The US House of Representatives today defeated the Paulson Bailout Bill. Leaving the politics of this aside, what are the real economic and financial consequences? Are we really now doomed to Great Depression 2.0? Or is this the beginning of the healing process?
Some things to consider:
- Free market fundamentalism is likely to fail as bad as, or worse than, wreckless interventionism. Hopefully we learned those lessons in the Great Depression 1.0. Laissez-faire economic policy is arguably just as bad as command socialistic economic policy.
- Failure of this plan alone is not sufficient to ensure a Great Depression 2.0.
- The DOW is not the economy. I, for one, am tired of the media running around acting like the DOW is a proxy for the health of the economy.
- Calling the bailout plan a "rescue plan" won't change anything other than what the talking heads on television spew. They've lost that battle anyway, my 70 year old mom in Ohio calls it a "bailout". Therefore, it is a "bailout" to Main Street. Get over it, media and Wall Street apologists.
- And most of all -- for anyone in the real estate industry: look out below! You thought home prices were coming down before? You ain' seen nothing yet. (By the way, I just saw a new construction home we looked at earlier this year, which had then been marked down from $1.55mm to $1.395mm, and was advertising $1.098mm a couple months ago...$699K. And it's _still_ overpriced. If you're the guy next door who paid $1.6mm for your nearly identical unit in 2007, what do you do now? That home won't retrace that price in your lifetime.)