Blogger Poll: 71% Against Bailout -- Rusty now for it
What a difference 48 hours makes. Yes, I was one of those bloggers who opposed the bailout. Today? Not so much."The Market" is nothing more than the sum of individual economic decisions. By announcing to the world that if the bill doesn't pass we are doomed [DOOMED!], President Bush, Henry Paulson, & Ben Bernanke have created a self-fulfilling prophecy -- individual investors became frightened and sold off financial assets causing the market to go in the very direction predicted. The long term structural problems at the root of the present crisis can be placed squarely on the backs of Democrats who intentionally created incentives for banks to loan money to those who in the free market would be considered too risky. That's the long term problem, and it needs to be fixed. But the short term collapse of investments in Wall Street? That's Paulson, Bernanke, and Bush's fault. The job of an Administration is not to tell an already panicky public that they have every reason to panic so here's the open corral door, please don't let it hit you on the rear as you join the stampede. It's to reassure the public that everything is going to be alright -- even when things aren't going to be alright. I'm sure that Obama and the Democrats would have cited such reassurances as proof that the Republicans are "out of touch" with "reality". But if I might paraphrase John McCain: I'd rather lose an election than see America in a severe recession. So, I didn't support the bailout but now I do. Not necessarily because I think it was the only thing that could have fixed the long term structural problems of sub-prime lending and the financial instruments associated with them, but because now it is the only thing that will reassure investors that everything is going to be okay so please keep your money in the stock market. Remember that The only thing we have to fear is fear itself thing FDR once said [I think he said it on TV, the day the market crashed]? The point he was trying to make is that the market is a psychological phenomenon and that the Depression was, in part, a self fulfilling prophecy based on irrational fears that soon became very rational. Today we find ourselves in a similar situation. Congress must now act to pass the bailout because our nation's idiotic leaders have signaled to the world that unless it passes the US economy is at risk. If nothing is done more people will sell than buy, the price of stocks will continue to decline, loans secured by stock pledge will go sour, banks will loan even less money to each other, and a recession will follow -- perhaps a bad one. They have no choice. The wheels have been set in motion. To not pass the bailout would be to cause the very thing we have been warned about -- in fact it already has. But it could get worse. In fact, probably will get worse. I hope I'm wrong. God save us all from the politicians. UPDATE: A couple of responses to comments. 1) Jaya: The TV thing -- that was a joke at Biden's expense. You been living under a rock? 2) bk425: see Mongol's answer. The market expects the bill to pass and prices probably reflect that. 3) LB: Bad analogy. The market is purely psychological and reflects the prices at which people buy and sell; it is an objective measure of subjective assessments. Your roof leaking -- completely objective. 4) A Stoner: Good point. I would have agreed two days ago. In fact, the worst part of the Paulson plan is his notion that we should pay $.60 for assets the market values at $.20!!! That's a direct corporate subsidy no matter how you look at it, and it's wrong. But at this point, I think subsidizing banks for the bad investments we encouraged them to make is the least of our problems. 5) newyank: That is the position I took two days ago. The only thing is that scale of the problem is so massive that it won't be just a few banks that go out of business; we're talking about a massive amount of money which has stopped circulating. Money that makes its way to Main Street. This is no longer a Wall Street problem, it's every one's problem. 6) Maybe I'm wrong. I hope I am. UPDATE II: Hmmm, maybe I am wrong. Then again, maybe they're unrelated?