$700 Billion Bailouts, The DOW, and American Debt

The House passed a $700 billion-bailout package this past Friday. The bailout package came, as “their only hope to avoid a market meltdown.” We are told that it will “take time for the bailout to reach its greatest potential” and cannot be rushed. It could take a long, long time before that happens though.

Which brings me to the price of oil, which has dropped below $90.00 a barrel. http://www.oil-price.net says, “Although oil prices seem high today, they are kept artificially low because many oil-producing nations such as Saudi Arabia peg their currencies to the U.S. dollar. When the dollar is devaluated, these countries currencies and national economies are threatened by inflation and this is an incentive for them to let their currencies float and appreciate.” Countries like Kuwait have moved away from pegging their economy from the U.S., causing our oil prices to rise. As more countries follow suit, we should expect energy prices to rise. With prices rising, one would think US oil companies would be hurting as well. Not so says the New York Times. After a great deal of work and litigation, companies like Exxon and Texaco have agreed to pay millions of dollars back – almost 900 million dollars – back to the government due to “shifty business matters.” Before you feel bad for the big oil people, consider Clarence P. Cazalot – CEO/President/Director of Marathon Oil Corporation. His salary is $1,294,000.00 with a bonus of $3,864,000.00. With stock options and other “options,” his total compensation is $19,470,725.00. Yeah. I feel bad for him too…

Which brings me to the stock market since the bailout was passed this past Friday. The New York Times said, “At its worst point, the Dow was down more than 800 points, an intraday record. The stock market rallied during the final 90 minutes of the trading day, and the Dow finished down about 370 points at 9,955.50.” The Dow has not closed below 10,000.00 since 2004 and there seems to be no end to the potential drop of the Dow in the upcoming weeks.

Which brings me to our Banks. Banks like Commerce Bank and the 5th largest bank in the US, Wachovia. Wachovia Bank has been bought by Citigroup, which the New York Times states, “Federal regulators worked around the clock this weekend to orchestrate the sale, finally reaching an agreement at 4 a.m. on Monday morning. In the end, the government agreed to provide Citigroup with a financial guarantee on Wachovia’s most risky assets.” For $1.00 a share, or about $2.2 billion, Citigroup was given ownership. Commerce bank also has had its financial hardships. I guess Regis and Kelly couldn’t provide enough financial backing to keep Commerce from being sold as well. TD Bank Financial Group will be buying Commerce for a cool $8.5 billion. Don’t worry folks – the “Big C” will still remain outside of Commerce, I mean TD – Toronto-based TD Bank – a Canadian Bank. Commerce Chairman Dennis DiFlorio told Philadelphia Business Journal that owning Commerce Bank “opens the door to tremendous new growth opportunities. Combining T.D.’s broad array of sophisticated retail and commercial products with our unparalleled banking convenience is truly exciting.”

Which brings me back to the bailout package that was signed last Friday. In this bailout package, the FDIC of banks will rise to 250,000.00. Its previous 100,000.00 FDIC was raised in efforts of saving small businesses from filing chapter 11. This 250,000.00 FDIC will only remain at this level till December 2009.

Which brings me to one of the biggest issues that brought all of this on in the first place; Mortgage loans. Many reasons why banks have failed is because they have given out loans to well-meaning families who have attempted to “beat the system” and buy a house they could not afford in hopes of turning (flipping) the house in a year or two in order to make a return. For example, one family I heard about wanted to buy a $589,000.00 house but when their assets and financial abilities were thrown together, they could really only afford a house that was $340,000.00. Thinking only good thoughts about the housing markets, this family attempted to cut down on their spending and even live off credit cards if needed so that they could earn an increase on the value of their house. As the housing market started to fail, they didn’t consider the cost of what would happen and did not seek any advice about what they should do. When it was time to “sell the house,” their house was worth less then what they had bought it for. They began to panic and used their safety net of their credit cards to stay a float. When they had reached their credit card limits, they had no choice but to sell a house that was bought for $589,000.00 for $420,000.00. That’s $169,000.00-house depression and no one was more depressed than our couple that thought they could beat the system and buy a house they really could not afford. With high credit card balances and a loss of money, this family, like many others, is in a bad way.

Which brings me to another issue that seems to grow faster than the weeds in my backyard: Credit card debt. Don’t worry – I have some too. In fact, according MSN Money, “About 43 percent of Americans spend more than they earn each year and average households carry some $8,000.00 in credit card debt.” What is absolutely mind-boggling though is how much debt the U.S. Consumers owe. As a total, Americans carry more than $700 billion in revolving debt like bank credit cards and retail cards.

Which brings me back to that $700 billion bailout package that was signed last Friday. I have a few questions that we really need to ask ourselves as Americans: What has/does this $700 billion bailout deal really help or hurt? Will it really help our economy or have we just wasted another $700 billion? Why did banks like Wachovia really get bought out? Why do we always need to buy above our means? Why does it seem like the “American Dream” is a carrot hung on a string above our heads just out of reach? Why can’t we pay for things with the money we have rather than “hoping” we will have the money needed at the end of the month? Why aren’t the people who have faulted on their loans taking real responsibility for all of this? Why do we have to bail everyone else out because they screwed everyone else over and if I am that American family member, why did I buy that house when I knew I really couldn’t afford it? Has the DOW grown too fast for our own good? Was it inevitable that it would drop as it has?

These are some of my questions I have to ask myself and I hope you will ask yourselves. I have been apart of the problem – having credit card debt, though not as much as the average American – it is now time to be apart of the solution and pay off my credit card debt as fast as I am able and cut up the credit cards I have. This will ultimately raise my credit score and give me a better shot at buying a house one day that I can afford. I am not sure that the $700 billion bailout package will really help the American economy. I think people taking responsibility for their debts and learning how to save will. I guess we will just have to wait and see.

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7 Responses to “$700 Billion Bailouts, The DOW, and American Debt”

  1. Bailout » Blog Archive » $700 Billion Bailouts , the Dow, and American Debt Says:

    […] The House passed a $700 billion- bailout package this past Friday. The bailout package came, as “their only hope to avoid a market meltdown.” We are told that it will “take time for the bailout to reach its greatest potential” and cannot …[Continue Reading] […]

  2. $700 Billion Bailouts, The DOW, and American Debt | Bank Credit Information Says:

    […] View original here:  $700 Billion Bailouts, The DOW, and American Debt […]

  3. Stocks and Bonds » Blog Archive » $700 Billion Bailouts , the Dow, and American Debt Says:

    […] Many reasons why banks have failed is because they have given out loans to well-meaning families who have attempted to “beat the system” and buy a house they could not afford in hopes of turning (flipping) the house in a year or two in …[Continue Reading] […]

  4. The Buzz » Blog Archive » $700 Billion Bailouts , the Dow, and American Debt Says:

    […] Many reasons why banks have failed is because they have given out loans to well-meaning families who have attempted to “beat the system” and buy a house they could not afford in hopes of turning (flipping) the house in a year or two in …[Continue Reading] […]

  5. Money, Stock and Finance » Blog Archive » $700 Billion Bailouts, the Dow, and American Debt Says:

    […] Banks like Commerce Bank and the 5th largest bank in the US, Wachovia . Wachovia Bank has been bought by Citigroup, which the New York Times states, “Federal regulators worked around the clock this weekend to orchestrate the sale, …[Continue Reading] […]

  6. Ryan Says:

    The bailout was the wrong thing to pass. It’s time to do something right.

    Please support this proposal and get your Congressional representative to sponsor this solution to our current monetary crisis.

    A complete list from the Detailed Executive Summaries of the National Economic Stabilization and Recovery Act:
    http://nesara.org/bill/index.htm

    The Federal Reserve System

    # The Federal Reserve Act of 1913 is amended
    # The Federal Reserve System is abolished and replaced by a new Treasury Reserve System
    # Control of the currency is moved from private control of the Fed to public control of Congress and the new Treasury Reserve System

    # Congress sets the standards for the new monetary system but the people create as much or as little currency as they need
    # Functions of the Federal Open Market Committee are transferred to the Board of Governors of the new Treasury Reserve System
    # A new mechanism, the Treasury Reserve Account, is created to provide the Treasury Reserve System Board of Governors a better method to fine-tune the money supply, effectively eliminating inflation

    # The Treasury Reserve System Board of Governors will continue using the previous three mechanisms for controlling the money supply: 1. Setting reserve requirements. 2. Setting the national discount rate. 3. Purchasing U.S. Treasury securities on the open market.
    # All U.S. Treasury securities purchased by the Treasury Reserve System Board of Governors will be immediately turned over to the U.S. Treasury and cancelled out of existence.

    Monetary Policy

    # People are provided with several alternatives for currency
    # Constitutional currency is restored
    # Currency becomes debt free as the people stop paying interest payments for their use of a public utility

    # Unlike previous policy, the new Treasury Reserve Board is provided one very specific mandate: maintain a stable currency
    # Expansion of the economy is returned to the free market
    # Private coinage is encouraged

    # Exchange ratios for the various currencies are published at least weekly
    # Printing of redeemable gold and silver certificates is allowed
    # Postal money orders are made available in denominations of gold and silver coin

    Banking

    # Returns the banking industry to serving public interests
    # For secured loans, compound interest is outlawed and replaced with a monetization fee
    # Provides stricter banking controls by imposing excise taxes to discourage high or runaway monetization fees

    # On secured loans obtained from a fractional reserve bank, principal must be paid in full before the bank begins collecting its monetization fee
    # Eliminates the facade for banking insurance (FDIC)
    # Except for fraud and criminal activities, virtually eliminates bank failures

    # Banks are prohibited from using as reserves any commercial paper
    # Only Treasury credit-notes can be used as bank reserves
    # Banks are prohibited from purchasing government issued debt, effectively removing banks from influencing monetary policy

    # Checking accounts against gold and silver deposits are prohibited
    # Commingling of funds among the various money accounts without owner’s permission is prohibited
    # All currency deposits with banks are general warrant deposits and custody accounts.

    The Income Tax

    # The Income Tax Act of 1939 is amended
    # People need no longer fear the IRS
    # Billions of hours of nonproductive labor are eliminated

    # Mounds of paper work are eliminated
    # The cost of the income tax is no longer hidden and embedded in the cost of doing business and passed down the chain with the consumer paying the final tab
    # Most likely eliminates state income tax plans because state income taxation piggybacks on federal income taxation

    # The IRS is reformed into the National Tax Service
    # Volumes of complicated tax code are history
    # Eliminates personal income taxes

    # Eliminates corporate income taxes
    # Eliminates gift taxes and estate taxes
    # Eliminates capital gains taxes

    Sales and Use Tax

    # Tax rate of 14%
    # Government entities are exempt
    # Government mandated expenses such as licenses, permits, passports, are exempt

    # Sales of bullion, coin and currency are exempt
    # Sales made by or to nonprofit schools are exempt
    # Sales of prescription drugs, medical supplies and services are exempt

    # Real estate rents and leases are exempt
    # Sales of groceries are exempt
    # Sales of plants, livestock and fish used in the production of food for human consumption are exempt

    # Insurance sales are exempt
    # Segregated portions of labor in retail service contracts are exempt
    # Incidental or occasional sales such as garage or rummage sales are exempt

    # Sales for the purposes of recycling are exempt
    # Meals provided by companies at company expense are exempt
    # Sales that are nonprofit in nature are exempt

    Immediate Relief and Results

    # Eliminates more than $1 trillion of the nation’s public debt
    # Reduces future private debt by more than $1 trillion
    # Immediately eliminates some private debt, especially for many homeowners

    # Workers maintain better control of their earnings
    # Production is no longer taxed, just consumption
    # Most of the necessities of life are not taxed

    # Encourages production thus revitalizing industry in America
    # Encourages rebuilding of inner cities
    # Discourages wasteful uses of natural resources

    # Exposes the true cost of government
    # Greatly eliminates the struggle between tax “protesters” and bureaucracy
    # Allows the “underground” to resurface and become a viable contribution to production of goods and services
    # Greatly restricts the influence of special interests and lobbyists

    Please do not confuse this with a hoax with a similar name. Tell your congressional representative to sponsor this proposal and submit it as legislation. It’s time we as the people took back our monetary rights. Tell your representatives and senators, and the candidates they are running against, that you will not vote for them if they do not openly support and sponsor this bill themselves. It’s the only short and long term solution for our current crisis.


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