Tuesday, September 30, 2008

The Scaremongering Effect

The U.S. media rushed to the airwaves when the market closed down a little over 700 points yesterday to try and blame the drop on the congress's failure to pass the bailout bill and thereby Republicans. But as we and the European media correctly pointed out, the drop was more about a rash of European bank nationalizations and the central banks decision pumping $620 billion into the system than anything else. This fact was proved by watching overseas markets which crashed hours before congress even considered a vote on the bailout.

If you turned on the radio or the TV, however, you probably heard the so-called experts talking about how we must pass the bill. They made baseless claims like companies not being able to make payroll because they can't borrow money and that when you go to Home Depot your credit card won't work because there simply isn't any credit left. You may have even heard how yesterday's drop erased nearly a trillion dollars in market capitalization, FYI that's about 30% more money than the bailout would hand out.

Let's just ignore for a minute the fact that the credit markets are alive and well for businesses and people that aren't risky borrowers, like Microsoft, who just borrowed $40 billion, or the tens of thousands of people that bought a new home yesterday or refinanced their existing, or the thousands that sent in those pre-approved credit card junk mailers that so clog our mail boxes. Let's ignore the fact that a businesses that have to borrow money to make payroll probably are businesses that doesn't deserve to be in business anyway, since the sole purpose of a business is to make money and clearly they aren't if they have to borrow money to pay the staff. Let's ignore all of that.

What does the guy in charge of our economy think will actually happen if we don't pass the bailout?
"I think that if the financial situation stays where it is or doesn't improve, that we're going to see higher unemployment, fewer jobs, slower growth, more foreclosures, fewer people able to buy houses and cars, and a much slower economy," Federal Reserve Chairmen Ben Bernanke told Congress.

Even though the Federal Reserve Chairmen himself only believes a recession will occur, a very normal occurrences in the cyclical nature of a our economy, that didn't stop the media from scaremongering. The sky is truly falling, they would have you believe. The end is f'ing nigh!

With all the fear mongering polluting the airwaves yesterday, what effect did it have on the American people?

A Rasmussen poll from Sep. 22, showed that only 28% of the American people support the bailout. But a 700 point drop in the DOW and a few hours of scaremongering does have an affect. A poll released today by ABC shows that the number of Americans that support the bailout has increased to 45%.

If the end is so nigh and the sky is falling on the world's economy, then why did the DOW recover nearly all of its losses from yesterday? It climbed, no it soared, nearly 500 points.

We don't need the bailout. We don't need to enact the largest socialist spending package in U.S. history to bailout a few banks that made bad loans (bad loans that were mandated by congress). Credit markets will not cease up. Banks only make money through interest from the loans they make. They will not stop making loans or else they will stop making money and banks aren't in the business of not making money.

A little commonsense is the only bailout we need right now.

1 comment:

Kyle said...

Amen - I can only hope that the conservatives in Congress continue to be sensible and not fall for all the fearmongering.