Bailout Passes..Now What?

So the bailout package is now law, and although no one liked it, it does a few good things. However I think the immensity of this package is only the beginning. Of course, we all know that when Congress tries to save us, often we get the short end and this one is no different. The $700 billion dollar approval package ended up being about $850 billion dollars when it was passed, and will probable explode into the trillions before it's all over. I know such large numbers are very abstract to most of us, but it basically boils down to an additional $2300 in debt for every person in the country.

So what are the "good" parts? The most important thing is that it provides some money to the credit markets so that banks can lend to people and each other again. However, I think it will be very limited--banks are probably still spooked and won't be lending money out as freely as they did over the past few years. Think of all the things we do in America these days "on credit": buying large appliances, cars, and yes, homes..now imagine if no bank or business could extend credit and instead demanded full cash payments. Americans generally don't have large savings put away. Lay-a-way would probably make a full comeback, and this economy would really come to a grind. So the bill did address that situation. Secondly, people are allowed to stay in their homes--now this could be both good and bad: people who can afford the house but need a refinance can stay in their homes, but apparently, so can the guy who bought more house than they could afford.

Also, we as Americans have to become more comfortable with being saved by other countries. From an article I read this afternoon:

Even though the dollar has strengthened a bit lately, we are going to need foreigners and sovereign wealth funds from China, Asia, Europe and the Middle East more than ever to survive this crisis — and they are going to need us to be healthy as well. In the process, we are going to become even more intertwined and dependent on the rest of the world.

So what does being a debtor nation have to do with you as an individual? Well, all I can urge you to do is to work on eliminating your debt positions as fast as you can. Are you making payments on a car? Thinking of buying a large house? Proceed very cautiously. Do not, in the rush to get everything in life, take on debt on the gamble that One Day you'll have a higher salary to afford it. Job losses these days have struck both blue collar line workers and white collar folks as well. I'm sure that some Lehman Brothers employees felt insulated walking into their building, thinking that their job was safe. Make sure that you have enough liquid funds (cash) to cover expenses for at least 3 months. Because one day, even the US Government won't be able to legislate a bailout big enough, and you'll need to depend on your self-reliance and self-determination to carry yourself through these turbeulent ups and downs.