Sorry, I was all DOOOOOOOM-y and then, as one does, went out to dinner and am catching up, and this'll be crazy long I bet.
Strega, why do you think things will be worse if the bailout does happen? (I'm not an expert on these things.)
I'm not either, lord knows. I've been reading a lot of increasingly depressing peak oil/econ/global warming blogs for most of the year. And every time I try to convince myself that they're overly gloomy and I shouldn't freak out, stuff they predicted 6 months ago happens. I would love it if they're just lucky, and I am freaking out when I shouldn't. But I'd rather be prepared for something that doesn't happen that be unprepared for something that does.
Anyway: this is probably the best summary -- the part I'm quoting was written last Feb:
The second part [of financial collapse] consists of men in expensive suits tossing bundles of suddenly worthless paper up in the air, ripping out their remaining hair, and (some of us might uncharitably hope) setting themselves on fire on the steps of the Federal Reserve. They, to express it in their own vernacular, "fucked up," and so this is also just as it should be.
The government response to this could be to offer some helpful homilies about "the wages of sin" and to open a few soup kitchens and flop houses in a variety of locations including Wall Street. The message would be: "You former debt addicts and gamblers, as you say, 'fucked up,' and so this will really hurt for a long time. We will never let you anywhere near big money again. Get yourselves over to the soup kitchen, and bring your own bowl, because we don't do dishes." This would result in a stable Stage 1 collapse - the Second Great Depression.
However, this is unlikely, because in the US the government happens to be debt addict and gambler number one. As individuals, we may have been as virtuous as we wished, but the government will have still run up exorbitant debts on our behalf. Every level of government, from local municipalities and authorities, which need the financial markets to finance their public works and public services, to the federal government, which relies on foreign investment to finance its endless wars, is addicted to public debt. They know they cannot stop borrowing, and so they will do anything they can to keep the game going for as long as possible.
He goes on to explain how this will lead to a commercial collapse, at which point we are so very, very boned. [link] Warning: it's not a cheerful read at all. There are other people who aren't so terrifying but it's kind of a semantic difference; they're describing the same process.
My understanding is that we, as a nation, are in debt. If we can't afford to keep buying products from other nations, our imports dry up, and then: boned. For decades our economy has been based on having lots of consumers who have cheap oil and massive debt. And now oil's not cheap and nobody will give us more credit, and we don't make much besides corn, which we've now decided to use as fuel for all our cars, and fuck.