Comments on: Martin Wolf: "The government can rescue the economy" http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html Sun, 22 Nov 2009 07:56:24 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html#comment-4534 Anonymous Thu, 28 Feb 2008 02:25:00 +0000 http://www.nakedcapitalism.com/2008/02/martin-wolf-the-government-can-rescue-the-economy/#comment-4534 Sure, the government can rescue the economy. The result will be a <a HREF="http://cij.inspiriting.com/?p=337" REL="nofollow">recipe for hyperinflation</a>. Sure, the government can rescue the economy. The result will be a recipe for hyperinflation.

]]> By: E. Cartman http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html#comment-4532 E. Cartman Wed, 27 Feb 2008 23:40:00 +0000 http://www.nakedcapitalism.com/2008/02/martin-wolf-the-government-can-rescue-the-economy/#comment-4532 P.S. Re-regulation WTF? The ROOT of this problem was the fact that the ratings agencies USED PULL at the SEC to block competing agencies from arising. Is that market failure, or a regulatory problem?<br/><br/>The FHLBs and TAF, opaque regulatory institutions both, have bailed out the banking industry to the tune of $350 billion. Is that a market failure or a REGULATORY problem? Wolf's OWN REPORTERS, Gillian Tett and Krishna Guha, broke the FHLB story to the sheeple in mid-December. Doesn't an editor read what his reporters write?<br/><br/>The insulation of the ratings agencies by the SEC, the "energetic" reaction by Bernanke, Paulson et al, and the corporate shadow welfare state of the TAF, FHLBs, subsidies, release of OFHEO caps, and so on, are a CASE STUDY of why regulation is doomed.<br/><br/>What is so infuriating is that Wolf knows this, yet he plays to the mob by advocating more inflation, more borrowing, more platitudes, more promises which cannot be fulfilled.<br/><br/>The TAF has printed >$100 billion. The FHLBs, over $250 billion. The misbegotten, "energetic" stimulus, $150 billion. The wars in Iraq and Afghanistan, $170 billion. The notional deficit, $250 billion. Ginnie Mae, Freddie Mac, who the hell knows how much garbage they have accepted in return for future jobs with Citigroup and the other decrepit institutions lapping up at the government teat.<br/><br/>Martin Wolf is at least vaguely aware of this. I suppose the allure of cocktail cachet, and the prospect of having the ear of panicked government officials, is too much for him to resist. Like Summers, Bernanke, Mishkin, and Paulson, he is but a weak man and a snake-oil salesman to boot. P.S. Re-regulation WTF? The ROOT of this problem was the fact that the ratings agencies USED PULL at the SEC to block competing agencies from arising. Is that market failure, or a regulatory problem?

The FHLBs and TAF, opaque regulatory institutions both, have bailed out the banking industry to the tune of $350 billion. Is that a market failure or a REGULATORY problem? Wolf’s OWN REPORTERS, Gillian Tett and Krishna Guha, broke the FHLB story to the sheeple in mid-December. Doesn’t an editor read what his reporters write?

The insulation of the ratings agencies by the SEC, the “energetic” reaction by Bernanke, Paulson et al, and the corporate shadow welfare state of the TAF, FHLBs, subsidies, release of OFHEO caps, and so on, are a CASE STUDY of why regulation is doomed.

What is so infuriating is that Wolf knows this, yet he plays to the mob by advocating more inflation, more borrowing, more platitudes, more promises which cannot be fulfilled.

The TAF has printed >$100 billion. The FHLBs, over $250 billion. The misbegotten, “energetic” stimulus, $150 billion. The wars in Iraq and Afghanistan, $170 billion. The notional deficit, $250 billion. Ginnie Mae, Freddie Mac, who the hell knows how much garbage they have accepted in return for future jobs with Citigroup and the other decrepit institutions lapping up at the government teat.

Martin Wolf is at least vaguely aware of this. I suppose the allure of cocktail cachet, and the prospect of having the ear of panicked government officials, is too much for him to resist. Like Summers, Bernanke, Mishkin, and Paulson, he is but a weak man and a snake-oil salesman to boot.

]]> By: E. Cartman http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html#comment-4531 E. Cartman Wed, 27 Feb 2008 23:26:00 +0000 http://www.nakedcapitalism.com/2008/02/martin-wolf-the-government-can-rescue-the-economy/#comment-4531 A government is nothing more than a front company for inflation. How adeptly it allocates that inflation determines whether the returns of "public investment" funded by inflation will be poor (US) or heinously poor (Japan). How much less it inflates than other governments determines how much net private capital flows into the country.<br/><br/>A government can "bail out" anything, because presumably it can set the value of money. And by "bail out," that means liquidating a huge long-term asset (global economic and currency credibility/ stature) in favor of a short term stupidity (allowing idiots who knew the game they were playing, to keep their houses).<br/><br/>If you think that's a good trade, you're an idiot, possibly named Martin Wolf. Or you're an old person who prioritizes stability at any cost, regardless of the inflationary legacy you bequeath to the children of the society you supposedly cherish. A government is nothing more than a front company for inflation. How adeptly it allocates that inflation determines whether the returns of “public investment” funded by inflation will be poor (US) or heinously poor (Japan). How much less it inflates than other governments determines how much net private capital flows into the country.

A government can “bail out” anything, because presumably it can set the value of money. And by “bail out,” that means liquidating a huge long-term asset (global economic and currency credibility/ stature) in favor of a short term stupidity (allowing idiots who knew the game they were playing, to keep their houses).

If you think that’s a good trade, you’re an idiot, possibly named Martin Wolf. Or you’re an old person who prioritizes stability at any cost, regardless of the inflationary legacy you bequeath to the children of the society you supposedly cherish.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html#comment-4530 Anonymous Wed, 27 Feb 2008 22:17:00 +0000 http://www.nakedcapitalism.com/2008/02/martin-wolf-the-government-can-rescue-the-economy/#comment-4530 Recapitalise the banks but jail the bankers. <br/><br/>Seriously. It's the only way they will learn. Five to ten years of rock breaking. If the court cases are taking too long, there's always rendition. Recapitalise the banks but jail the bankers.

Seriously. It’s the only way they will learn. Five to ten years of rock breaking. If the court cases are taking too long, there’s always rendition.

]]> By: john jansen http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html#comment-4510 john jansen Wed, 27 Feb 2008 12:26:00 +0000 http://www.nakedcapitalism.com/2008/02/martin-wolf-the-government-can-rescue-the-economy/#comment-4510 Certainly the crisis is a result of a combination of factors which created a perfect financial storm. The subprime crackup would have been bad enough if been contained but the unintended consequence is that is sparked an epiphany amongst risk managers who delved into their own portfolios and found excessive risk. That risk accumulated in the Long Term Capital aftermath and that trade and its variants was a driver of profit and performance for nearly a decade.<br/>The unwinding of positions,leveraged and otherwise,which took a decade to construct is a long and painful process and attempts to short circuit that process will only make the ultimate conclusion more painful. Certainly the crisis is a result of a combination of factors which created a perfect financial storm. The subprime crackup would have been bad enough if been contained but the unintended consequence is that is sparked an epiphany amongst risk managers who delved into their own portfolios and found excessive risk. That risk accumulated in the Long Term Capital aftermath and that trade and its variants was a driver of profit and performance for nearly a decade.
The unwinding of positions,leveraged and otherwise,which took a decade to construct is a long and painful process and attempts to short circuit that process will only make the ultimate conclusion more painful.

]]> By: The Social Pathologist http://www.nakedcapitalism.com/2008/02/martin-wolf-government-can-rescue.html#comment-4508 The Social Pathologist Wed, 27 Feb 2008 11:27:00 +0000 http://www.nakedcapitalism.com/2008/02/martin-wolf-the-government-can-rescue-the-economy/#comment-4508 Bailing out the Banks, helps the Banks bu not the debtors who still have to pay back their original loans to the banks. The government taking losses in no way ensures that the Ponzi scheme which has underpinned asset prices would resume.<br/><br/>There is no way out of this mess.<br/><br/>The choice is which is the least toxic poison.<br/><br/>1) Recapitalise the Banks by shifting bad loans onto the Goverment, socialises losses but in no way encourages people to borrow money in an enviroment which is likely to see falling asset prices.<br/><br/>2) Inflating away the debt benefits the banks and all other debtors but screws savers, i.e those about to retire.<br/><br/>3) Doing nothing sees a couple of large banks go under, the economy slide into a recession proportionate to the excesses of the boom and a chastising of the stupid and reckless not to borrow/lend as much.<br/><br/>Assume crash positions. Bailing out the Banks, helps the Banks bu not the debtors who still have to pay back their original loans to the banks. The government taking losses in no way ensures that the Ponzi scheme which has underpinned asset prices would resume.

There is no way out of this mess.

The choice is which is the least toxic poison.

1) Recapitalise the Banks by shifting bad loans onto the Goverment, socialises losses but in no way encourages people to borrow money in an enviroment which is likely to see falling asset prices.

2) Inflating away the debt benefits the banks and all other debtors but screws savers, i.e those about to retire.

3) Doing nothing sees a couple of large banks go under, the economy slide into a recession proportionate to the excesses of the boom and a chastising of the stupid and reckless not to borrow/lend as much.

Assume crash positions.

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