Wednesday, October 08, 2008

Getting worse

Bernanke, Cox and Paulson are all on the record as opposing regulating derivatives, though that is not what they are saying now. Leaving these clowns in charge of fixing things is making things worse, expeditiously. In Europe, things are no better, as Wolfgang Münchau describes in his cheerily entitled 'The depression of 2009':
Everybody knows the mistakes of the banks, the regulators, or the rating agencies. Now governments on both sides of the Atlantic are committing perhaps even bigger mistakes. It seems that even in times of severe crisis, their main priorities are about short term political gain. The US administration’s TARP proposal is a case in point. It has lambasted by almost every economist, including those who normally disagree with each other on most things. Buying up toxic securities at above market prices is simultaneously the most expensive and unfairest way to recapitalise the banking system. It is very difficult to believe that the US treasury secretary can possibly be driven by a motive other than a wish to benefit the investment banks he once chaired, and which stands gain handsomely from such a package, and which would never dream of accepting any government capital infusions. The only alternative explanation for his behaviour is immense stupidity – and I know that he is not a stupid man.
Münchau concludes his must read article with this:
The whole gist of the German government’s policy consists of a bet that the wider public remains infinitely stupid and ignorant. This bet it will lose.
We might say that the US government's policy is making the same bet. Certainly the two presidential candidates statements about this are infinitely stupid and ignorant, helping to keep the public in the same position. So it looks like a bet the US will win, for all the good it will do them.
(h/t naked capitalism and Cursor)


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