Robert,

As an employee of a small business, I can't help but agree with you.  As an employee of a small business that does business with banks, I am seeing red over the antics of this government. 

The smaller, local and regional title agents don't have much of a chance when it comes to competing for the business of the megabanks.  There are just too many localities and regions for them to manage so many relationships.  We work with local and regional banks.

So now these clowns want to take our tax dollars and give them to the megabanks that have long sucked the business from our locales.  Instead of greasing the lending machine, our tax money is now going to be used to buy up the few regional and community banks left to do business with.

And now a question:  Why is it that inflation is bad and deflation is bad too?  Isn't deflation just a reversal of the inflation, which was a bad thing?

I thought the same thing as I was reading one of the articles.  My undergrad is in business and, sadly, I don't remember all that much about the economics of inflation and deflation. But, generally, I think there is a sweet spot where wages and earnings keep pace with modest inflation that is where we want to be.  When consumer prices rise or fall in comparison to what everyone makes it creates problems. 

When we have inflation, the price of goods costs all of us more and we buy less.  Buying less means that business make less, the demand for employment drops and people lose jobs.On the other hand, when we have deflation, businesses lose profits.  When they aren't making as much money, they make cuts and people lose jobs. 

It seems to be a very delicate balance... our economy is much more fragile than I had thought, I guess. 

I did hear one economist on CNN explain why our economy was not as susceptible to a depression as it was in the 1930's, though.  He said that back then, business built up large inventories and sold out of their warehouses.  When demand dropped, they could pretty much stop production until their inventories dropped.  Today, we have "just in time deliver" of inventory.  Rather than stockpile what is produced, it is produced to keep up with demand.  Thus, even though production may get cut and some people will lose jobs, it won't be as bad as the situation created in the Great Depression.

I cannot grasp the intell behind handing 700 billion tax dollars to corporate entities who so poorly mismanaged their own assets by flabby procedures and lack of oversight in lending.  How does it make sense to say, "here's another 700 billion--go make some more crappy loans to unqualified borrowers"?  How about refocusing that money in some type of revamped Works Progess Administration?  Get the money to the consumer by providing them jobs.  Create the jobs in markets other than lending--which only reinforces the value of debt as opposed to the value of living within your own means.  Create the jobs in discovery and creation of alternate energy sources.  Have the federal government work with state and local governments to create jobs to reinforce transportation infrastructure. Create industries and jobs in fields other than lending which would be utilized by economies outside of the U.S. (easier said than done, I'm sure.)  The point is, refocus the money and efforts to diversify outside of the lending markets.  If consumers have jobs and money to spend, the economy will rebound--irregardless of whether big flabby lending companies exist.

Get the money to the consumer by providing them jobs.  Create the jobs in markets other than lending--which only reinforces the value of debt as opposed to the value of living within your own means.

You are absolutely correct. Although lending is so crucial to our economy that I do believe that something had to be done. A massive failure would have been devastating to big and small businesses, alike - and all of those who have jobs. However, I think that it should have been better thought out and more controls put in place.  I also would have rather seen the large lenders forced to scale back and allow the smaller lenders to expand.  Instead, they gave money to big banks to buy other banks - that makes no sense.

Bailing out the auto industry will only prolong the problem.  They have had serious mismanagement problems for years!  They lost control of the company to the unions and those unions now, in the face of bankruptcy, are unwilling to offer any concessions.  That is ridiculous - they do not deserve taxpayer money.

and quit spending money that they (read: We the People) don't have.  I agree, Rob, let the market correct itself.  I came across a 2004 article citing a study by UCLA economists Harold L. Cole and Lee E. Ohanian which concluded that the New Deal was actually responsible for prolonging the Depression by about seven years.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

I also agree with your assertion that,  "Small businesses will be the key to restoring our economy."   But allowing the government to commit huge sums of money to a stumbling economy will only prolong the pain.  Beyond a reasonable amount of oversight, government has no business tinkering with the levers and switches of the economy.

Scott,

I don't disagree that the government should refrain from spending money we don't have.  My point regarding the new deal was this:  In this case, the government has already committed to spending the funds.  Instead of parading down wall street throwing it at the leaders who have mismanaged  whole industries, the government should roll their sleeves up and spend that money and their time to figure out a way to get it directly into the hands of the consumer. Since handouts are never a good idea, make the consumers work for it--or funnel it to small businesses to buttress the work force with a more direct link to the consumer/employee.  What do you propose?  Yanking the carpet out from under the economy by refusing to expend the 700 billion already earmarked?

I read the article you cited.  The article suggests that programs funded by the New Deal artificially set hourly wages for the workers at a rate that stifled competition from other market players.  I understand that.  However,  lawmakers have already "gum[med] up a recovery with ill-concieved stimulus policies."  It just seems to me that there might be a better use for those funds. 

but it seems to me that we're trying to fix the problem by doing more of what caused it in the first place.  It was Congress and government regulators putting pressure on the lenders to loosen their credit underwriting standards that caused this mess and now they want us to believe they're coming to the rescue.  Like one of my favorite economists Dr. Walter E. Williams has said, when you see a building burning, you don't call the arsonist who started the fire to help put it out.

I don't think the bailout legislation should have ever seen the light of day.  True, a lot of big players would probably go under, but today's economy is a lot more resilient than it was 70 years ago and the market would most likely correct itself within a matter of two to three years.

I agree but don't think many see this most important fact:

"It was Congress and government regulators putting pressure on the lenders to loosen their credit underwriting standards that caused this mess and now they want us to believe they're coming to the rescue."

This was at least four years ago, when most of government was sleeping anyway- now they want us to "pat them on the back for a job well done" when it should be the dog in the corner with it's tail tucked in for being reprimanded severely- none of those parading as heros are anything like a hero to the American public- unless one believes their lies, they are the CAUSE and REASON for this mess- and now , why should we let them try to "fix it".
I like the "don't call the arsonist who started the fire to help put it out" !!! Well said.
Thanks for the post.

Steve Meinecke

"It seems to be a very delicate balance... our economy is much more fragile than I had thought, I guess."

The only reason the economy appears fragile is because of past misguided government intervention. A truly free market (which we have not seen in the US since at least 1913, with the creation of the Fed, and possibly even further back than that) is enormously robust.

Further attempts by the state to "stabilize" the economy will only result in more instability. And the more they interfere, the longer the period of instability will be.

hi robert :) charlie here,

i too want some of that  bailout money to help my small business.  i tried to find out where to write to to obtain some of the money but could not find a site so i wrote to the washington post to see if they could help me find out where i can write to to get some of the bailout money for my small business. would you know where i can write to obtain some of that money???