Pick your fantasy...
One of the things that's troubled me about this whole bailout discussion (aside from the fact that so many so-called supporters of free markets flip-flopped on that the minute their paychecks seemed threatened by the gloom and doom predictions) is the story that the government is buying "assets" that are purely temporarily impaired, that are bound to be worth more in the future.
Well, actually, what troubles me most is the speead and ease with which some people, many of whom should know better, accepted the premise. I saw it happen among folks whose brains I expect. And, I saw it everywhere. I saw news stories in which people who knew nothing, zero, zilch (seriously, random shoppers in malls) were being asked for their opinion, and were saying it was a good idea because we'd be getting all this debt so cheap, and we'd all make money in the end.
Even "expert" money managers are promoting this line. Former Hedgie Andy Kessler actually says here, in the WSJ, that he thinks Paulson is going to earn $2 trillion on this deal.
There are many good reasons not to believe this argument, the first of which is that, without any details whatsoever on how the "buying" process will proceed, it's impossible to say what price we'll be paying, and for what, and without knowing that, it's impossible to predict the return -- even if you knew the eventual value. Of course, we don't know that, either... And with housing continuing to crash and more and more workers out of jobs... But I digress...
The main reason I don't believe this argument is that it so blatantly begs the question: The bailout is a good idea because the debts are worth more than we'll pay. How do we know the debts will be worth more? Because we say they will be or, because the bailout itself will make them worth more.
When everybody begins believing in and repeating a conclusion which hasn't been successfully argued -- indeed hasn't been argued at all -- I'm pretty sure it's because they're too scared and too confused to think. That's no way to run a government, or an economy.