Last week, Brian Carney interviewed Anna Schwartz, who coauthored "A Monetary History of the United States" with vaunted economist Milton Friedman in 1963.
http://online.wsj.com/article/SB122428279231046053.html
I'll spoil it for you. Anna says the problem with the economy isn't lack of (taxpayer bailout) money. The problem is that nobody (individual or institutional investors), including Barack Obama (representing the interests of taxpayers), wants to be exposed to all of the toxic waste banks and other companies are hiding in their balance sheets. Lots of financiers bought snake oil. Now it's toxic, and they are claiming that those toxic assets are only temporarily toxic. Few are talking about what it will take to turn that toxic waste into gold again. All of this toxic waste really represents the price inflation of (mainly) real estate assets, caused by loose lending practices. Some suggest that we can, through some miracle of economic policy, reestablish real estate valuations from 2005. This would be the worst inflationary mistake of all time.
What even fewer people, Anna Schwartz excluded, are talking about is restoring the basic trust in the dollar value of assets in our economy. If a player cannot pay debts owed, then the rescue should be up to the creditors. If the government needs to step in, we cannot afford to lose the information about what was overvalued and who took the bad risks. This is the basic information upon which the markets, and thus our global market economies depend.
What we seem to be doing is doubting markets' ability to set prices for the toxic waste, and engaging in wishful thinking that somehow this toxic waste is going to get more favorable valuation from the market in the future. If government steps in an buys the toxic waste at inflated values, we will have essentially allowed bad people to print money, causing inflation to worsen drastically. This, obviously, is the solution favored by bankers. It is macro economically equivalent to bailing out real estate, but it leaves the little guy completely in the dust.
The best case scenario is to just bite the bullet, and let failures fail. Once we are able to sort the good from the bad, any government intervention can be informed and targeted. This will doubtlessly create a sharp economic decline, but a quick bottom also means a quick return to recovery. Opportunity is waiting for initiative. We should set up a facility to auction off the toxic waste, and be done with it. When we have learned from our mistakes, we can move on. Regulation, in this case, would be pro-market because it would enforce accounting standards to prevent the kinds of coverups which make bad things worse. Informing markets means empowering markets. We need to treat this problem, like a much bigger Enron, as an accounting issue and regulate it out of existence.
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There's not a lot of time left, and still a lot to do. There is no time to sit on the sidelines wringing our hands. It's going to take all of us working together. Remember that this campaign is not accepting PAC money, and what your dollars are doing to help the hundreds and hundreds of people working 12 hours a day, 7 days a week, furiously, gleefully to register new voters, get out the message, and get out the votes. Look at the Electoral-Vote.com map and consider how close important swing states are: Florida, Ohio, Virginia, North Carolina, Pennsylvania, Michigan, Wisconsin. Also consider how close we are to a Filibuster-proof majority in the Senate or a strong supermajority in the House.
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GOTV
In the eleventh hour of the campaign, everything switches to Get Out The Vote (GOTV) mode, and we MUST make sure that our field organizers have all the resources to mount a highly effective GOTV effort on and before election day. That way we can exceed our poll numbers and win some surprise states too!
Let's get fired up and DO SOMETHING to put this movement over the top!
This year, for Christmas, I'm going to the polls to give my daughter a future!
From Chalking for Obama
Please dig deep. Time is running out. No matter what happens, you will only regret not doing enough. Don't think too much about it. Just ask yourself "How much is enough?"
Please? Thanks.
"When virtue has slept, she will get up more refreshed.." --Nietzsche
Nothing the scope of what is currently happening in the US credit markets could be perpetrated without our participation. What could we possibly have done to deserve this? At the root of this, most everyone has accepted the sophist hand waving argument that something new, which is to be taken for granted as good, which nobody understands, should be allowed or even recklessly encouraged to ferment.
It has nothing to do with finance: it is an attack on rationality itself. The financial crisis is simply the most sensitive and untimely measure of the loss of basic trust. Because we have abandoned the middle ground of rational thinking, and we have replaced it with wishful thinking, the breeze may shift or the tides come in and dissipate our prosperity--what we had believed were the foundations of our civilization. The wishful thinkers collectively invite the wrath of God.
On Thu, Sep 18, 2008 at 8:36 AM, Cabbage Ron wrote:
A purveyor of door hardware in the Lower East Side, who gave only his first name, Henry, 43, said he had seen problems with subprime lending long ago. "I never understood," he said. "I didn't think I was sophisticated enough, but apparently I was. I thought it was just my old-world way of thinking."
