The downward spiral begins...

Well as of this morning the massive $700 Billion bailout package that will go to the House for vote today (and later to the Senate) has had a less than stellar impact on the markets. Markets overseas in Asia and in Europe were less than impressed by the proposed shoring up of US economy by the Federal Reserve when they started trading (Sunday) with their own opening bells. Today is the first day post bailout package for the NYSE to see US investors view the overall efforts by the government. As of opening bell, the NYSE was down 120 points...

Wachovia announced over the weekend that Citi will buy it out as well - that's another massive nationwide bank that is being absorbed by the remaining big bank club endorsed by the Federal Reserve.

My thoughts are mixed. I actually believe now that the government HAD to do make some efforts to slow the bleeding to keep the American investing public from completely packing up and just buying gold. I don't get the impression that this has actually hit "Main Street" yet - I think that this will play out by the end of the year (just in time for Christmas!). The companies that don't have cash flow working for them by dried up contracts, sales and other purchases that the US Citizens aren't really making now will start to affect operating budgets at all sorts of companies nationwide. Without cash available for most businesses, people will start to loose their jobs and unemployment will start to dramatically rise.

This will be the point when Americans really start to feel this impact from these banking institutions failing. When jobs are lost, underemployment rises from unavailable high end job availability and those that are left with jobs are feeling that they could be next in any possible layoff round. It causes economic shutdown. Our consumer nation grinds to almost a complete halt with non-essential purchasing dwindling down (if you're going to own stock, keep it in those things that people just can't live without) - I wouldn't put it in with any automakers if I were you.

In my experience with small business administration, most companies are are the brink of financial collapse - not unlike most households. Those who have stockpiled liquid assets will have a better chance of shoring up lost contracts and sales - or worse yet, covering for those that owe them a lot of money as receivables will inevitably increase as businesses try to hold on their money as long as possible and become tardy on debts.

It's a spiral that just keeps going and going until there is a point where mass public can start to feel comfortable again. If you look at how that affected those that grew up in the Great Depression, that can take a long, long time (my grandmother, at the time they moved out of their house who lived most of her life in abject poverty had over $10k in tightly rolled up bills stuffed inside a Thermos!).

There will be massive winners in these upcoming times. Those that have the means will be buying up failing companies (like we've seen in the banking industry) for super cheap amounts. Companies that would have sold for $1M will be on the blocks for $100k and those with the cash to wait out a longer recovery period will make crazy money when this levels out.

We are staring at the world's largest transfer of wealth in human history. Trillions and trillions of dollars will change hands before this is over with a crushing of the middle class and a dramatic rise in those who have - and those that have not.