What is bailout? how does it work?
I remember pple were talking about AIG bailout few years ago and after that, world economy went down.
- TringleLv 67 years agoBest Answer
Long ago the government decided to get involved with the market and regulate it. In 1913 with the signing of the federal reserve act. The purpose of the act was to reduce the number of new small banks, print money out of nothing, and make the US tax payers take on the debts of failed banks, corporations, and countries (bailout).
The big banks or big corporations go to congress and tell them the sky will fall and the economy will die and America will be destroyed if they aren't bailed out. So congress buys into the fear and bails out banks and corporations. To get the money congress either raises taxes (people don't like that) or they print more money. Inflation occurs when you print money out of nothing and the price of everything goes up, its a tax but people don't notice it.
Bailouts encourage the banks and corporations to take huge risks because they know if they fail and lose billions the tax payers will have to take on their debt, and we do, and now the country is 16 trillion in debt.
They also bailout failed socialist countries through the IMF and world bank. A majority of the money given to the IMF and world bank comes from the US tax payers but a little also comes from other nations with a high standard of living.
In a free market those banks and corporations would fail and we would be better off.