Thursday, July 17, 2008

Doubledown on doublethink

Doublethink is now so common among politicos that it hardly bears comment. Charges of flip-flopping are ridiculous in such an environment, but when doublethink becomes common among the leading economists of the nation, it might be time to worry.

This article, US mortgage firms safe, says Fed, by a news organization that has gone down the tubes (the BBC), is a case in point. Listen to this:

In the second day of his semi-annual testimony to Congress, Mr Bernanke sought to allay fears that Fannie Mae and Freddie Mac, which between them guarantee nearly half of US mortgage debt, might run out of cash.

Policymakers have always insisted the two firms are adequately capitalised, but the US Treasury announced plans on Sunday to supply them with additional credit and buy shares in the firms, if needed.

and try to fit your head around it. Fannie and Freddie are in great shape, but you don't have to worry because even if they're not, we're already planning to bail them out, or nationalize them, whichever costs the most, probably.

It's also encouraging that the markets are responding so positively to the doublethink good news. It kind of reminds one of what happened when Bear Stearns was bailed out bought given away. How long did that euphoria last?


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