Tuesday October 14, 2008 - 21:37:44 GMT
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Forex Blog - Death of Dogma...for now anywayIn case you did not notice, the
economic ideologues in the White House and Treasury hoisted the white flag of
surrender on Austrian economics in the last week. TARP, as it was
initially defined (and now redefined) was an attempt to cast a government
bailout in a market mechanism and with a little sorcery keeping government
ownership in the private sector limited to FDIC temporary takeovers of weak and
To quote from the Treasury Secretary
Paulson just a few weeks back in his Congressional testimony to convince
Congress that TARP was the way to address the crisis, he said "There were some that said we should just
go and stick capital in the banks, put preferred stocks, stick capital in the
banks. And that's what you do when you have failures. You know, that's what
happened in Japan. That's what happened in other spots. And we have dealt with
some failures. And we've dealt with them where there's capital. But we said, the
right way to do this is not going around and using guarantees or injecting
capital, and there have been various proposals to do that, but to use market
Even the most extreme
dogmatists who play economists on TV like CNBC's Kudlow was one of the loudest
cheerleaders for government intervention.
make for a very pragmatic approach to policy making in bull markets and credit
bubbles...they are the license to get paid. Low taxes, self-regulation of
markets (derivatives, shadow banking) and trickle down economics on
steroids. With no serious support in mainstream academic economics, supply
side economics (these ideologues assert allegiance to Austrian economics, albeit
falsely) gets top billing on cable news providers in the business space CNBC and
Fox as the get super rich mentality dominated Wall Street for the last 5
years. It was as if nothing was leaned from 9-11 like sacrifice and rainy
day preparation much less risk management for tail events. Anyone telling
you about being overleveraged, too concentrated or hopelessly backward looking
(yesterday is a good guide to the next century) were chastised Ã¢â‚¬â€œ run out of
government, run off of Wall Street and run off of Main Street.
Now that the biggest
asset bubble in history has burst (property market and its derivative the credit
market and its derivative the credit derivative market) the bloviators of
Austrian/supply side nonsense warn that Obama is going to socialize the economy
(this is one for the Daily Show). Unless Bush changed parties the only
socializing of business institutions is happening right now and is being done by
a Republican president, Republican Treasury Secretary, Republican Fed Chairman
and Republican FDIC Chair. This is not about finding the religion of
government intervention and regulation but is all about insuring against the
downside after 5 years of off the hook excess. And more clearly it means
killing the private banking system to save a public banking system.
And yet all we see on
TV are fear tactics - who is Obama, he pals around with terrorists (not only
Ayers but Pelosi and Reid), he wants to nationalize Dairy Queen, and he wants to
raise everyone;s taxes. Are you afraid yet? Are you angry yet?
We all know what Pelosi, Reid and Ayers share in common Ã¢â‚¬â€œ they all hate the
country and love the enemy right?
Not even the WSJ could
ignore some of the hypocrisy of the campaign. Today it reported on how
McCain (well the RNC) is raising money on Wall Street and joining Lou Dobbs
slime job on the very people who the Arizona Senator is asking for money.
I can't remember a presidential campaign when the nominee of a leading party is
running as a de facto independent and against the current party leader President
9-11 should have left
the US with a deep sense of prudence, sacrifice, tolerance (against intolerance)
and unity. Instead it left us with no sacrifice outside of military
families, no prudence whatsoever on Wall Street and Main Street, discernable
intolerance and a nation at war with itself ideologically and politically.
Soros has a new book
out and from what I gather (have not read it) he uses a term that I think has
more staying power than reflexivity - economic fundamentalismÃ¢â‚¬Â¦a take on
religious fundamentalismÃ¢â‚¬Â¦or the economic theory and practice that turns what is
convenient into a dogma. Well when dogmas or ideologies become entrenched
in the functioning of markets and policy, they tend to run to extremes and end "violently." This week should leave little doubt that economic
fundamentalism died violently.
Well folks liberal
socialism crosses party lines as today proved. And when the financial
system, left to its own, neared disintegration the government stepped in and
stepped in big time - hopefully not permanently and hopefully not leaving too
big a footprint when it leaves. But if there is any lesson here it is
pragmatism is always a better approach than dogmatism, just as tolerance over
intolerance, unity over disunity, prudence over exuberance and sacrifice over
selfishness are all far preferred traits.
Thank goodness, in a
pinch, the US is still a nation of pragmatists and not ideologues.
Now pardon me while I
get ready to downsize.
If you think I am
voting for Obama you are right. It is time to let the other side have a go
and say no to fear mongering.
But locally I am
voting Republican and against my liberal Democrat House Rep Joe Courtney for
voting against the bailout twice.
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