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To: tcmay who wrote (143855)	9/20/2001 1:26:25 PM
From: Tenchusatsu	Read Replies (1) \| Respond to of 186894

Tim, <Are the Feds going to bail out AMD and Intel?> Nah, just AMD. ;-) Tenchusatsu

To: tcmay who wrote (143855)	9/20/2001 2:50:00 PM
From: fingolfen	Read Replies (2) \| Respond to of 186894

Talking about bailing out industries because we feel sorry for them is especially insidious. Are we going to bail out Cantor Fitgerald for losing 700 of 1000 employees? How about the New York theater business, which is closing down most performances? Or thousands of restaurants now seeing 20% of normal business? And so on. Some interesting points are made here, but I think people are trying to paint a black-and-white picture of a situation which contains many shades of gray, and one has to look at a case of the "lesser of two evils." I normally don't like bailouts. However, in the week following the attacks, the airline industry itself as cut 100,000 jobs. Unemployment in the U.S. will therefore undoubtedly rise above 5% (the 'magical full employment' number). Some companies will go out of business, but we're not looking at a few weak companies going under and permitting greater strength in the rest, we're looking at an entire industry on the ropes. Can the American economy survive if the airline industry buckles? By "survive," I mean prevent that nasty "D" word from appearing again. We're virtually guaranteed a recession at this point. Consumer spending was the last leg of the economy which was holding us over for a couple of quarters... now that's been kicked out from under it. If we let the airline industry fall, does it start a domino effect? I think it does, and the net result would be worse for the country in the short AND long term. I agree we shouldn't let emotion dictate what industries we target for assistance. I do, however, believe that it is in the best interest of the country to target SOME strategic industries for temporary relief. The airlines and related industries are clearly in situation not entirely brought about by normal market forces. The airline industry is also one with substantial barriers to entry (though not exit), and is therefore in jeopardy. Intel and AMD are in the middle of a downturn which has been generated by market forces. The chip industry therefore doesn't qualify (or particularly need) a handout. In fact, it appears as if Dell and Compaq have just received large orders to replace IT capital lost in the attacks. The problem the U.S. economy has been suffering with over the past several months is a lack of spending. These events will force some unplanned spending which should carry some industries through the worst of the recession. In short, I agreed with Greenspan and co. this morning. America needs to look at a long-term stimulus package with long-term goals. Where do we want to be in 2 years??? Do we want to have an airline industry dominated by the 3 or 4 major carriers who were able to survive the downturn? Do we want to be in an upturn in 2 years? Do we want to limit the depth and duration of the downturn? It will require a full arsenal of fiscal and monetary policy to accomplish that. The economy hasn't started to react to the lower interest rates as of yet. It will, but the question is when, and by how much? The economy needs surgery to recover from major trauma. The prognosis is good, but if we don't give the economy an IV at the scene, the patient may not make it into the operating room. An airline bailout is an IV or "bandaid." That's all. It's a temporary measure to maintain stability until the real work can be done.