I've been having an excellent Discussion with a friend about our current economic difficulties. After exchanges I was given a series of questions to which I feel that I have answered thoroughly and which explain how a moral society would deal with this crisis.
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When you talking about bringing home troops that are overseas, are you including Iraq and Afghanistan? I have certainly been no advocate of the War in Iraq, much to the contrary. However, can we really properly secure our nation without any presence overseas whatsoever? Also, while I like this idea, the fact is that our current crisis, while stemming from a lot of things, did not stem from the federal government spending too much money. The argument for bringing home troops makes sense if we are trying to balance the budget, but I fail to see how that would have prevented us from our current problems.

I am talking about bringing home the troops especially in Iraq in Afghanistan. I have a simple question to answer your question “can we really properly secure our nation without any presence overseas whatsoever?” Is our nation more secure or less secure since entering into the war in Iraq? Is our country more secure or less secure since we got into the business of undermining foreign governments and propping up military dictators in the Middle East? When you make Megan upset because of a foolish decision, do you keep making the same foolish decision over and over again, or do you apologize, and change your entire approach to the situation?

The economic crisis is a multifaceted problem. But consider this analogy. If you are going to school, and you are taking out student loans to get that education (social security, welfare). Now, that’s not entirely bad because eventually you’ll be able to use that education to be profitable (just as social security and welfare are in place with the assumption that they are to help people who are potentially profitable or were profitable in the past). Now, let us pretend that, while you are still not profitable you decide to buy a brand new 20k car. For this car you take out another loan while you haven’t done anything to pay your school loans (CIA mission to overthrow a government). Now also pretend you decided that you just have to have a house, so you somehow (no bank in their right minds would give you this loan, but lets pretend that they do) get a loan to buy a 300k dollar house (compare this type of loan to starting a war in another country). You’re still not profitable as a student bringing in no income, so you’re not paying back on this loan in any way.

Now pretend also that it becomes apparent that you are not going to be able to pay back your debts, have you increased or decreased your repertoire with the banks and lenders who gave you those student loans? Pretend that you use your car to drive through people’s lawns and tear up their lawns and to destroy public property. Are you more or less safe from having negative revenge taken against you? Pretend also that you had someone else’s house demolished to build your house, are you more or less safe from having revenge taken against you? Pretend further that not only have you done all of this, but as it turns out while you claimed you were borrowing this money from a backed source, it turns out that you haven’t! In fact you created counterfeit money to do it, unfortunately no one can charge you for it because the Chair of the federal reserve actually helped you create it without any backing. Now 320k dollars in counterfeit money isn’t likely to cause too much inflation. But pretend that it’s actually somewhere around 40 trillion dollars (approximately how much money the federal reserve has created without any backing).

And herein lies the fundamental problem. 40 trillion dollars, when created artificially must inflate the dollar, and that is the major effect of what we’re seeing today. So long as other countries still believe, and so long as the country still believes, that one dollar can buy something, it will buy something, but eventually the effects of this artificial injection in our fiat monetary system must have an effect.

So I got a little distracted from answering your original question directly, but I believe I have answered it in a round about way, so I will summarize here. While our presence overseas has not (by itself) bankrupted our country, in collusion with our welfare state, and increasingly police state, the bankruptcy is inevitable. If you look at our national debt (53 trillion) you must ask yourself where we’re getting this money from. We have not literally borrowed it from other countries. We have “borrowed” it from ourselves. And what this amounts to is the Federal Reserve creating the money out of thin air thus inflating the dollar. Inflation is a tax on the poor. It doesn’t hurt the people at the top who get the money first (government, bankers, and military-industry corporations). It hurts the poor person whose income increases by 2% when their buying power decreases by 30%

Ok, so you're prepared to let all of the banks that received TARP money go out of business? This includes Wells Fargo, JP Morgan Chase, Citigroup, Bank of America, Morgan Stanley, Goldman Sachs, etc.

The question is not are we going to let them go out of business. That is the wrong question to ask. The question to ask is, “Do we have a right to hurt the poor people (and eventually even the middle class) in this country by inflating the dollar by creating more money we do not have to bail them out?” If your answer is yes to this question, then I believe that you are a part in creating the immoral oppression of the poor in this country.

What do you think will happen to the stock market if all of these banks fail? Who are all of these other profitable banks? What about all of the people that have their money in these TARP receiving banks? What about all of the people that are employed by these banks? Most importantly, who's going to make loans to our countries' citizens, small business, and corporations if most of the countries' banks have failed. If you want to talk about the country coming to a screetching halt, this would be it.

In answer to the questions about the stock market, you must understand that the companies that are being propped up are in existence because of something artificial, and it cannot, and will not last. The question then becomes, will we prolong the agony, or will we get it over quickly so we can move on? To answer the questions about the stock market, I would encourage you to watch YouTube videos of Peter Schiff, also check out Europac, the company he owns. Companies like his would take the place of these other bad businesses, but the government keeps propping them up when they are repeatedly wrong and non-profitable.

In answer to your questions about loans, people pay back student loans and if you check, most student loan companies are not in significant trouble at this time. The big banks that you are talking about, by being propped up by the government are not allowing free entry into the market for new companies who can offer better, more secure loans for people who need them for things like houses. Most of these companies (despite popular opinion) are not failing because of the housing industry. They are failing because of credit card debt, and what is called credit default swaps. Because the Federal Reserve has been artificially setting interest rates and injecting capital into our economy the housing bubble was created because it appeared that we had more money to buy houses than we really did. The housing crisis is because the cost of houses is artificially too high (this is what’s called a bubble) the bubble is trying desperately to deflate, but the Federal Reserve is doing everything to keep the prices high. Unfortunately, this does mean that people who got into bad loans where they can no longer afford their house, they did so not because of corrupt real estate agents, or corrupt bankers, but because of corrupt government intervention. Government intervention is keeping the housing too high and so new people who want to enter the market, who are saving their money, still cannot afford housing.

In reference to credit default swaps, which I mentioned earlier, I learned most of what I know about them about 2 months ago in several articles I read about AIG. Unfortunately, I don’t remember as much about it as I wish I did. However, the main issue was that banks were basically guaranteeing investors interest returns on their CD’s which didn’t pan out, in part because of the housing bubble, but that issue was compounded by impending credit card debts that weren’t being paid off.

In a non-interventionist free-market economy, these banks would not have been propped up by the government and given significant unfair tax breaks (unfair because they disadvantaged new companies from entering the market) allowing them to become “so big we can’t afford to let them fail.” In addition to this issue, in a non-interventionist free-market economy, people wouldn’t be taking out loans for cars, or furniture. They would save their money to buy these things, and this would be encouraged instead of this constant call for SPEND, SPEND, SPEND, that we’re seeing today.

All of these big banks will be profitable again. The problem is that the nation has no confidence in their ability to function- to make good loans. The problem now is that all of these banks are plagued by bad debts from defaulted loans. In many cases, the banks don't even know how much money in bad loans they have. Therefore, when the government dispersed the TARP funds, the banks did not start lending and making new, good loans because they didn't know how many loans they could give out. Once these bad, defaulted loans are purchased by the government, the banks can start loaning again and slowly regain the confidence of the American people.

Loans for what? What is it that people are “needing” loans for? People have recourse for starting over, bankruptcy, cutting back on expenses. The problem here is not whether or not it’s fair that people would have to live less wealthy than they have so far in their lives. The problem, and important question is, what right does the government have to decide who gets to benefit and who they’re going to take from to benefit those they decide are worthy. Bailing out banks is not going to save our economy it is going to tank it. Because the government eventually has to pay for the artificial capital that they are creating to bail out these banks, and when they do the people they are going to go to will not be able to afford it. So we are left with dealing with the inflation that has been caused by creating capital out of thin air.

Don't get me wrong, I don't like giving money to corrupt executives whose businesses have failed. But, in this kind of a situation, you have no other alternative. I don't think it's immoral to give funds to poorly functioning banks when millions of peoples and families livelihoods are on the line. You'd be potentially impoverishing more people this way I don't see any "profitable" banks stepping up to take on the role that these other failing giants have played.

I think I have adequately answered this paragraph so I will just reiterate previous points. If you act now and give money to banks to help in the short term, you will impoverish millions of people in the long term, bankrupt our entire government beyond repair, and collapse the value of the dollar. If you allow the market to correct itself from all the bubbles that government market interventionism has caused millions of people will forced to cut back on their standard of living in the short term, but this situation is recoverable instead of forcing a the dollar into collapse.

Poor people are oppressed through the tax code and when government spends money? I just think that you fail to recognize the impact that an unregulated market economy has on the poorer members of society. The poor get poorer and the rich get richer. It's built into the system. Just look at how the poor has done during the Reagan and Bush years. America has more billionaires than almost any nation. However, at the same time, there is greater inequality of wealth in the United States than in almost any other industrialized nation. I think that's pitiful. We are not going to obtain social justice in this country without government intervention. People are caught in cycles of poverty that many can not break out of without a boost from government

I challenge you to explain to me how the unregulated market has a negative effect on the poor. And I challenge you to do so specifically. It’s a common statement that you just made, but it has never been successfully explained to me. Do you think George Bush expanded regulation or removed it? Not did he remove it in some areas, which is irrefutably true. But in sum total did he expand it or shrink it? The answer, if you check into it, is that he expanded regulation. Look at how the poor did during the Clinton administration. Don’t be deceived by the expansion of millionaires, and decreased unemployment, look at how much the dollar was inflated during the Clinton administration. It was just as much as with the Bush’s and Reagan administration. If I have not fully explained how the government impoverishes people through inflation and redistributing wealth from the profitable to the unprofitable (good business to bad business, working Americans to not working Americans, production companies to insurance companies, etc.) then I apologize for not explaining it well enough. But until you understand the effects of government interventionism in our economy (as well as in the world) you will never understand how people in America are impoverished. And it is no surprise that there are more billionaires than ever before. When there is 53 trillion more dollars in the market than there was 40 years ago it is no surprise that this artificial creation has stayed at the top of the economy, the place where the government keeps giving the money (Democrat and Republican).