What is the significance of the Spain bailout early this week? We’ve seen the US government invest $700 billion toward bank bailouts. We’ve also seen four European countries requiring rescue funds, including the latest Spanish Quest for the $125 billion bailout.
So what is the significance of this latest news? It certainly isn’t the largest bailout, it’s not the most desperate call for help, so what’s the big deal??
The answer is; it’s the latest bailout. Tomorrow it will be Greece again.
The bailouts are sometimes a hard pill to swallow knowing there are millions of small investors, some unemployed who could use a little bailout themselves. It’s a hard pill to swallow, but it’s a necessary one.
Someone asked me the other day, “what’s the key difference between the Great Depression and the Great Recession”…although I am not completely fit to answer this question as I am fortunate enough not to have lived through a Depression (so far), my answer was the government’s willingness to bailout some of the largest financial institutions in the world.
If the exchange of investments went from business as usual one day to absolutely nothing the next at the speed in which those banks were turning money over, hitting that proverbial wall would have collapsed more than just the bank next door. It would have sent a ripple effect of panic that may have dwarfed the Great Depression.
No doubt, we’ll feel the impact of these bailouts for years to come, but in order to save a sinking ship; you need to plug the holes. That’s exactly what these bailouts are doing.
What was the key difference between the Great Depression and the Great Recession?? Let us know your thoughts.
Have a great week.