The Jared Dillian Letter

Bankruptcy Beats a Bailout

The airlines were running on one month's worth of cash when COVID-19 hit.

They ran out of cash because they spent their money on buybacks, trying to get their stock prices up.

This is terrible behavior. They jeopardized their companies. And the government rewarded them with billions of dollars in relief funds.

What we should have done is let them go bankrupt instead.

Bankruptcy Isn't Such a Bad Idea

The bankruptcy process is nothing to be afraid of.

The airlines would have still continued to operate. They also get financing, which gives them a chance to restructure and bring down their operating costs.

Yes, there would have been more layoffs. Those people would have found other jobs.

Capitalism is a process of creative destruction. Bad businesses die so good ones can take their place.

That Would Put More Money in Your Wallet

If our markets were free from government intervention, the prices of goods and services would go down. That includes stocks.

It is not the government's job to bail anyone out. Its role is to create the conditions necessary for the economy to thrive, like lower taxes and lighter regulation.

The economy thrives because of the decisions that individuals and companies make. It grows when they hire and reinvest in their businesses.

There's a consequence when you shield companies. They hire too many people, spend too much money, and become grossly inefficient. And they are free to keep making the same mistakes.

On Self-Reliance

I like to preach self-reliance. That's why I encourage you to sock away at least six months of expenses so you can bail yourself out in an emergency.

We all have the ability to save, at all income levels. It just depends on your time frame and what standard of living you choose for yourself.

Bailouts—whether for people or for companies—because they failed to plan for an emergency only teach them to look for help when the next crisis inevitably comes around.

If you have questions about money, don't wait to ask for help. Call my radio show any time, day or night, at 1-888-DILLIAN (345-5426), to leave me a message. And tune in Monday through Friday, 6 pm to 8 pm Eastern—I might play your message on the air and you'll be able to hear me answer it live.

Jared Dillian
Jared Dillian

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