Thoughts on the financial crisis
Feb. 23rd, 2009 08:47 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
rhuSome thoughts, not necessarily coherent.
Money has stopped moving. Back in tenth-grade economics, when Mr. Marienhoff explained the concept of the velocity of money, I kinda got it in the abstract. But it's frighteningly clear now: when banks are afraid to lend, and companies are afraid to spend on goods and services from one another, money stops moving, and each dollar in existence only counts as a single dollar instead of the four or five dollars that it normally counts as when it changes hands four or five times. And the resultant liquidity crisis and massive deleveraging is as destructive as if 80% of the manufacturing facilities in this country had been blown up. Worse --- we'd rebuild the factories.
Collateral damage and collective punishment. Yeah, there were a bunch of irresponsible people, and worse, there were a bunch of swindlers. Not all of the swindlers did something illegal, even if in retrospect it ought to have been. And the dilemma facing us is that the course of action that will result in the least harm to America as a whole and the majority of us "hard-working slobs" will also result in these people getting away with it; they'll get bailed out too. And you know what? At this point, I don't much care. First, fix the economy. Then we can worry about finding tar and feathers. Because the alternative is that the hoi polloi will get crushed, and the fat cats will get tarred and feathered and still end up with more money than we have.
Republicans. My god, they just can't stop playing head games, can they? I used to proudly call myself an independent voter, and I'd consider Republican candidates on their merits. Screw them. Rush Limbaugh is a big, fat idiot after all.
Nationalization. Yeah, the shareholders of the banks are going to get screwed. I'm one of them. Deal with it, get the pain over with, and let's move on. Nationalize the banks that need it, and give the shareholders scrip saying that in N years, when the banks are ready to be reprivatized, if there's any value left then you'll get a pro rata share in the new AIG/Citigroup/BoA/whomever. And if there isn't, then tough. Make the depositors whole, flush the bad assets out, get the money moving again. But shareholders take on risk; that's the way the system works. And if the company's liabilities exceed its assets, then that's what the Constitution calls "bankruptcy" and the shareholders are the ones who are left with nothing. Trying to shield us will only make the pain go on, and on, and on.
So please, can we make this recession nasty, brutish, and short? Because it seems to me that the alternative is nasty, brutish, pus-filled, and lingering.
Money has stopped moving. Back in tenth-grade economics, when Mr. Marienhoff explained the concept of the velocity of money, I kinda got it in the abstract. But it's frighteningly clear now: when banks are afraid to lend, and companies are afraid to spend on goods and services from one another, money stops moving, and each dollar in existence only counts as a single dollar instead of the four or five dollars that it normally counts as when it changes hands four or five times. And the resultant liquidity crisis and massive deleveraging is as destructive as if 80% of the manufacturing facilities in this country had been blown up. Worse --- we'd rebuild the factories.
Collateral damage and collective punishment. Yeah, there were a bunch of irresponsible people, and worse, there were a bunch of swindlers. Not all of the swindlers did something illegal, even if in retrospect it ought to have been. And the dilemma facing us is that the course of action that will result in the least harm to America as a whole and the majority of us "hard-working slobs" will also result in these people getting away with it; they'll get bailed out too. And you know what? At this point, I don't much care. First, fix the economy. Then we can worry about finding tar and feathers. Because the alternative is that the hoi polloi will get crushed, and the fat cats will get tarred and feathered and still end up with more money than we have.
Republicans. My god, they just can't stop playing head games, can they? I used to proudly call myself an independent voter, and I'd consider Republican candidates on their merits. Screw them. Rush Limbaugh is a big, fat idiot after all.
Nationalization. Yeah, the shareholders of the banks are going to get screwed. I'm one of them. Deal with it, get the pain over with, and let's move on. Nationalize the banks that need it, and give the shareholders scrip saying that in N years, when the banks are ready to be reprivatized, if there's any value left then you'll get a pro rata share in the new AIG/Citigroup/BoA/whomever. And if there isn't, then tough. Make the depositors whole, flush the bad assets out, get the money moving again. But shareholders take on risk; that's the way the system works. And if the company's liabilities exceed its assets, then that's what the Constitution calls "bankruptcy" and the shareholders are the ones who are left with nothing. Trying to shield us will only make the pain go on, and on, and on.
So please, can we make this recession nasty, brutish, and short? Because it seems to me that the alternative is nasty, brutish, pus-filled, and lingering.