on future lending to avoid being interpreted as a patsy, but it would bypass the knot of debt-holders created by the derivatives industry.

  5. Doug,

    it would be easier to name who won’t be bailed out.

    How about… newspapers? [1,2] 😉

    also, you might want to grab one of those obama collector plates now, before he and his team gets run outta town on a rail. they’ll be worth something, in the same way an edsel is valuable, about 60yrs from now.

    Obama’s going to systematically betray his supporters — spend down his political capital — as nearly every President must.

    I hope we get enough out of him while he is still powerful to make it worth it.

    Michael,

    Having taken them on, it could use its lower interest rates to help them stay above water while teaching them better habits–and use its greater influence to find and punish those who try to skip out!

    I don’t think rewarding people for being close to default teaches one not to be close to default — we may have different views of pyschology.

    [1] http://www.weeklystandard.com/weblogs/TWSFP/2008/11/kathleen_parker_continues_to_e.asp
    [2] http://www.washingtonpost.com/wp-dyn/content/article/2008/11/25/AR2008112502104_2.html?hpid=opinionsbox1

  6. Why not a bailout of the video game industry or movie industry? Or better, the retail sector? I mean, while we pervert capitalism and manipulate the markets, why not?

  7. The part about helping them learn is for people who genuinely don’t know how to live within their means. The part about hunting down the people who try to bail on the government is for those who don’t want to live within their means.

  8. The time discount rate appears to be heritable, similar to personality, or intelligence.

    Indeed, it has been probably been under positive selection in some countries longer and more intensely than others [1,2]

    The way you get around these sort of preferences is through conditioning — reward behavior that you want to increase in frequency.

    Bailing out those with marginal credit rewards those people for those decisions, making the problem even worse.

    [1] http://www.tdaxp.com/archive/2008/01/20/review-of-a-farewell-to-alms-by-gregory-clark.html
    [2] http://www.amazon.com/Farewell-Alms-Economic-History-Princeton/dp/0691121354

  9. It is interesting how those who suffer from Bush derangement syndrome simultaneously think Bush is an incompetent, and an evil mastermind who engineers wars, financial crises, etc. to benefit his lackeys!

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