No Time for Utopian Anti-Interventionism

[Charles Mackay]

Re: No Time for Utopian Anti-Interventionism

Buffett: $700 billion bailout may not be be big enough

"It will cost more to solve this problem today than it did two weeks ago," said Buffett, referring to when Treasury Secretary Henry Paulson's first proposed that Congress help rescue Wall Street, which has seen the collapse of Lehman Brothers and Bear Stearns and the sale of Merrill Lynch. "It's that bad. If we don't get it solved next week, I may go back to delivering papers."




;) Spoken like a true FIRE elite!

[santafe2]

Re: No Time for Utopian Anti-Interventionism

The unexpected consequences are so far beyond the pale that I won't even try to put it into words.

A very painful education is ahead, and many will never get it.

Although I tend toward a very conservative crowd anyway, I've been surprised over the last few weeks how many friends, family and associates have put all spending on hold. They're using the current period to raise cash and pay down debt, (cars, mortgages, etc.). I wonder if it will last, maybe become a new life style. That will certainly be a problem.

[Charles Mackay]

Re: No Time for Utopian Anti-Interventionism

The really rich people wont suffer w/o a bailout.

Trust me.

Depends where they have their money... just like it does for all of us on this board.

[phirang]

Re: No Time for Utopian Anti-Interventionism

Too bad we are low on tar from peak oil and feathers due to bird flu... otherwise we could right the wrong the old fashion way.

The really rich people wont suffer w/o a bailout.

Trust me.

[Charles Mackay]

Re: No Time for Utopian Anti-Interventionism

Without the bailout, the stock market crashes and the retirees and savers lose all or most of their money.

With the bailout, big inflation or hyperinflation happens, and the retirees and the savers lose all or most their money. Oh . . . and the stock market probably crashes anyway.

The only difference in my mind is that with a bailout, the rich folks get to unload their bad debts at tax-payers expense, so they've got more money to spend on building their fortified compounds and/or offshore villas.

I say, if there's going to be pain anyway, let's have the rich folks join in the fun.

The only bailout that I would consider acceptable is that one includes punishing those who have profited from making the bad bets that impoverish the savers and retirees.

I don't know how that would work . . . . maybe:

1) Heavy fines for endangering the savings of retirees' and savers' money. Make the money-men refund their profits in cases where their clients lost money.

2) Immediately ban these "financial wizards" from working in the financial or banking industry, and prevent them from doing so in the future.

3) Or . . . . we could just deliver these "masters of the universe" up for public execution, like the Chinese do to those who damage society. :eek:

Too bad we are low on tar from peak oil and feathers due to bird flu... otherwise we could right the wrong the old fashion way.

Re: No Time for Utopian Anti-Interventionism

Bart - You are referring to unexpected consequences corrolary to the passing of a bailout, not the rejection of a bailout. What consequences in broad line are you referring to? Maybe just a bullet list?

The unexpected consequences are so far beyond the pale that I won't even try to put it into words.

A very painful education is ahead, and many will never get it.

Re: No Time for Utopian Anti-Interventionism

Without the bailout, the stock market crashes and the retirees and savers lose all or most of their money.

With the bailout, big inflation or hyperinflation happens, and the retirees and the savers lose all or most their money. Oh . . . and the stock market probably crashes anyway.

The only difference in my mind is that with a bailout, the rich folks get to unload their bad debts at tax-payers expense, so they've got more money to spend on building their fortified compounds and/or offshore villas.

I say, if there's going to be pain anyway, let's have the rich folks join in the fun.

The only bailout that I would consider acceptable is that one includes punishing those who have profited from making the bad bets that impoverish the savers and retirees.

I don't know how that would work . . . . maybe:

1) Heavy fines for endangering the savings of retirees' and savers' money. Make the money-men refund their profits in cases where their clients lost money.

2) Immediately ban these "financial wizards" from working in the financial or banking industry, and prevent them from doing so in the future.

3) Or . . . . we could just deliver these "masters of the universe" up for public execution, like the Chinese do to those who damage society. :eek:

Let me disagree with your first statement. They didn't HAVE TO lose most of their money. Retirees and other savers have free choice and have had it for the last few years, far before any "crisis" occured, and could have moved their money out. Even those stuck in 401k's could have gone to cash and avoided the nominal losses. When I was buying gold and oil and agriculture they were still buying US stocks and their icons were mocking those of us who did.

Isn't this just the free market at work rewarding those with the right vision (or willingness to listen to those with it) and punishing those who ignored the (pretty obvious) signs? Yes, grandma got carried along for the ride, but ultimately we have to take responsibility for our investments. The true "savers" who don't invest but rely on CD's are the ones who you might claim are screwed (by inflation). The govn't is doing it to them. But stock owners? Easy come, easy go with that.

I agree with at least the concept of "punishing" those who misbehaved. Whatever happened to the concept of Fiduciary Duty? Did something change in the laws that encouraged the insane risk taking and lack of prudence? I don't remember hearing about such insanity as a kid. People who got that far in life were assumed to be "grownups".

[bart]

Re: No Time for Utopian Anti-Interventionism

The unexpected consequences are so far beyond the pale that I won't even try to put it into words.

A very painful education is ahead, and many will never get it.

[Supercilious]

Re: No Time for Utopian Anti-Interventionism

I hope we will be a great country again, but to do that we will need at least a parallel system with metallic money competing with paper money. I would argue that is the BEST system to pursue at this time, you get the flexibility of FIAT with the ability to opt out and have the security of a Gold/silver based system.

You need to have both because you will need the unlimited credit potential of the first (to save the economy and fund the next bubble) backstopped with the safety of the second.

Not sure about that, but that's off topic. I've opened a new thread on this subject:

http://www.itulip.com/forums/showthr...1642#post51642

[jtabeb]

Re: No Time for Utopian Anti-Interventionism

It is certainly interesting to see how some people throw their principles under the bus in times of crisis.

Funny too, I thought that by holding on to principles you avoid crisis and get them over quickly if they happen.

That being said, yeah we need something like the king plan (it keeps the "next bubble" open as a possible policy option, doing nothing removes the "next bubble" as a possiblity completely. And I think that is what EJ is NOT saying.

No bailout = NO NEW BUBBLE. That's the sad fact.

[jtabeb]

Re: No Time for Utopian Anti-Interventionism

Is that Karl Marx as your pic? If so, are you sure you're in the right forum?

Yeah it is, (they didn't have a picture of Ayn Rand, so I chose her antithesis).

Marx wins if you don't have a gold based monetary systems.

Rand Wins if you do.

So both are right or wrong, it depens on the enviornment.

I hope we will be a great country again, but to do that we will need at least a parallel system with metallic money competing with paper money. I would argue that is the BEST system to pursue at this time, you get the flexibility of FIAT with the ability to opt out and have the security of a Gold/silver based system.

You need to have both because you will need the unlimited credit potential of the first (to save the economy and fund the next bubble) backstopped with the safety of the second.

(I'm a little bit socialist, little bit coutry, oops, I mean rugged individualist)

[nathanhulick]

Re: No Time for Utopian Anti-Interventionism

It is certainly interesting to see how some people throw their principles under the bus in times of crisis.

[grapejelly]

Re: No Time for Utopian Anti-Interventionism

The Globe article that you cited pointed to tighter lending standards, not a broken credit system and you're right that is typical from newspapers all around the country right now. I see a big fleecing going on with this Paulson plan as the politicians and the MSM commentary are telling people that credit standards can be loosened again if we just agree to their plan.

I wrote this email today, apologize for the "spam killing" spellings etc.:

In October 1929, the stock market crashed. Fortunately,
President Herbert Hoover was ready! He had already
presented the Hoover Plan for "permanent prosperity".

Hoover injected a phenomenal amount of money into
the economy via the Federal Reserve -- a 10 percent
increase in cash deposits on one week!

The interest rates that the Fed applies to its
member banks dropped to 2 percent.

Bank reserves continued to increase through 1930.

Since stock prices were falling, Hoover forbade
short selling of stocks. Short selling has been
made illegal today for many stocks too. The idea
is that short sellers make clams when stocks
fall, so if you ban short selling you won't have
stocks fall.

Stocks continued to fall in 1930.

And Hoover pushed through the National Credit
Corporatino (NCC) to invest 500 millyun into
shaky banks.

Congress passed into law the Reconstruction Finance
Corporation in early 1932, empowered to issue
1.5 billyun in debt.

Unlike today, that was a lot of clams then!

The RFC could lend clams to commercial banks to
tide them over and to large corporations such as
the railroads.

Meanwhile, peeps were losing their houses and
farms at a record rate.

In a few months time, the RFC lent out 1 billyun
clams, all under great secrecy, to a variety of
favored businesses, especially big railroads.

Unfortunately, all this cash flying around didn't
do much good for the economy.

Banks were not in a mood to lend and Americans
started dealing more and more in cold hard
ca_sh rather than cr_dit.

You see, those bad citizens had withdrawn
800 millyun in currency. Hoover railed against
the average American and blamed them for
"hoarding" clams.

Hoarding isn't a bad idea even today.

Point being: the erroneous conclusions of Bernanke and company, that the Fed did not do enough, and that the US government did not do enough, to forestall the Great Depression.

The government did a LOT. In fact, what they did resembles, quite eerily, what they are doing now. And it did not do any good.

It did harm.

Why didn't it do good? Because banks didn't want to lend and people didn't want to borrow. Mish is right in this one.

Japan pursued a reckless "rescue" fiscal policy post-1990. The US did post-1929. In both cases, as will happen today, the effect was the opposite to that intended, and served to prolong the depression or recession.

[Slimprofits]

Re: No Time for Utopian Anti-Interventionism

It is necessary to create a new system parallel with the existing dysfunctional system in order to mitigate the inevitable economic and financial damage and to facilitate, as seamless as possible, the transition to a functioning financial system or new model of credit and banking.

The credit system is broken, but at the same time people are more dependent on credit than ever with the recession and lending standards have been tightened.

The Globe article that you cited pointed to tighter lending standards, not a broken credit system and you're right that is typical from newspapers all around the country right now. I see a big fleecing going on with this Paulson plan as the politicians and the MSM commentary are telling people that credit standards can be loosened again if we just agree to their plan.

[Rajiv]

Re: No Time for Utopian Anti-Interventionism

See also - Nouriel Roubini on Hardtalk