[G-Mail isn't cooperating. First, it seems to have sent this off to you without me doing anything, before it was complete. Then, I tried to send the complete version and it got lost. Go figure.]
In today's New York TIMES, David Leonhardt writes that >... the overwhelming majority of homeowners are doing just fine. So how is it that a mess concentrated in one part of the mortgage business — subprime loans — has frozen the credit markets, sent stock markets gyrating, caused the collapse of Bear Stearns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression? > I'm here to urge you not to feel sheepish. This may not be entirely > comforting, but your confusion is shared by many people who are in the middle > of the crisis.< He doesn't point out that part of the problem is the fact that so many people -- including many in the middle of it all -- are confused. In fact, many were confused when the bubble was inflating, encouraging that expansion. It shouldn't be surprising that confusion over financial matters should lead to disaster. However, it's says something about how little these folks (including Robert Rubin) deserve their exalted salaries and power and influence if they're so confused. It also should be noted that a lot of this confusion was deliberately created by "entrepreneurs," who made a lot of profit via extremely complicated loans and financial instruments. (Contrary to the "Austrian" opinion expressed awhile back on pen-l, there is often an incentive for "entrepreneurs" to create asymmetric information, not simply destroy it.) In many cases, the mortgage borrowers or the purchasers of complicated assets did not know what they were getting into. Of course, as with any con, the recipients likely thought that they were getting "something for nothing." That "something for nothing" attitude (not mentioned by Leonhardt) together with the silly "there's no place to go but up!" optimism, helped to fuel the bubble. Bubble, bubble, toil and trouble: stir in high returns from risk-taking (which is supposed to be a "good thing" among mainstream economists) and increased leverage -- and you've got the standard pattern of _laissez-faire_ finance: bubble --> bust --> bail-out. Reminder: though in theory, _laissez-faire_ finance would reject bail-outs, in practice it refers to "give the money people what they want," which involves such a dole. Since _laissez-faire_ finance has made the U.S. and world economy so dependent on the financial sector during the last 27 years or so, even the "wiser heads" at the Fed find that they have no choice but to use taxpayers money to help the feckless financiers. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
