HI Billy, Overall a probably fair indictment, but it did raise a question I've wondered about:
On Apr 7, 2010, at 12:57 PM, [email protected] wrote: > He gave political support to the Bush tax cut in 2001 because -- get this -- > unless the government reduced taxes, there would be no more Treasuries for > the Fed to buy to conduct monetary policy! He refused to raise margin > requirements in the late 1990s to defuse the technology stock bubble, arguing > publicly it would have no effect. (Privately, he acknowledged it would > curtail the bubble but might nail the economy in the process.) > It certainly is true we could have avoided this whole bubble by clamping down on big banks and irrational lending. BUT.... would that have just caused a similar economic crash earlier? I think you can make a case that an earlier crash would have been a "normal" recession, versus a Great Depression. And that Wall Street wouldn't have made trillions during those intervening years, and thus require plus-sized bailouts. But, I don't know anyone who's even asking that question. In other words, was it really possible to have brought the economy in for a soft landing, or was as crash like this more-or-less inevitable, and the best we could have done is to deliberately precipitate it? If the latter is the case, then I have a bit more sympathy for politicos who've blinked. Of course, if there was a way to have stopped the excesses *before* they became a structural problem, then that would've been much better. But how early would that intervention had to have taken place -- 2001? 2005? And did anyone *else* see the problem way back then? That's the one caveat I have with all those (admittedly much-deserved!) blame-flinging. Would the earlier cure have been as painful as our current disease, when would it have to have been implemented, and who truly knew back then? To be sure, I do agree that there *were* valid warning signs that were deliberately ignored. I just don't know if the signal to noise was very high, and thus whether the crime was ignoring a strong signal or failing to pay sufficient attention to a weak one. Which is an important distinction if one is trying to redesign the system as a whole to behave better, rather than just vilifying individuals. Ernie P. -- Ernie P. >
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