Financial Crisis

I think putting a ban on foreclosing mortgages and printing money (increasing liquidity) would "solve" the crisis. Let the banks fail (currently the largest bank that was failing was bought up by another corporation (JP Morgan I think) which seemed happy to get it!). Let the stock market fall 20%.

Also, I think there are more important economic problems in the US including unemployment, poverty, and non-existent or overly costly healthcare.

If they do go ahead with a $700 billion bailout, it is a lot of money, but when broken down over several years it is a smaller amount of money than the US wastes on defense ($500 billion per year), or on health care (US health care costs are 3-6% more of the GDP than other countries, and yet we don't have full-coverage, this is a waste of roughly 300-500 billion/year).

The Crisis Grows

At a second glance, this crisis is looking worse than I thought. Even though I studied Economics, unfortunately we never got into the details of how the modern banking system works - so I'm not entirely sure what's going on.

It looks like we are paying for the massive amounts of personal and corporate debt that we shouldn't have accumulated in the first part (so far governmental debt hasn't been an issue - though it is a contributing factor). People (and corporations) have been buying on credit. Credit becomes short or too expensive causing corporations/people to limit their expenditures (fire employees, reduce consumption, sell assets), ultimately causing more credit problems as the assets that people use to get credit aren't worth as much.

If we are into a circle of declining expectations, then we are in for trouble. Ultimately people/corporations/banks are just going to "sit" on their money, preferring to keep it in government bonds then in using it for anything productive - the economy will tank, and this cycle can continue for a while (Ex. see Japan's financial crisis that started in 1990). Corporations (and people) aren't going to invest money if the economy is in decline even if the interest rate is as close to zero as possible.

While a lot of the cost of the crisis will hopefully go to the upper class (eg. the absorption of much of the 30% decline in the US stock market from its peak) - they typically have substantial positive net wealth, whereas for middle class Americans this crisis can put them into a negative wealth situation that can cause them to go bankrupt. Middle class and working class Americans are also threatened by job loss.

The crisis is going international - which makes it far more serious.

Another Solution

Any solution could be paid for by increasing the capital gains tax. This would also balance the hand-out to the markets - as a similar set of people would be benefiting from the handout as who'd be paying for it.

US defense budget (including

US defense budget (including Iraq, Afghanistan, Veteran Affairs, and nuclear weapons) is actually around $850 billion in 2009 (assuming that the Iraq/Afghanistan costs are the same as 2007).