The $700B Bailout

Here is a post from a redditor that sums up his/her opinion on the proposed $700 Billion line of credit bailout that Paulson has proposed. I thought it was interesting:

This is Reality, not Fantasy Land. Housing prices have to be affordable, have to reflect the actual ratio of 3-4 times the income of buyers.

The plan doesn't do jack. The fundamental problem is that housing prices are three times greater than the income ratio of people who would buy those houses.

There's only two possible outcomes to solve this problem:

1) Everybody's income triples.

2) Housing prices collapse by 66%.

That's it. Everybody who is making $40K a year this month starts making $120K a year next month. Or those median $250K houses drop in price to $85K.

With approximately 100M homes in the US, a 50% drop in prices at a $225K median represents a wealth loss of $11 TRILLION. Not ONE TRILLION. Not $700 BILLION. ELEVEN FUCKING TRILLION DOLLARS.

The fundamental problem is too big to be solved by government because the inflation of the money supply which occurred is massively beyond the wildest comprehension of 99.99% of the people. Why do you think the Federal Reserve stopped printing the M3 total money supply number which reflects all outstanding credit and all outstanding currency?

So you spend $11 TRILLION to keep people in their houses by keeping prices inflated, and what does that do? NOTHING. It leaves us in the exact same position as before where house prices are not affordable by first time buyers, and nobody further up the housing chain can sell and upgrade, except another ELEVEN FUCKING TRILLION DOLLARS has been blown up in not affordable housing.

And the bubble isn't just in housing. It's in Health Care. It's in College Education Prices that are more per year at private universities than the parents' incomes of 50% of the people going to those schools! It's in Wall Street Credit Default Swap Derivatives. This is the MOTHER LOAD end game of massive fiat currency inflation counterfeiting of the money supply.

What's the difference between a one dollar bill, a five dollar bill, a twenty dollar bill, a fifty dollar bill, a hundred dollar bill? They are all printed on the exact same rectangular piece of non scarce worthless paper!

see more comments on the matter here