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Old 09-27-2008, 11:37 AM   #1
George
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Default Bailout bafflement

Quote:
Originally Posted by Steve Rindsberg View Post
"The economy is based on unit pricing"

If you'll allow me to tack "without regard for long-term value" onto that, you have a pretty good explanation of the current financial mess we're in.
Oh, actually, I don't think so. It explains the current mess the American auto industry is in... uh...but...it just depends on how business objectives should be established and assessed.

The current banking mess appears to be based on poor decisions on sub-prime real estate loans -- taking risks for short term profits -- and that certainly parallels what you are getting at with unit pricing. But it's all just a matter of perspective, I think.

However, are there not disadvantages to focusing too much on long range profits scenarios?? For instance, it leads to socialism, and that has it own cans of worms. I'm not ready just yet to give up on the free enterprise system.

I saw a part of an interview with Bill Gates the other day, and he said that if there is no bail out, the amount of investment money is not going to be substantially affected in the USA, that most Americans are not going to be affected negatively, that our economy will remain basically sound. He's not the only super-rich person with such an opinion. American business is still experimenting a lot with how the economy works. I don't have a problem with that.

It reminds me somewhat of the insurance industry experimenting with cash flow underwriting is the 1980s. It nearly destroyed the industry...but yet, it survived. And now, the constant representations are no longer being made that insurance companies do not have to have an underwriting margin of profit, and they only operated on such a basis due to being inherently greedy and evil. We learned something, and the hardships were worth the lesson.

There is still a lot to learn about how economic systems work, especially in new environments of communications, knowledge, and technology, and we just have to accept that. Still, I favor a bail out, and then better formulated regulation, as just a part of the quirks that come with learning more and more about economic principles in free enterprise.

George
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