World Bails Out World

Apparently, the Dow rose 936 points today, the single highest gain in 75 years, because more than a dozen European countries pledged billions of dollars to prop up their banks and ailing companies and because the Japanese lent $9,000,000,000 to Morgan Stanley. Yet, when the U.S. Congress pledged $700,000,000,000 to do the same thing for America, the Dow fell nearly 800 points.

I guess investors are more confident now because taxpayers the world over are taking on an unprecedented amount of debt; all governments are bailing out their banks. It wasn't enough for America to do it, the whole world has to do it. All governments must over-leverage themselves to bail out all of their banks and corporations that are over-leveraged, because all of our economies are doomed if the credit markets remain frozen. Edward Yardeni, the investment strategist, stated in the New York Times today that all of these bailouts will essentially “provide unlimited liquidity to the world’s banking system."

Is it really better to shift responsibility for all of that debt from private banks and corporations to the public trust? Is anyone going to stop and assess whether any real change in the fundamentals will occur. Are company profits going to suddenly improve so those who still have jobs can stop worrying about being laid off? Are new jobs going to be created for those who need them? Is the magic fairy going to wipe out everyone's credit card debts? No, no and no. Unfortunately, all the taxpayer will get for their largesse is a big, fat, whopping bill.