I should be sleeping right now, but I woke up a tiny bit and started thinking about how the Cheney crowd is robbing us of our dreams of a society that helps care for its people. I woke up more, thinking, "Throw them in prison! Lock 'em up!!!" Before long, I knew -- I might as well just get into a hot bath. Where I eventually started thinking about where the hell all this money is.
Now, I'm not an economist, and I hope this isn't really stupid, but it seems to me that most capital is virtual. How much is your home worth? How much is your stock -- if you have any -- worth? As we know from our basic Econ classes, it's only worth what someone is willing to pay for it. But in the case of our homes, as long as we can manage to hold on to them and live in them, it doesn't necessarily matter how much the home is worth on paper -- it matters that we have a place to live. More below...
Stock is just bits of corporations. While there is some hard capital value in corporations, most of the real value is in it's ideas. The rest of the value is virtual -- just like the value of your home. Stock is worth a lot if people are willing to pay a lot. It's worth nothing if people are willing to pay nothing.
So where is this trillion dollars we're talking about? Much of it vanished when the perceived value of our homes dropped. And the rest is threatening to disappear as the value of stock drops.
When people have homes and then lose them, that is a very real loss. The virtual value of the home disappeared into thin air, but the home itself is still there -- likely with nobody living in it.
When people have stock and the stock loses value, that loss is on paper. It's a loss of virtual value.
With this bailout, we are talking about borrowing a trillion dollars to prevent the value from dropping out of the stock -- something that has little inherent real value. That's why it is possible for the bailout to fail. We can pour all that money in to prop it up, but if people are still not willing to pay much of anything for the stock, that money disappears.
With that money goes our hopes and dreams for a more equitable society.
What if we were to let the value evaporate from the stock -- let the companies fail -- but borrow as much money as we need to keep people in their homes, keep food on the tables, and give people medical care on top of that? We could do this as a temporary measure until businesses are able to regain their footing and start paying people to work again.
Does this make sense?