Making sense of the markets

Even as someone who avoids traditional news sources, it’s hard to avoid the ubiquitous headlines “$700 trillion bailout – that means you, Mrs. Common Cents!!”. It’s an exciting time for those of us who drool over economics like it’s an intellectual hot fudge sundae. For some reason, friends have been coming in droves asking what our opinions are on the current status of our financial crisis. I was embarrassed on more than one occasion to say I don’t know, because I don’t quite understand how we got here or why. I’m only somewhat comforted by the idea that many people – including some brilliant minds on Wall Street, in Congress, and even in the White House – were uninformed as well. However, ignorance does not allow me to excuse myself from my own intellectual curiosity, so I pressed on for more information.

A great primer for those trying to make sense of the amount of commentary and information and have been left with nothing but scratching their head is this fantastic Q&A explaining the Wall Street bailout plan. In a nutshell, yes, you, Mr. or Ms. Taxpayer will be paying for this, but the government hopes that this bailout is better than the alternative of letting the market collapse onto itself and that hopefully, it won’t be the entire $700 billion and maybe, just maybe, Uncle Sam will even make a few bucks on the risk (I’m not holding my breath).

So how much is $700 billion, and what does that have to do with the price of milk? According to the New York Times “A $700 billion expenditure on distressed mortgage-related assets would roughly be what the country has spent so far in direct costs on the Iraq war and more than the Pentagon’s total yearly budget appropriation.” (Dear Mr. President - Perhaps it’s time now to forgo the defense budget in lieu of the impending financial doom – whattaya think?) $700 billion equates to roughly 2 grand for every tax payer, which is probably a price I’d be willing to pay to ensure that our country doesn’t end up going back to a depression synonymous with that of The Grapes of Wrath.

At heart, I’m a liberal who favors capitalism and free market economics, so I’m not thrilled by the current bailout. Admittedly, I haven’t fully grasped the reasons behind Congress’ decisions and I need to do a lot more research to make sense of how and why it came to this before I make any judgments. However, until things go back to “normal”, I’ll be content sitting here and drooling on my intellectual hot fudge sundae.