Tuesday, September 30, 2008

Another scraping from the back recesses of my brain

Again, a comment from Megan McArdle's, What am I so afraid of?, I post:
One thing that just hit me at lunchtime: Where is the government going to get this magical $700 billion? The Treasury doesn't have it laying around in a sack under Mr. Paulson's office. The government only has 2 ways to get that $700b:
  • Sell Treasury paper on the open market (or more likely straight to sovereign funds and central banks). M2 right now is around 7.7 trillion dollars (US style). 700B is around 9% of that. If you believe Shadow Stats, M3 is around 14 trillion. $700b is 5% of that. How are the money markets supposed to react to 5% of the total supply of dollars suddenly being pulled into Treasuries?
  • Have the Fed "buy" the Treasury paper with new money. How exactly is inflation supposed to react if we magically increase M2 by 9%? Fed-printed money is supposedly M3 (i.e. doesn't really count), so the whole justification in inflating the crap out of M3 was that it didn't leak into M2. Making M2 jump 10% in a matter of days just can't be healthy. Sounds a lot like Weimar Germany to this Packrat.

Neither option makes a lot of sense to me, and the latter sounds downright painful. I'm almost suspecting that a natural deflationary recession would be better for us all.

The money system is a zero-sum game. If you spend $50, you had to get it from somewhere. If you try to get it from nowhere (fiat money creation), you end up taking it from everyone.

The American People aren't THAT dumb

Tell me ONE way that the Paulson bailout plan (or the House version of it) will fix the systemic damage in the financial market, and I'll support it. Yes, it will inject up to $700 billion into the financial industry. That's nice. (Of course, no one mentions the $700b+ it'll take out of the financial industry in treasury paper....) That would help a bit, but it won't fix anything!

If I'm supposed to part with my part of $700b, what will it do to keep this from happening again?

No Love of the Presidential Candidates in Congress

Milady and I were talking last night, and I said, "No one is talking about how much Nancy Pelosi and Harry Reid hate Obama." "I was just sitting here thinking the same thing."

This was the moment for Obama to shine. President Bush threw out a plan that was little more than "Give Paulson $700b and stand back". Everyone in the country hated the plan because it threw money at the problem, not solutions. This was a moment that was ripe for a leader. All the Democrats had to do was compose a Democratic version of the bill that appealed to their base and the moderates, and stick Obama out in front of it. There are really smart Democratic economists; Robert Reich could come up with a better bailout than this. (N.B. After looking a bit, Robert Reich appears to have a blog, and he DID come up with a bailout plan that makes a lot of sense, even if he does like the more noxious idea of bankrupcy judges rewriting mortgages.) Then stick Obama in front of a teleprompter camera and have him tell the country why its such a good plan and how he is leading the Democrats in the House to pass the bill. They could then make it the Senate Republican's fault, and by extension John McCain's fault.

But no, Mr. Obama is AWOL. Neither Pelosi nor Reed will even mention his name, or get him involved in the action. I don't know if this is payback for defeating Clinton, or a strong measure of personal dislike, but they don't want him on that podium.

I don't have to post much about the Republican's inherent dislike of McCain. To quote the SNL skit (hat tip: Vox Day):
I have never supported President Bush. I have undermined President Bush, just ask any Republican! I have always been disloyal to this president, a disloyal, untrustworthy, unreliable renegade who has abandoned my party when it most needed me. The fact is, you simply can't count on John McCain. That's why on November 4th, the American people will elect me their next president.
The best satire is 99.9% true. The House Republicans KNOW that McCain would sell them down the river in a moment, and are completely unwilling to put one ounce of trust in him.

If either major party had a candidate with one ounce of leadership, he would have taken over that debate and stepped in on this bill and taken over. Instead we have an old warrior politician who's burned too many bridges and a younger man who's never taken the time to make any.

Monday, September 29, 2008

A comment on Carpe Diem

Over at Carpe Diem, in "New Banking Data", Anonymous asked:

How can interbank lending be frozen while other types of lending are ok?

Here's my opinion:

It's a sign of the CDS meltdown. The banks trust their customers to repay their debts more than they trust each other to stay solvent.

I think this credit crisis will spread some, especially if more banks closed. However, we don't need to patch over that debt; we need to burn it.

UPDATE: A Fox News talking head said "we're too much in debt. Let's give them more." Yeah, right....

An important comment

Megan McArdle has all but abandoned libertarianism to support the bailout. On the post So what happens now?, I noted:

On one side we have Japan: a 10+ year depression caused by the government bailing out every Tom, Dick, and Harry that got burned by lending money before a real estate market collapse.

On the other side, Nancy Pelosi and George Bush are telling us that there will be Hell On Earth (tm) if we don't bail out every Tom, Dick, and Harry who got burned by lending money before a real estate market collapse. Excuse me if I think we're going down the wrong road.

You don't cure a hangover by handing out vodka, and you don't cure too much bad loans by handing out more loans. You close the loans, and start over. The credit markets don't need quantity, they need quality.

Sunday, September 28, 2008

It burns, it burns....

When I see a picture like this:

I have to resist the urge to grab my wallet and a gun. When Barney Franks is this happy, the rest of us should be very, very afraid.

Saturday, September 27, 2008

Who won the debate?

So, who won the McCain-Obama debate? I think it's a draw. Mr. McCain certainly was on the attack, but he wasn't mean. He did rattle Mr. Obama, which surprised me some. OTOH, Mr. Obama certainly was able to give up his teleprompter and actualy speak. If there was one sound bite that conservative talk shows will run with, it's all of the "I agree with Senator McCain" type statements.

I could tell their ages and generations. McCain was all "Senator Obama" this and "Senator Obama" that, while it was "John" this and "John" that. My mother, Miss Manners that she is, would have had my hide for talking to an older man that way. I know it's more casual in life now, but I just can't help thinking that things didn't improve.

So, did you actually change your mind because of this debate? I didn't. I'm still voting for Bob Barr. Even if those square glasses of his look like old women's glasses....

Friday, September 26, 2008


I'm restoring my old posts. I might make some new ones too. Eventually.

Update: I have all of my "new" posts up, and I was able to dig out the archive from my original blog. Right now, I'm going through them as fast as Blogger's spam filters let me work.