Strengthening Constitutional Self-Government

No Left Turns

Politics of the economy

The Dow fell again, now to 1997 levels. Confidence is sagging. No kidding. It is becoming increasingly obvious that Obama and his team (as people still like to say, but now with less gusto) have not yet been capable of instilling confidence that they know what to do. Charles Krauthammer is quoted from Friday�s Fox News (just a couple hundred words), the short of it: "The markets are responding remarkably, exquisitely, sensitively to political events, much more in than in the past. And the reason is for the last year we have had huge intervention of the government in the markets and the banks, in autos. So it is not just a reaction to economic news, but to what�s happening in Washington." And this is a nice summary from Investor�s Business Daily. And then there is the issue of possibly nationalizing the banks (This took a bit of an explanation to my mother the other night. Is this possible son? No, no, Mom, this is America, says I with wink toward Hucklebery Finn and his stretchers; why upset my old Mom.): This story indicates that it will not happen. That would surely be the end of regaining confidence and trust...for a long while.

Discussions - 1 Comment

BofA, and others are already de facto nationalized. Citi will be nationalized in name today, and AIG already has been. Fredi & Sallie mae/mac were nationalized a long time ago, so the housing sector is already nationalized.

These nationalization experiments have been universal failures. The mixing of "public/private partnerships has failed in every instance.

Of course, the markets already know this unlike political philosophers who say things like "possibly nationalizing the banks" with a straight face! No offense, but this is not your field and it shows.

To quote someone with an economics knowledge base:

I don’t know where to start — the continued nationalization that they say isn’t really nationalization of our the businesses and banks that the government allowed to consolidate into behemoths which they say are now so big that their shareholders are a better use of welfare dollars in this society than feeding hungry children. I guess there are three main points in that convoluted sentence I just wrote –

1. Does the Treasury and the elected officials it appoints (that’s the way it works these days, right?) actually think anybody takes anything they say about the future seriously? Remember when Geithner and his boss used to tell us that the economy was fine over and over as it began to crumble in 2007? Remember when they told us the economy would stabilize if we’d just send Bear Stearn’s shareholders two billion in welfare so that people wouldn’t “lose confidence” in seeing a major bank like that wash out its shareholders even though Bear Stearns was insolvent and the shareholders were people who had been rich enough to risk their own money on that stock? Remember how they said they could fix it all if we’d only just this one time ignore contract law as they’d just give welfare of $160 billion to cover complicated derivative insurance contracts that AIG wrote for the hedge funds and other exclusive investor class counterparties who are the only ones who were buying that crap from AIG even though AIG had no money to pay for those contracts? – That's Cody Williams...

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