| Tuesday,
September 30, 2008
It's actually midnight Monday and I am about to go to bed.
I have a persistent nagging thought: if we had simply adopted Poulson's
execrable plan of giving him $750 billion to spend as he saw fit to stimulate
confidence in the economic system, the nation would be One Trillion Dollars
wealthier today. It's unlikely that Poulson would need the entire $750
billion, or that very much of that would be lost in any event; there's a
good argument that the US would end up making a profit from the confidence
injection. Now of course some money would be stolen. Poulson might even set
aside a pension fund for himself on the theory that this would probably be
the last job he would ever hold, and he would probably be hated no matter
how successful he might be. Spending that much money would require hiring
some people and of those some would inevitably be crooks.
And the nation would be One Trillion Dollars wealthier today. The worst
that might happen would be that we would lose the entire $750 billion
(although it is very difficult to make money actually vanish by stealing it;
you can't get any benefits from the thefts without spending it and that
injects it back into the system.) Alas, the money erased yesterday may just
plain be gone, as is the $800 million Norway's pension fund had invested in
Lehman Brothers.
If we do not restore confidence and liquidity into the financial system,
it will get a very great deal worse.
Today is a day for reflection. Tomorrow the Congress meets again.
Unfortunately the market will be open today. I fear the evening and the
closing bell. All over Europe markets are falling. Asian markets are down.
And tomorrow is a new day.
=================
If you are curious as to how we got to this mess, read
http://www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf
and watch
http://www.youtube.com/watch?v=H5tZc8oH--o
=========================
There are two articles in today's LA Times:
Jonah Goldberg on the editorial page
http://www.latimes.com/news/opinion/
la-oe-goldberg30-2008sep30,0,5468292.column
and Tom Petruno's 'No' vote could hit you in your 401(k)
http://www.latimes.com/business/la-fi-petruno30-2008sep30,0,4475947.column
From Petruno:
The anti-bailout crowd got what it wanted
Monday: More pain for Wall Street fat cats, to the tune of the biggest
one-day drop in key stock indexes since the 1987 market crash.
Unfortunately, that pain also was felt in the not-so-fat 401(k) retirement
savings plans of millions of Americans.
Both are worth reading, particularly by those who are more concerned with
punishing the guilty than with trying to do something about the coming
fiscal slide.
Those who believe that the best remedy for the Great Depression was
Hoover's policies from 1929 to 1933 are likely to get their laboratory
experiment, only it won't last quite so long. It's quite likely that Hoover
and his Treasury Secretary Andrew Mellon were right, and the best way to end
the Depression and panic was to let the fundamentals rule; ride it out, let
it hit bottom, and build from the low point in a sound way. It hardly
matters. The election of 1932 routed the Republicans, and it took World War
II to end the Depression. Along the way we got the New Deal, which cost over
the long run a few trillion dollars.
Rush Limbaugh is almost speechless as he rails against intervention in
the economy. And he is concerned about Federal meddling and the pork for
Democrats that will be in the final bailout. You know it. After January 2009
it's likely that we'll have Freddie Mac and Fannie Mae back with a vengeance
in all their lobbying and campaign contribution glory; we'll have a new
bureaucracy; we'll have a new Hundred Days and a National Industrial
Recovery Act (the Mussolini inspired fascist system of price fixing boards
-- I think there is still one of them for milk, and the citrus price fixing
boards were with us until a few years ago). We will have something like the
WPA. If you thought that Poulson's mortgage investment plan -- it would have
been better to call it that, rather than 'bailout' -- was bad, wait until
you see what is going to happen after next January when the Democrats have
both a majority in the House, a cloture-proof majority in the Senate, and
the White House.
Of course Pelosi got what she wanted. Monty says:
Subj: Bailout bill failure
I think one could argue that Pelosi knew *exactly*
what she was doing, to wit: enraging the Republicans so they'd vote
against the bill and the Democrats could then blame the Republicans for
its failure.
It's an old Bolshevik strategy for frightening the
People into giving Absolute Power to the Party: "The worse, the better."
Rod Montgomery==monty@starfief.com
And apparently the Republicans in the House took the bait.
Bob Holmes points out that this wasn't a bailout,
but an investment:
Bailouts versus Investment Opportunities
Jerry,
This morning's failure of the "bailout" bill to pass
the House is not surprising, but should have been expected given the
following:
1. Paulson sent a three page bill to Congress.
2. Over the weekend, in the hands of Congress, it
became 100 pages.
3. The Democrats, with their majority in the House
did not have enough votes to pass the Bill.
4. Before the Bill came to a vote Nancy Pelosi gave
a partisan speech essentially blaming the Republicans and the Bush
administration for the problem.
Of course there is always more than one way to
characterize a course of action. In the current case the Press and many
Congress critters have characterized the course of action recommended by
Paulson as a "Bailout." This is a very poor characterization since in the
absolutely worst case in the long term only some reasonably small
percentage of the Government funds used to purchase the currently impaired
mortgage securities might be lost. The more likely scenario is a fairly
significant Government profit. I have seen estimates of a profit of 400 to
500 billion on the investment of 700 billion.
Isn't is amazing what can happen with the use of a
single word coupled with moron for a House Speaker!
Bob Holmes
And of course the Republicans took the bait. I would say Pelosi was
Machiavellian, not moronic. Now, of course, if we have a new bill it will be
a Democrat-attracting bill, with ACORN and Union Members of corporate boards
ex officio, and various other such measures and the Republicans will have to
vote against it.
The original Poulson plan was called a bailout, but it in
fact was an investment: the United States would buy, at prices somewhere
near the actual intrinsic value, a number of properties. We would hold them
until the panic ended, then sell them off in an orderly fashion.
Rush Limbaugh wants the Republicans to run on principle: no
compromises. As Calvin Coolidge said when there was a financial crisis: his
advice was "Get religion." It was the right thing to do at the time. It was,
on principle, the right thing to do this time, and my good friend
Dana Rohrabacher voted against the bill
yesterday precisely because he would always vote against that kind of thing.
But this is the United States, and whatever your views of
populism, something will be done. As Monty observes, when things get tough
enough, the people will, in panic, turn to someone who looks like a strong
leader. That happened in Germany as the Weimar Republic floundered, and it
happened in 1932 when we gave Roosevelt his 100 Days and New Deal.
I have no crystal ball, but my guess is that you will one
day wish we had adopted Poulson's execrable proposal when it was first
offered.
Yesterday we lost a Trillion Dollars. I don't know what will
happen tomorrow.
As for me, I'll ride it out: I'm not selling. My house is
nearly paid for. I can't live on social security and I suspect my CREF
pension fund is likely to be worth considerably less than it is even today
(which is about 6& less than it was worth yesterday) but story tellers
usually survive in bad times. I'll probably have to do a lot more singing
for my supper -- thanks to all you subscribers I have had suppers all year
despite 50,000 rad burning away at my brain and sapping my energy -- and I
suspect all my readers will do well. We are all out on the right side of the
bell curve, and we generally will survive; some will do well.
But when this is over, I wonder how many "Reagan Democrats"
will be left? The spin put on all this will be that the terrible Republicans
and deregulation caused the whole problem. And that is the message most of
the people hear.
And I had better get to singing.
On Panic
Reading the above I sound as if I am on the edge of
hysteria. I suppose that's a subconscious triggering of ancient memories,
soup kitchens and long lines for any job available. Not that I was in such
lines -- I was a schoolkid at St. Anne's, and later at Capleville
Consolidated (both schools had 2 grades to a room, and both taught every kid
in the school to read, but that's another essay).
The problem is this: intellectual arguments about what is
the best thing to do about the financial crisis are not going to prevail. We
will not do the right thing (whatever that is).
Intellectual arguments about which party should govern are
not going to prevail. We will not do the right thing.
If you can keep your head when all about you,
Are losing theirs and blaming it on you --
Then you will probably lose your shirt along with those who
panicked. You won't do as bad as they did, nor will you do as well as those
who early on sold out and bought gold. And those who tried to do the right
thing will be voted out of office.
And that is why I keep looking at what the government ought
to do here. Sure, the people who created this mess will come off well if the
government now goes out and buys those bad mortgages. Sure, some of the
people who bought places they couldn't afford may be bailed out as
foreclosures are halted or delayed, and will end up with a windfall that
didn't go to the people who saved, made down payments, took out a mortgage
that amortized their debt, and never missed a payment. It's about the same
effect as we would have had if Fannie Mae and Freddie Mac had never existed
and instead we had created a Federal Housing Acquisition Authority that used
tax money to buy houses and then sell them to people who could not otherwise
afford them. (Fannie Mae and Freddie Mac did that, sort of, but the people
who got the houses didn't really own them, and they got them for prices they
could not afford). Now of course that kind of distributist action
doesn't sit well -- but it's a hell of a lot better than what we have. I am
not half so afraid of giving things in fee simple to people and thus
inducting them into the middle class if they can stay in it, than I am of
the complex mess we created to accomplish the same result. The Fannie Mae
and Freddie Mac method created millionaires selling CD's on How To Become a
Millionaire by Flipping Houses. (And at least one would suppose that a
"bailout" or investment bill would not rescue those who are not living in
the houses they can't pay for.)
My panic is this: Hoover arguably did the right thing in the
sense of not changing the fundamental capitalist structure of the US. The
result was the election of 1932, the 100 Days, the NIRA and then NRA, and
the New Deal; which cost us trillions of dollars, but over time, and not all
at once, and didn't end the Depression. It took war to do that.
If the government is not seen -- visibly seen -- to be doing
something, I suspect the populace will turn the government out and bring in
those who promise they will do something. That happened to Weimar Germany
who brought in the National Socialist German Workers Party who promised to
Do Something and Do It Fast. It happened in Italy when crises brought in the
blackshirts led by Mussolini who lived and died as a socialist, and who
originated a number of the policies of the New Deal.
I am listening to the Democrats, as they begin to expand the
"benefits" of the bill, with immediate benefit to the taxpayers. God knows
what Christmas Tree Ornaments will grafted onto it. Perhaps we will be
spared ACORN, but I wouldn't bet on it. After all the Democrats have the
power to pass any bill they like, and if the President vetoes it, they can
blame the resulting financial panic on the Republicans.
And maybe I'm just getting old. After all, story tellers
usually do well in bad times.
The great thing is not to lose your nerve.
====================
Back to computers and technology: the newest mailbag is up
at Chaos Manor Reviews.
=================
All the chatter I hear on the radio seems to be more
concerned with "taking money from the taxpayers and giving it to Wall
Street."
I suspect the market crash will "take money from the
taxpayers"; but once the Democrats get in, you will really see "taking money
from the taxpayers" and who they will give it to isn't in much doubt. But I
suppose that's just my whimsy.
============
The Dow closed up 500 and more than half yesterday's loss
was recovered. I breathe a sigh of relief, and also take heart: apparently
many of the investors did not lose their nerve.
I didn't think that would happen, and I am much cheered. I
do ask: is this due to the panic among the politicians who, when they saw
the crash, vowed to go DO SOMETHING AND DO IT NOW -- ? That is, is it the
hope of a new Investment Bill (it is NOT a bailout) that has given Wall
Street some hope and halted the panic?
Heck, if a promise of a bill will do it, then promise away
and do nothing..... (I hasten to add that is whimsy, but indeed it
corresponds with reality).
And now I really am going to go sing for my supper, which is
to say I am going to work on Mamelukes. After that comes LisaBetta, the
proposal with Niven on a new Big Book in which we Hit The Earth With
Something Large, and the proposal for The Mask on the Wall. Which is
to say I have my work cut out, and none of it is going to result in much
income before end of the year. Keep those
subscriptions coming.
===================
Incidentally, Obama wants the "Fairness Doctrine". That will
kill the Talk Radio Stations. I wonder if it will apply to ME? Will I be
required to print anything Al Franken sends? Or excerpts from the Daily Kos?
=================
And a quick truth:
stock loss??
I would like to point out an truth about the stock
market. No money is lost until a stock is sold. So if you sit tight while
others panic you MAY actually come out better. However Calpine, Lehman
Bros. and Global crossing demonstrate the downside of this strategy. The
bailout was shaping towards a Swedish model bailout when That IDIOT Pelosi
gave a speech that derailed it. RICO may be used to some effect in this
instance as CEO's used a business to defraud their stockholders. mayhaps
we could catch a few congresscritters in this net?
Nuclear Power, It's not rocket science it's PLUMBING
!
Thomas Weaver
Unfortunately, if these are held until recovery, the fund
that holds them isn't going to be paying a lot of dividends -- assuming it
survives. Market crashes are not good.
And yes, we were moving toward the Swedish model in which
the taxpayers are not soaked at all, while the market is cleared of
cholesterol. But that's gone. My guess is that Pelosi was Machiavellian, not
idiotic, and that a number of Republicans bit. Now they will do a Democrat
attracting bill with lots of goodies. ACORN may even come back, If they
don't need Republicans they can do anything they like.
============
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