Jim D. wrote:
I agree that "nationalization with haircuts" makes a lot of sense. But
the above is extremely unlikely to happen. S&Ls were nationalized at
the end of the 1980s, but then they were denationalized. That's the
usual pattern seen historically and as far as I can see those
mainstream folks who advocate nationalization are also advocating
denationalization after things are cleaned up.
Jim also sent yesterday's op-ed by Krugman, as an example of
"mainstream folks who advocate nationalization are also advocating
denationalization after things are cleaned up."
My reply:
Yes, I agree that temporary nationalization with later
denationalization is what mainstream folks have in mind. So I guess
our slogan should be "permanent nationalization with haircuts".
Mainstream folks also do not have in mind the "haircuts" for the
bondholders that I am advocating.
But I think there are very strong ethical and economic arguments for
"permanent nationalization with haircuts", as summarized in my previous
message.
Nationalization without haircuts is an outrageous economic injustice -
a bailout of the super-rich bankers and their super-rich bondholders
with ordinary taxpayers' money. This is unacceptable. (And also
trying very hard to conceal this economic injustice from the taxpayers;
that is the subject for another message.)
Temporary nationalization followed by denationalization, would put our
economy once again at the mercy of an inherently unstable capitalist
financial system. Better to keep nationalized banks that will take
fewer risks in order to avoid debt bubbles that inevitably burst and
cause such misery and hardship as we are witnessing today.
Don't you think these are strong arguments? Permanant nationalization
with haircuts is economically just and provides greater stability.
Even some mainstream folks are starting to concede these arguments
(e.g. Buiter).
Don't you think we should be making these arguments as much as we can,
in order to try to influence the public discussion, instead of
conceding the public discussion to the mainstream folks?
Thanks again,
Fred
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