America rescue plan rejected on a day of nationalisations and bail-outs

[Kärnfysikern]

I dont know shit about economy so this is a stupid question. But why are those 700 billion so important, I mean its just around 5% of the GDP of the US. Its a big hefty ammount of money, but why would everything go to hell without it?

It also seems like a folish policy to save banks that behaved so god damn stupidly, let them burn and then they wont repeat the misstake.

[Flagg]

I dont know shit about economy so this is a stupid question. But why are those 700 billion so important, I mean its just around 5% of the GDP of the US. Its a big hefty ammount of money, but why would everything go to hell without it?

It also seems like a folish policy to save banks that behaved so god damn stupidly, let them burn and then they wont repeat the misstake.

I don't know much about economy either, I do know that the US has something like 10 times the GDP of the UK which really surprised me. When you consider that America is wasting nearly a trillion dollars a year on the Iraq war and borrowing, and just those two areas alone, I think that 700 Bill is only delaying the inevitable.

[Kratos]

I dont know shit about economy so this is a stupid question. But why are those 700 billion so important, I mean its just around 5% of the GDP of the US. Its a big hefty ammount of money, but why would everything go to hell without it?

It also seems like a folish policy to save banks that behaved so god damn stupidly, let them burn and then they wont repeat the misstake.

The thinking is to take on some of the bad debt that was created so banks continue lending money. The US economy rolls on credit, and if banks stop lending it's a problem.

For example, I bought a new car not too long ago and my credit is not bad. I think my credit score is a 680 where anything above 720 is good. Had some late credit card payments back in college, that's about it. The interest rate I was quoted was 15%. The prime rate is somewhere in the 5's I think. I'm not gonna pay 15% interest, so I took the money out of stocks and bought it for cash. It's not an option for everyone though to pay cash for their car.

Then you have the problem of the housing bubble. Houses gained so much value in the last 15 years excluding the last 3 or so, they're worth like tripple or more what they were. Even if you can afford your house as it is, everyone is morgaged to the hills on them, and you need a buyer if you ever want to move, so loans need to be availiable. Banks take back a house and the housing market is in the tank, they're gonna sit on it and loose their shirt. Inventory is building and it could be a problem for all of America. The domino's could start to fall.

Businesses need loans all the time too, and that's a big peice of the puzzle.

I don't think anyone fully understands the ecomony, that's why it becomes such a mess. Will the economy shit the bed without the bailout? Who knows. Will the bailout have the intended effect? Who knows. But, they're willing to throw money at the problem and hope for the best.