Monday, September 22, 2008

PRIVATIZING PROFITS . . . AND SOCIALIZING RISK, PART II (AKA, WHO'S GETTING BAILED OUT, AND WHO'S DOING THE BAILING?)

Another hard-hitting, directly on-point piece from the Cunning Realist. I urge you to read it in its entirety, but a highlight or two:
While the economic cost will be huge, the real damage from all this will be psychological. Bailouts are now an indelible part of our national identity. When the economy and financial markets recover -- and they will -- that new identity will shape the behavior of economic players and market participants for decades. This has implications for the next bubble, which should be a doozy. Will speculators remember the faded lessons of Bear and Lehman? Or will they be guided subconsciously by a single word -- "bailout" -- just before hitting the buy button?
And this (he's speaking ironically here. The "voice" is that of the Fed/Treasury/Administration/Congress, i.e., the Stooges of Wall Street):
[B]ailouts, interventions, and the socialization of risk are only feasible with a de facto dollar standard. With a massive new expansion of government liabilities, that will become even more imperative. Last week, gold rocketed from $780 to $900 in a few hours. Oil is back over $100. That's unacceptable. Those who shun the dollar are threats, and must be treated accordingly -- now more than ever.
Scary times, folks. Strange, unchartered, dangerous days at hand. Keep your powder dry.

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11 Comments:

Blogger Weaseldog said...

The growth of the money supply is so fast that bubbles and busts only take a few years now, instead of decades.

This bailout will shorten that period. And Paulson's next bubble will pop sooner and harder than this one.

1:11 PM  
Blogger Rickey Henderson said...

Rickey wonders: who will bail out the Mets?

8:01 AM  
Anonymous wfta said...

Would somebody please ask GWB WTF happened to the economic juggernaut built on the tax cuts masterminded during his first year in office? I was under the impression that this was the shining city on the hill—the very reason we should establish a permanent GOP majority.

This looks more and more like the Karl Rove Investment Bank Recovery Act of 2008. With a trillion dollars for the initial liberation, can you imagine what the surge will entail?

1:14 PM  
Blogger George said...

Can't keep my poweder dry--it's all wet for my tears for those goddam Mets.

5:11 PM  
Blogger DED said...

Here's what the House will be voting on on Monday.

9:49 PM  
Blogger Mike said...

Ded, I really hope they vote down this monstrosity.

I gave it a skim and two things leap out:

1. Paulsen pretty much has carte blanche to do whatever he wants up to $250 billion.

2. The SEC can suspend mark-to-market accounting rules whenever they want, which encourages, I think, the sorts of shenanigans that screwed us up in the first place.

7:04 AM  
Blogger DED said...

I do too. I think that alternatives need to be considered. However, I think it's going to pass (though I hope I'm wrong).

If the electorate is as pissed off at this bill as they're alleged to be (and not just a vocal minority), then there could be a lot of turnover in Congress this election.

12:32 PM  
Blogger DED said...

Wow! It didn't pass.

2:49 PM  
Anonymous wfta said...

At what point does it cease to be a lame duck and become a dead duck.

4:27 PM  
Blogger commoncents said...

Great site!

Would you like a Link Exchange with our new blog COMMON CENTS where we blog about the issues of the day??

http://www.commoncts.blogspot.com

5:56 PM  
Blogger Mike said...

Thanks for the offer, Common Cents, but after looking at your blog I'm not sure what made you think I'm one of your allies.

I'm not.

Again, thanks for the offer and good luck with the blog, but no thanks.

6:31 AM  

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