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Bailout – begining of the end for US solo Super Power in the world. October 1, 2008

Posted by Bipin Agarwal in Global Economy, Politics and economy, Real Estate Development in Global Economy.

I am sure lot of my friends here in US will not appreciate it or understand it, but that does not mean I will not be truthful about my views.

Why this bailout is needed – We can blame the Wall Street, and politician love to do it to get elected. Main Street person is in so much debt that he has no choice but to believe it. If they do not believe it, the alternative is not pretty, they have to declare bankruptcy. None of us like to go through that if there is a way out.

Real person who is causing this bailout is the person on the Main Street, not Wall Street. I do not think, there are lot of people living in mansion are filing for bankruptcy. This bailout was needed to salvage the bank from the loan that were given to common Main Street person, who does not have the capacity to pay the interest on the loan, forget about the actual loan. Main Street consumed the money, why cry about paying for it. Person taking the loan has to pay it back some day. There are two ways to do it. Either the person responsible for the loan pays it back (bankruptcy), or everybody chip in to pay it (bailout) or the bank declare bankruptcy (Given there are there are only three major bank left, this would mean government goes bankrupt)

What Main Street has done to American banking system, America is doing to rest of the world. We borrow 2 B (B as in billion) every day to support our economy. Where is this money coming from – other countries, certainly not coming from the saving that our society in US has created.

Let us draw some conclusion. When guy on the Main street can not afford to pay (after he has sold all of his other asset), he or she declares bankruptcy. Some point of time other credit holder countries will start demanding collateral for their debt,  after we sell our asset (by the way what are these assets? land, home, diamond rings, made in china pens, made in japan cars, worthless IOU notes provided by US gov to domestic and international institutions), what option we will have?

There is an interesting observation. In most of the countries, rich person is the one who lends money to others, Are we a rich country with 11 trillion (yes eleven trillion) in debt? and what assets?

How do we solve the problem:

  • We are a country that has lived beyond our means for too long. We have mortgaged future of our kids. We need to stop it right now. No bailout, let people on the main street pay the price. Wall street is already paying the price, look at AIG, Wachovia, Lehman, GE Capital, Countrywide, Bear Stern, etc. If anything Bailout will help wall street.
  • Beggars can not be choosers. Easy solution that other country did, devalue the dollar to 25% to 50% of its value against china and russia. There will lead to significant investment in the manufacturing sector. Thank god, we can make our own laptop.
  • Increase oil production in US, and work hard to maintain the oil price at $150 per barrel, that is the only way to increase sales of next generation car in US, and manage trade surplus in Asia.
  • Massive immigration of educated engineers, doctors, educated work force. It will solve the housing problem and will provide the work force needed for manufacturing and support services
  • Significant investment in infrastructure that is planned based on usage of public transport system both railway and light rail. Reduce our dependence on oil. Planned community development around the concept of Twenty Minute Lifestyle (TM) to reduce oil consumption, provide quality living. New housing infrastructure should be less maintenance oriented meaning more concrete and steel and not dry wall and wood.
  • Cut down the defense spending and entitlement program such as social security and medicare.

America is country with lot of brain power and resolve. We can solve the problem.

If you have a question, about Global economy and Politics correlation, feel free to ask.


Bipin Agarwal


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