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Read this brilliant essay on the bailout/debacle/hoedown, whatever it is. I beg you.
Political Power and Economic Ignorance
If you are not up for it, at least read these quotes, and have a good day!
"Nevertheless, if some grasped the connection between these present effects [of the depressed economy] and that past cause [of Fed and government policies], few of them seem to have grasped that resorting to the same policies at present will necessarily have the same consequences in the future: to delay the recession, and worsen it."
This, to me, is the most frightening aspect of this debacle. No one seems to be learning.
Or how about then-Governor Bernanke's speech and apology to Mr. Greenspan in 2002, "Regarding the Great Depression. You're right. We did it. We're very sorry. But thanks to you, we won't do it again."
He should have added, "Unless we feel political motives are more important..."
How To Understand the Economic Crisis: Political Power Run Amok
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4 Comments:
What do you believe the causes are for this now global fuckstorm crisis? Are the feds encouraging risky mortgages the lone perpetrator? Is government intervention the primary cause of this collapse? If so, does that mean we should abandon intervention in the future?
@tim -
You asked, "What do you believe the causes are for this now global fuckstorm crisis?"
Fed policy: Easy money, inflationary policies, negative interest rate lending (that's basically paying people to take your money.)
Government policy: legislation to encourage bad loans, insuring those loans.
Corporate policy: making those loans, trusting the government to bail them out when (not if) they went bad, re-bundling them and selling repeatedly in global markets with virtually no verifiable underlying asset besides government assurances.
What's that spell? I think you got it right Tim: global f*ckstorm crisis.
You asked, "Are the feds encouraging risky mortgages the lone perpetrator?" Nope.
You asked, "Is government intervention the primary cause of this collapse?" I'd say it is. They made the conditions for bad loans easy and encouraged them, their partner in crime, the supposedly independent Fed and its Presidentially-appointed chairman (um, what?) helped the whole mess along.
You asked, "If so, does that mean we should abandon intervention in the future?" Heck yes.
Fair enough until the end there- should there be no bailout or rescue package at all? The DOW is plummeting on a daily basis even with the promise of more help to come. Should we risk letting the whole thing come crashing down?
I've got a book on this in the mail coming- Bad Money by Keven Phillips- supposed to be very good. Will let you know what I think.
@Tim - I only have to ask you - do you think this bailout money is being fairly spent? (See AIG junket.)
I am against the bailout 100%. Let the chips fall where they may. Global meltdown? Sure. Would we finally learn our lesson? I think so.
But, for those who like the bailout idea - I had heard of a far more reasonable idea - a reverse Dutch auction to sell off the assets to those who wanted them, that way the market (any willing buyer) could decide their real value, and those who were deemed worthless wouldn't get a govt. lift. A more thorough explanation can be found here:
http://www.creditslips.org/creditslips/2008/09/a-modest-bailou.html
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