Capitalism Fails

[JinXy]

In 2008 it started as a localized failure of the realestate market that escalated, however it never were even close to a complete failure. If a complete failure ever happened the pension payouts would stop, the government would go bankrupt as would banks and peoples entire life savings would be worth naught, food prices would skyrocket and in general everything would quickly become very bad and very nasty.

No it is not because while small depositors as a group might carry a significant part of the banks total deposits they each represent a very small part, it is risk capitalists, corporations and business in general that carry the large deposits and they go wherever the returns are best because they know that in case of a failure they would be the ones to get their deposits paid back first. The small depositors thus carries little of the say and almost all the risk, hence it would solve nothing to not bail them out, the fundamental flaw still exists.

No... it happened because the government and Fed bailed everyone out in the dot.com bubble 8 years earlier. Bad companies grow bigger. Money printing pushed down interest rates artificially, government programs (guaranteed deposits being one of them) encouraged banks to lend money recklessly and taught depositors not to worry, and banks were able to repackage mortgages and sell them to fannie and freddie (government entities), thinking there is nothing to lose! Don't read from the mainstream media because they know nuts about economics :)

And while I support bailouts I think that whenever the government is forced to bail out any corporations it should be mandatory that they seize a portion of the shares equal to the percentage worth of the bailout relative to the stock value of the corporation at the time of the bailout. This would prove incitement for investors and corporations not to ever get bailed out by the government as it would be a direct blow to themselves.

Why would you make taxpayers own a part of a bankrupt company? It doesn't make economic sense, let alone moral sense.
Why must millions of hardworking americans who did nothing wrong, who saved for the future and did not buy 4 or 5 houses, pay for those who did? And pay for those bankers who gamble?

Let the companies go bankrupt. Successful companies will come in and buy up the assets and gain market shares, and the whole system start from a sounder base. Scandinavia did it. South Korea did it. The US had done it before. Japan didn't do it. In the 1990s the US TOLD japan that they were doing the wrong thing to bail out japanese companies. Now Japan has have 2 lost decades already. What an irony, the US went on to do what it preached not to do.

The first because it insures that a company that is generally viable but come on hard times gets a chance to become profitable again and thus saving jobs and investments, the second because it incentives people to invest their money rather than hoarding it(where it does no good) So I think they're generally have a justification for existing but therefore I also think that bailouts have a justification for existing as it's the other side of the coin of the first two.

Yes and no. It saves jobs in those failed companies, YES. But the resources used to save these companies must come from another part of the economy Elldallan. Somewhere else, jobs (more productive jobs!) that would have otherwise come into existence could not because the resources have been diverted away to save those failed companies. There's no free lunch. Many economists assume that there is.

And hoarding money is not a bad thing at all. The money is saved in banks, which lowers interest rates and gives signal to businesses to borrow and invest for the future, in anticipation of future spendings by those savers. Savings and investment is how an economy grows, not spending per se. What is spent is gone.

The financial market is a very complex system and I don't claim to have more than a passing familiarity with it so I might very well be wrong about things because there are deeper issues or things hidden below the surface.

It is complex indeed. But there are a few economics laws and fundamental principles that will never change till the end of time. :)