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Originally Posted by Willravel
Okay. So let's say we let Citi, Bank of America, Wells Fargo, JP Morgan, Morgan Stanley, Goldman Sachs, PNC, US Bank, and Capital One (what's in your wallet?) die. They all file bankruptcy and then the FDIC then essentially writes checks to everyone who had money in these banks. People take their checks and invest in banks that didn't die. The market stabilizes? I'm serious, walk me through what might happen.
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First, there is a difference between demand deposit accounts (checking/savings) and investments made by financial institutions. Not all the institution you list had the same problem, so I don't know what you want me to address. In some cases investment banks were highly leveraged using investors money seeking high returns using collateralize mortgage agreements. This almost had nothing to do with normal banking operations. With the housing bubble bursting the underlying value supporting these agreements made some of them worthless. On the other side of these transactions some made profits. The problem became liquidity in the system and that is what Congress tried to address. However, if the pain of re-valuing real-estate is going to be felt, you can delay it but you can not make it go away. The original TARP legislation was a joke in the fact that anyone thought it would have a real impact on liquidity in our banking system.
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Originally Posted by dippin
population growth is not equal to labor force growth. Labor force participation in the US is 65% of the working age population.
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Good point. But, my point is that under normal economic conditions our economy creates jobs. If government takes credit for that, I think it is misleading at best.
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In any case, considering how much of the "investing in the future" actually comes from the government, yes, public investment does create lasting jobs. And considering the current stimulus package emphasizes health and education spending above all, you can bet that it is investing in the future.
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Government is a net drag on any economy (Because if they take $1 from me to give to you, most likely you would get the benefit of less than $1 - they have to cover the cost of private drivers for senators and stuff like that). Sure we can have a population come to an agreement to invest in a interstate highway system that provides tremendous value to an economy but the fact is in order to build it and maintain it - it is all done with taxes taken from everyone or those who use it. The value did not come from government, the value came from people who paid for it.