I guess I'll be a lone voice in the wilderness and defend US Treasury Secretary Geithner and his Financial Stability Plan.
Now hang on. For better or worse, I defended Geithner when he was nominated because (1) Brad DeLong vouched for him and (2) I've never heard the man utter a word and thus he's never had a chance to annoy the shit out of me. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
As you can see from the comment thread it is still unclear how this is supposed to work in detail, and what the goal of the legislation actually is. But I'm personally on Krugman's "wait and see" camp. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
I hope we're not going to have an argument then, along the lines "that's what Geithner meant to happen"/"no it isn't!" ;)
When Larry Kudlow says that a bank plan is terrible, my instinct is to wonder what brilliant part of it I had not previously noticed.
He also criticised the US and UK approach to bank bail-outs, comparing it with attempts by Japan in the 1990s to solve its banking crisis. "The current US and UK approach may end up looking like the zombie banks of Japan that were never properly restructured and ended up perpetuating the credit crunch and credit freeze," he said.
The solution to not having enough money to pull toxic assets out of the system to get enough of the toxic assets out of the hands of all of the big money center banks to ensure that they can continue to act as big money center banks ... rather than the alternate view of the task at hand, in the terms of ensuring a sufficient subsystem of non-zombie banks to be able to provide the finance sector services required by Main Street if there is a recovery in 2010 or 2011 ... is to subsidize the acquisition of toxic assets by speculators.
The "them" he is not giving up is the senior management and overpaid specialists for the big money center banks. And, seemingly, he continues to view a main function of the banking system to act as a middleman between financial individuals and financial markets, with hundreds of billions of dollars under his direct control to be aimed at socializing losses so that the process can continue.
IOW, the people that have to be the main target of any hidden nationalization of the banking system aimed at ensuring that what was once its primary function (but which it "outgrew" over the past thirty years in the "market centric" Anglo disease countries) is not sacrificed to acting as a middleman between wealthy individuals and financial markets.
However, bank shareholders ... many of them, indirectly, small individuals and small business via the pension funds, insurance companies and other institutional investors providing "Main Street" financial services ... well, if it goes pear shaped, they can take a haircut. You gotta have your priorities, after all. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
The financial middleman function, on the other hand, is not an engine, but just a transmission.
But if you the textbooks for Money and Banking ... even the so-called "New Keynesian" textbooks ... the role of the Finance Sector is the middleman function, and even though there are chapters that describe the money creating function of depository instituutions in some detail, the fact that this is not a financial middleman function and so the depository institutions are more than simply middlemen ...
... well, that is not in there.
And we have raised more than a generation of college students going into the finance sector on this blinkered monetarist view of the finance sector, that money is somehow dropped on the economy by heicopters and banks are supposed to be just one more type of financial middleman.
It could well be that Geitner in reality simply does not know that he is working on fixing the oversized monetary transmission when the problem is that the monetary engine is not only broken, but is a too small engine trying to drive a too large transmission to make an effective drive train. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
In other words, even if a group of heterodox economists led a revolution, the slightly educated masses wouldn't follow.
A little learning is a dangerous thing. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
"Saving" as adding to a Dragon's Hoard that will increase societies real productive capacity when "the time comes to spend it" ... that is even more deeply entrenched than the "gas tax is political suicide" meme.
And of course, Agent Orange is designed to avoid undermining people's basic prejudices. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
You're From Ohio, You Idiot, Don't Screw With Our Train I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
