Tuesday, September 30, 2008

The Day the World Didn't End- No Bail Out, No Worries

Well, we were told two weeks ago that we were days, maybe hours from a total collapse of the world's financial systems if we didn't immediately cough up $700 billion to overpay for bad loans. The bill failed and the world continues to turn. The market is actually up 450 points today, bringing the day net reaction so far to a 3% drop in the Dow, which, given current economic conditions, is probably still a bit over priced.

Maybe traders believe a bail out is inevitable. Maybe the reality is that credit's going to be tight for a while, some companies will fail, some wont, but we'll get through this with or without a raid on the treasury.

Pundits continue to spew that the public just doesn't understand. The public understands, they just don't care. The bank that's been raising their rates and putting the squeeze on them for months is begging for a bail out. Excuse me for not panicking. Alternatives have been put forward. Some have suggested offering a capital gains and income tax holiday on homes purchased in the next six months. That actually makes sense. It's lack of home sales that's at the base of the problem, so stimulate home sales by increasing the potential profit margin. It wouldn't cost the government a dime, since they weren't going to see any tax revenue from unsold homes anyway.

We have to clean up this mess before we rebuild. This is not 1929. Information, ideas, resources and talent flow more freely now than at anytime in history. We are well prepared and able to deal with a market downturn. As long as the system is perceived as fair, just, transparent and consistent, we can weather this storm and come out stronger. If the government steps in and changes the rules every week, all bets are off.

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