As economic nuclear winter ensues and the Dow continues its downward trajectory (a 733 point drop today), there are a lot of Chicken Little's running around screaming that the sky is falling. Everyone is a critic; some say the government is doing too much, while others chastise Uncle Sam for not doing enough. The fact of the matter is the government doesn't yet know how much is exactly needed of it because no one, not even the bastards that put us all in this position, know how far this has permeated the global economy.
Based on the Economics-101 knowledge I have of high finance, I think Hank Paulson is doing a wonderful job of making lemonade out of the humongous lemons he has been given. While I don't think he should have expected Congress to write him a blank check and cast no oversight on him, I do think his sense of urgency and his navigation thus far are praise-worthy. As I said in another post, I think it is our lawmakers who have shamed themselves, not to mention the respective silence and opportunism of the Obama and McCain campaigns, and their handwringing (and hand-tying) have hobbled whatever effective government response there has been.
But anyway, back to the Chicken Littles. I love these armchair quarterbacks out there, whether they are journalists or my neighbor, who think they have a fix for this. "What they should have done is this...and what they need to do is that". Oh, please. Number one, if you know what they need to do or should have done, you wouldn't be writing for a newspaper or working for FactSet. Number two, how do you propose to fully understand a scenario that not even the people who created it even half-way understand? As such, in my opinion, only your observations are valid; your prescriptions can wait until banks stop failing, the stock market bottoms out, and homeowners stop defaulting en masse on their mortgages.
One of favorite gripes usually comes from the ranks of I-bankers, hedge fund managers, and/or any of the other narcissists who flaunted karma and brought everything crashing down. You hear them talking about the "People's Republic of Wall Street" and how partial nationalization of the big banks amounts to socialism. Even Paulson himself said nationalization in the banking sector is anathema to his beliefs. Notwithstanding the audacity these scumbags have to complain about the entity that is absorbing all of the consequences of their detrimental short-sightedness, what choice does the government have? In 1929, Treasury Secretary Andrew Mellon's response to the stock market crash was to tepidly leave the mess for the banks to sort out. And look where it got us. Now, with the complete global interconnectedness and interdependence of finance, without some hedge, some mitigation of risk, the Great Depression would look tame compared to what could happen.
We don't "do" socialism in this country. It's totally against who we are and where we came from. However, we're in no position to decry the government for trying to throw its weight against the specter of a complete global economic meltdown. Who knows if any of this will work, but we don't know unless we try. When the market rebounds and these schmucks figure out another way to cheat the system and make gazillions of dollars (they always do), the government will be in a unique position to sell its assets, thereby chomping down a tremendous amount of our national debt.
If I'm being too harsh on Wall Street, it is not my intention. I believe the blame goes all around: from the culture of deregulation to the homeowners who bit off more than they can chew. I just think that Wall Street should know better and, furthermore, the smugness and self-righteousness they have demonstrated throughout this process makes you wonder "If they're up here, who's running Hell?"
At the risk of contradicting my statement above, I have my own observations about this whole drama. Despite the fact that the stock market has dropped 40%, I think it is a good thing. The fact of the matter is that meaningless paper was traded at such incredibly inflated values for so long that investors, the market, and the invisible hand are re-evaluating their assets and finding the point of where they are supposed to be. And once everything stabilizes and the system corrects itself, then these guys can think up their next "Get-Rich-Quick" scheme. It might seem like socialism is on the way in, but Capitalism is here to stay.
No comments:
Post a Comment