Financial Crisis, Part 2

Source: www.necn.com

After an astonishing and surprising defeat of the so-called 'bailout plan' by the House, it looks like the Senate has passed a concentrated pile of crap as a result. The original bill numbered just 3 pages, but it has now swollen to over 450 pages. I've linked it here.

Even at a time of crisis, the politicians have managed to inject a tremendous amount of pork, to include:

-Manufacturers of kids' wooden arrows - $6 million

-Puerto Rican and Virgin Is- lands rum producers - $192 million

-Wool research

-Auto-racing tracks - $128 million

-Corporations operating in American Samoa - $33 million

-Small- to medium-budget film and television productions - $10 million

-and many more...

The NY Post goes on to say that according to the Congressional Budget Office the total "will add about $112 billion to budget deficits over the next five years because the bill doesn't contain enough offsetting revenue hikes to keep the budget balanced."

Frustrating stuff for sure. I'm against this bill, but it will most likely pass the House next week amid constant calls "to do something!" Yet, a monstrosity has been created and political tensions are just simply too high right now for true rational thought to take place on this matter.

Despite this, I do believe the economy will get worse for a little while, but it will recover as it always has. The media is salivating at this crisis and is all too willing to feed the flames. Case in
point: The BBC, in a Q&A section about the bailout bill, said this in reference to the bill's failure:

"The Dow Jones index lost 770 points - its largest one-day points fall in its history - after the bill's rejection."

In reality, the Dow didn't even break into the top ten losses in terms of percentage, which is far more representative of the truth. It's not hard to find doomsday headlines and articles, but the truth is the market is correcting itself for grossly overblown oil prices, housing prices, and commodity prices. Investors thought prices could go nowhere but up, but they were obviously wrong. The upside to this situation is that the dollar is up (ie. worth more), oil is way down (which has a ripple effect across the economy), people's debt is worth less and interest rates on those debts are extremely low (credit cards are a different matter), it WILL get better eventually...it always, always does. Just like the climate, the economy is a cycle. Pay your bills on time and there's nothing to worry about.