Have you seen what’s been happening to Netflix (NASDAQ:NFLX) stock? The stock fell about 40% this week, down to $77 a share.
In July, the stock was selling for $300 a share. Folks who bought the shares at $300 have lost a lot of money, so should we bail them out? Or how about just bailing out the folks who can't afford the loss?
We could work out some kind of formula: If their Netflix stock equaled 1% of their income, the government could bail them out. Of course this is ridiculous talk. When folks agree to buy something, there's no guarantee it will pay off. You shouldn't buy any stock unless you can afford to lose it.
But it's the same kind of talk we're hearing about home mortgages and college loans. Our economy can't survive if folks who borrow money never intend to pay it back.
Eventually, the folks who lend money would stop lending. And in fact, that's exactly what's happening now. Banks aren't lending partly because too many folks are expecting a bailout. That mentality undermines our entire economy. This talk of bailouts has to stop.
It's tough to lose money on a stock like Netflix. It's tough to lose your house if you can't pay the mortgage. But it's tougher to live in a society where stock markets and banks close down because no one's willing to take risks and pay back what they owe.