The Economic Advisor

Bailout - Taxpayers and Ordinary Citizens Are Paying For the US Economic Bailout

At first the President and the U.S. Senate wanted $700 billion.On October 1, 2008 they wanted $850 billion.The President and Congress have tried to scare the American people.What happened to the first $700,000,000,000?Now the Congress and the President want another 150 billion.

This bailout would help the worst companies.The American people have not had this explained to them.We do not know where the 700 or more billion dollars is coming from.Is the money coming mostly from foreign investors or is it going to be printed from thin air by the government?

There should be congressional hearings.The American people should have a full explanation of what our money is going to buy and the sources that will provide the money.Cannot we wait another two or three weeks to get some better answers?

This will allow future borrowers, especially large corporations, to get away with more mischief in the future.The United States may not be able to do that next bailout.What will be the cost of the next bailout?

If you divide $850,000,000,000 by100,000,000 workers that is about $8,500 each.We have a situation in which the middle class and lower class are bailing out the rich corporations and a few very rich individuals.

The President and certain members of Congress have used fear and anxiety to try to get Congress and the American people to accept this horrendous mistake.The President of the United States said in March that he was confident the U.S. economy was not in bad shape and that we were probably not going into a recession this year.

Deregulation over the last 25 years has hurt the United States economy and the American taxpayer.The U.S. Congress needs to take control and get more regulation for the banking and lending institutions.Deregulation has cost us hundreds of billions of dollars in the last several years. This bailout is one example of the harm of deregulation without proper consideration of all crucial variables.

What will be the real cost of this bailout during the next 24 months?It could be over $900,000,000,000.

We’re now seeing a great transfer of billions of dollars from the lower and middle classes to Wall Street and to banking houses in United States and across the world.How much of this money will go to European bankers?What is the interest rate on this money from the United States to European bankers?Congress has not told U.S. citizens where this money is coming from and what is the interest rate on this money, or how long it will take to pay off these loans from foreign banks and foreign governments.

This bailout will probably hurt the U.S. economy during the next 10 years or it could be the next 20 years.The reason is a basic law of economics.One basis of the economy is production and the efficiency of that production.This bailout will give more money to risky lenders and shaky corporations.We are transferring money and resources from productive workers and efficient companies to less proficient companies.Therefore there will be a lowering of economic living standards in the United States and a lessening of the efficiency of the whole U.S. economy.That also means that we will be less competitive with countries like Germany, Japan, China and India.One result is that U.S. capital and foreign capital will flow away from the United States and away from U.S. companies to foreign countries and foreign markets.You don’t have to have a MBA or a Ph.D. in economics to understand some of the consequences of those flows of capital.The main result will be the United States gets less capital for not only private projects, but also public projects like roads and schools.The standard of living for U.S. citizens will decline.

This bailout will probably cause a large amount of inflation in the U.S. economy during the next four years.We could have an extra 2% or more inflation per year.For example, if the inflation will be 6% per year during the next four years that would place the inflation at 8% per year.The extra inflation could be 3% or 4% or more per year!

Instead of $850 billion dollars, why not start with $400 billion and add another $300 billion in January 2009 if needed?Why the hurry to throw billions of dollars onto the fire?

Who will get the first $700 billion?Will 90% go to large corporations and the remaining 10% go to individuals and small businesses? U.S. taxpayers should not sign a blank check for over $700 billion to unknown recipients.

The U.S. taxpayers do not know the effects of this bailout.This bailout is a very dangerous leap into the unknown.The President, Congress and financial institutions are leading the United States into unknown and dangerous times.

This article is by Kenneth Sumerford, MBA, writer and small business owner.

Kenneth Sumerford is a writer and small business owner who has a MBA in business and economics from Missouri State University. During the last 35 years, he has obtained extensive knowledge and experience in the fields of finance, Information Technology, small business and marketing. To learn more about debt consolidation, credit card debt relief, debt management, debt reduction options, and building wealth through wise financial management visit http://www.DedicatedToDebtRelief.com

Copyright 2008 by Kenneth S. Sumerford