Biggest Bailout Ever: Did the Government Go Too Far?
So of course the stock market goes up when the US puts itself into greater debt?
So what are the costs? Almost certainly:
Higher taxes
Higher interest rates on government debt
Bigger government deficits
When the alternative is the entire financial system going bankrupt, we guess these costs are acceptable. But we're not convinced that that was the alternative. Also, numerous questions remain. The most pressing is "What price will the government buy the toxic waste for?" (This price will determine how much additional capital the banks have to raise to offset any losses.) Merrill Lynch shareholders are probably also wondering whether they can cancel the Bank of America deal. And Lehman would probably like to un-declare bankruptcy.
So of course the stock market goes up when the US puts itself into greater debt?
So what are the costs? Almost certainly:
Higher taxes
Higher interest rates on government debt
Bigger government deficits
When the alternative is the entire financial system going bankrupt, we guess these costs are acceptable. But we're not convinced that that was the alternative. Also, numerous questions remain. The most pressing is "What price will the government buy the toxic waste for?" (This price will determine how much additional capital the banks have to raise to offset any losses.) Merrill Lynch shareholders are probably also wondering whether they can cancel the Bank of America deal. And Lehman would probably like to un-declare bankruptcy.
