Wednesday, January 13, 2010
NY Fed Face House Subpoena Over AIG Bailout
What does the phrase "Socialized Debt; Privatized Profit" mean? If we were truly a capitalist country, we should have let these businesses fail. Why didn't we?
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The phrase means that the debt is shared and the private entity reaps all the benefits and makes the profit. The government doesn't get the profit either. We didn't let these businesses fail, because some of these businesses were so large that simply letting them fail would have produced greater consequences than stepping in to help. So many people would have lost their jobs and become unemployed, and the insurance policies held by AIG would have gotten destroyed as well. Too many people would have been affected negatively, and we would have been even worse-off if AIG wasn't bailed out.
ReplyDeleteUhm, the link is broken? Or at least for me.
ReplyDeleteHowever, "Socialized Debt" means that the debt of a group of people, say a country, is shared, that every individuals debt is combined to create a shared debt that everyone gets to pay off. "Privatized profit" means that when an individual makes a profit, they get to keep it for themselves, no sharing involved.
We didn't let the businesses fail because we aren't a truly capitalist country. Not only are jobs lost, but any goods/services that company provided are gone too, and no one is profiting anymore. The government decided that the consequences of letting the company fail were far too great in comparison to the benefits.
The link is down for me as well, but I will try to answer you question to the best of my abilities. I interpet the phrase "Socialized Debt; Privatized Profit" as meaning that, in a capitalist market, any debt basically becomes taken on by the entire market and effects all market participants in some way, but that profit can only be attained by an individual effort, and that profit for one does not mean profit for all. I think the only reason we didn't let these businesses fail is because we had placed so much dependence on them initially that if the deficits far outweighed the benefits if we were to have let these businesses fail.
ReplyDeleteThe phrase “Socialized Debt; Privatized Profit” means that as individuals spend, and create debt, it affects everyone. Everyone’s debt becomes one large debt. The privatized profit part means that if an individual goes and makes a profit they get to keep all parts of the profit. They do not have to share their profits with anyone, and it does not have to go towards the debt. We did not let the businesses fail because we are not a completely capitalist country. We also saved them so that we would not get into any further trouble.
ReplyDeleteIt means that the debt is paid by all, but the profit goes to the corporation which creates the debt. We feared that letting these businesses fail would cause major turmoil in our economy. Plus, we seem to slap the label capitalist on everything and anything we do, but I think Ian is right. We aren't 100% capitalist, or we would've waved goodbye and let the ship of big business sink.
ReplyDeletethat is a good question!!!!!!!!!!! a great one actually. why should we reward failure? this company obviously did not do a good job, therefore they should have failed. there is no justification for "bailing" them out.
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