That hurts, sure. But the real question is whether the financial system holds together or not? Can companies borrow the money the need to keep the wheels turning? Does the public keep the faith in the banking system, or are we looking at It's A Wonderful Life-style bank runs?
It's those questions that will determine if this is a bear market or a Great Depression. The rANT is keeping all six of his legs crossed...
Original Post: Dated Friday, 9/26/08
The fiscal meltdown dominating the news these days is enough to make any hardworking business owner sick to his or her stomach. The combination of unfettered greed, insane complexity, and world-class blame-shifting is making us all poorer -- and that's the best-case scenario.
While real businesses scratch and claw and work nights and weekends to make an honest buck by creating value in the world, the financial industry and the politicians spent decades enriching themelves without actually adding anything to the world.
This whole thing makes the dot com boom and bust look wholesome and productive. Sure, the dot commers got ahead of themelves (the sock puppet guys were waaaayyyy ahead of themselves), but at least they (we?) were trying to create something. To make the world better, to find new ways to do things.
The rANT has no issue with folks getting rich. Heck, we want to be rich too. But it's all about getting rich by creating real companies that make money because they're creating insanely great products, as Apple's Steve Jobs put it.
Steve earned his money. So did Bill Gates, for that matter. Not to mention Larry Ellison and all the other Silicon Valley types who sweated blood to create products that made people's lives better.
Say what you want about Google (we did), there's a big difference between search engines and sub-prime mortgage derivatives, or between iPhones and leveraged buyouts. Could you imagine a Wall Street firm even acknowledging the possibility of doing evil? It's not even on their freakin' radar screens.
The only thing the financiers care about it is the cash. And their time horizon extends only to the end of THIS QUARTER. The idea is to rake in as much as they possibly can RIGHT NOW, and let next year (much less the next generation) worry about itself. And God forbid they should leave even a penny on the table, no matter what the cost to the world around them.
As owners and managers of growing businesses, we totally get the short end of this stick. We're responsible, so we didn't take advantage of the easy, no-credit-check-required cash floating around. We knew we couldn't pay back those loans, so we didn't take them.
And now that the fecal matter has hit the fan, how much of that $700 billion bailout do you think is going to come our way? My guess is: Zero. Instead, we'll be paying to take care of the greedy fatcats who recklessly led us to this point. If we don't pay with higher taxes, we'll most certainly do so via inflation and a devalued currency.
The rANT isn't saying that a bailout isn't necessary at this point. Things appear to be so far gone that the economy could all too easily grind to a halt. But just injecting upwards of two-thirds of a trillion dollars -- TWO THIRDS OF A TRILLION DOLLARS !! -- won't do anything but buy us a little time unless we change the way the financial sector works. We need to change the rules of the game so that greedy, parasitic leeches can't make billions by exploiting cracks in the system. So that you actually have to contribute something to make money.
You know, the way business owners do every day.
Not surprisingly, though, no one's even talking about substantial reform of the financial system (except for the Australians!). Just a few cosmetic changes in exchange for the handouts.
Maybe, if we manage to avert the immediate crisis, we'll take the opportunity for structural reform. But The rANT isn't counting on it.
More From bMighty: Financial Crisis Survival Kit