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Re: Why Can't The Majority Act?
From: David Farber <dave () farber net>
Date: Sat, 27 Sep 2008 12:19:32 -0400

Begin forwarded message:

From: "Dave Wilson" <dave () wilson net>
Date: September 27, 2008 12:15:09 PM EDT
To: dave () farber net
Subject: Re: [IP] Re: Why Can't The Majority Act?

Paul Krugman has an answer:

September 27, 2008,  8:48 am
Tricky bailout politics

Nouriel Roubini has a characteristically scathing takedown of the Paulson plan, and here's the thing: language aside, his economic analysis is similar to mine. The fundamental problem in the financial system is too little capital; bizarrely, the Treasury chose not to address that problem directly, by (say) purchasing preferred shares in financial institutions. Instead, the plan is premised on the belief that toxic mortgage-related waste is underpriced, and that the Treasury can recapitalize banks on the cheap by fixing the markets' error.

The Dodd-Frank changes make the plan less awful, mainly by creating an equity stake. Essentially, this makes it possible for the plan to do the right thing through the back door: use toxic-waste purchases to acquire equity, and hence inject capital after all. Also, the oversight means that Treasury can be prevented from making the plan a pure gift to financial evildoers. But it's still not a good plan.

On the other hand, there's no prospect of enacting an actually good plan any time soon. Bush is still sitting in the White House; and anyway, selling voters on large-scale stock purchases would be tough, especially given the cynical attacks sure to come from the right. And the financial crisis is all too real.

So is it better to have no plan than a deeply flawed plan? If it was the original Paulson plan, no plan is better. Dodd-Frank-Paulson may just cross the line — let's see what details we have if and when agreement is reached.

If the plan looks not-awful enough, I'll be pro. But I won't be cheering — I'll be holding my nose.

On Sat, Sep 27, 2008 at 10:41 AM, David Farber <dave () farber net> wrote:

Begin forwarded message:

From: Karl Auerbach <karl () cavebear com>
Date: September 26, 2008 7:41:06 PM EDT
To: dave () farber net
Cc: ip <ip () v2 listbox com>
Subject: Re: [IP] Re:   Why Can't The Majority Act?

David Farber wrote:

*From: *Ken Deifik <kenneth.d () roadrunner com

It's already become a populist issue among know-nothing voters:

Know nothing is a rather broad brush.

I'm not an wizard on economic issues.  Nor am I an expert in medicine.

But once upon a time I had a substantial spinal injury and it was recommended by my doctors that I try acupuncture to see if it might reduce some of the ancillary pain.

So I went to Acupuncturist A. She started sticking pins into my toes and uttering what sounded like gibberish about how the aura of my shakra is focused around my foot and that the energy would emanate to my spine. Sounded like nonsense. She accomplished nothing except to leave me with sore feet.

Acupuncturist B was rather more scientific - he admitted that he didn't know how the pins affected things but that he had learned through experience (and training) that certain locations, usually near the affected area, do produce relief. Much to my surprise his treatment worked.

The point I'm trying to make is this: even though we "know nothings" may not comprehend the deep meaning of economic processes, we do have common sense. And we can distinguish between so-called experts who themselves don't have a clue and those who, even if they don't comprehend everything, do have more experience, knowledge, and wisdom than we have.

So far the bailout seems to be more like the person who tried to solve my spinal pain by manipulating metaphysical auras and shakras in my toes.

If the issue is mortgages that people are having trouble paying or are finding that they owe more than the home is worth then the common sense notion of proximity suggests that the cure should be applied near that problem and not at the very remote site of the speculative firms that have bought financial instruments N levels removed from the house and the person living in that house.

What I want is a clear explanation why the best method of cure is to stick pins in a part of our economic system that is so far from the causative event.

Absent that kind of clear explanation is it any wonder that I am skeptical?

By-the-way, it seems that in the race to pour money onto the financial system we've forgotten that we continue to flush cubic money down the toilet of a couple of wars. Perhaps we should say "our problems at home are big enough that we have to stop solving other peoples' problems for a while."


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