Whew!

Some people don’t understand that we narrowly averted a major crisis in the US economy. Most of the commentary in the legacy media, and most everything being said by politicians, betrays a total lack of understanding of the problem. The current financial crisis is a big complicated mess, but, with a lot of work, it is understandable. Maybe you don’t care to do the work, and I don’t blame you. But understand this one thing: the final shoe to drop was the beginning of a run on money market funds.

So what? Well, without money market funds and other short term credit facilities, a lot of companies would not be able to meet payroll. Some would not be able to keep the lights on. If a run materializes yet in September, we will see a wholesale closing of stores and factories. It will be only weeks before companies go belly up – not just banks, but every kind of company. Millions could lose their jobs overnight. Think there’s a housing crisis now? Mortgage default rates are pretty low (around 4% last I looked), but suppose 10% of Americans lost their jobs? Or 20%, like in the Depression? And it’s not just companies – state and local governments, as well as non-profits, would all be impacted the same way. We’d be seeing huge cutbacks in services.

So, like most everyone else, I don’t like the huge tax liability we’re creating and I don’t like the socialization of industries and big bailouts. People resent the bailout of Wall Street Fat Cats, but understand this: the bigger bailout was for you and me.

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