Update from the Heartland
No.354
22.9.08 – 28.9.08
Blog version: http://heartlandupdate.blogspot.com/
No.354
22.9.08 – 28.9.08
Blog version: http://heartlandupdate.blogspot.com/
To all,
This was the week we fulfilled my Mother’s last wish. With the help of Jeanne, my sister and brother, we organized a family gathering in Monterey, California, to celebrate Mom’s life and return her ashes to the Pacific Ocean. Taylor, Sherri, Jeanne and I arrived midday Thursday, to check the lay of the land, to find the spots we needed to be, and to finalize preparations. We enjoyed lunch at Bubba Gump’s Shrimp Company on Cannery Row in Pacific Grove – ‘the’ Cannery Row made famous by John Steinbeck. We visited the various sites for our planned events to validate directions, identify parking options, and note other relevant variables not previously anticipated. After accomplishment of the day’s assigned tasks, we checked into the hotel, got settled, refreshed, and then took a leisurely journey along the famous 17-Mile Drive to enjoy the magnificent scenery and see how the rich folk live . . . well, only the façade of the dwellings and grounds of their not-so-humble abodes. We putt-putt’ed along ‘the’ Pebble Beach with its multitude of stacked rock columns and caught glimpses of the famous golf course by the same name. Taylor and Sherri felt the urge to dip their toes in the Pacific Ocean on the beach at Carmel-by-the-Sea as we witnessed the Sun set behind the ever-present, offshore fog bank that enveloped the coast every evening. We savored a delightful evening meal at Clint Eastwood’s former establishment, the Hog’s Breath in Carmel. Friday, we met with Captain Dan Musker – the boat owner who would take us the legally required 500 yards offshore for the purpose of our trip – to confirm our meeting place, timing, boarding procedures, and other related formalities. We also toured Veterans Memorial Park, adjacent to the U.S. Army’s Presidio at Monterey, where our planned picnic celebration of my Mom’s life would be held. Those members of the family who arrived Friday, met at Fandango’s Ristorante in Pacific Grove for a sumptuous meal and renewal with family. The appointed day for fulfillment of my Mom’s wishes was Saturday. My sister, brother and I, along with my oldest and youngest boys plus Melissa’s daughter boarded Captain Dan’s sailboat and headed out of Monterey Harbor to Lover’s Point – the northern corner of the Monterey Peninsula. We made our peace, rendered the words significant to each of us, and I scattered her ashes in the Pacific Ocean. We added brightly colored, assorted flowers to the spot. Upon our return to shore, we gathered at the park with a couple of dozen other members of our family including Mom’s sister, cousin, and brothers-in-law along with grandchildren, nephews, nieces . . . all in all, four generations. A family picnic seemed the most appropriate venue to celebration my Mother’s life – thank you Melissa for reminding me. Melissa Louise and Melissa Sue provided the exquisite sustenance. My mission accomplished, we scattered again. Jeanne and I remained in California to visit her sister and husband, and take a few extra days just for ourselves, which is one reason this Update is late to the wire.
The follow-up news items:
-- Grand Dear Leader Umpa-Lumpa may or may not be ailing, but his cronies apparently are frustrated with the lack of attention they have been shown since they blew up the cooling tower at the DPRK’s nuclear reactor at Yongbyon [293]. North Koreans expelled the IAEA inspectors, and indications suggest they have begun reactivating the reactor.
The first McCain-Obama debate that was, then wasn’t, then was, happened Friday night as originally scheduled. Unfortunately, I had a family event at the same time as noted above, and I was not able to watch the debate. I have seen snippets as the Press decided to edit the event, and I have listened to the talking-heads pronounce one or the other as the winner. I have insufficient information to render judgment or an opinion. Next, we look to the Biden-Palin debate, which should be quite entertaining.
More history in the bad-debt, credit-crunch crisis this week:
-- The two remaining Wall Street investment banks – Morgan Stanley and Goldman Sachs – were reclassified as bank holding companies, bringing them under stricter oversight and tighter financial constraints.
-- Goldman Sachs reached an agreement to sell US$5B in perpetual preferred stock with a 10% dividend to Warren Buffet’s Berkshire Hathaway, and to sell US$2.5B in common stock to the public.
-- We learned on Tuesday about the FBI’s criminal fraud investigations into a string of companies in the headlines [352, 353] – Fannie Mae, Freddie Mac, Countrywide, Lehman Brothers, AIG . . . 26 companies in total, so far. I suspect there will be a bunch more folks going to prison and deservedly so.
-- Carving up the carcass of the once venerable Lehman Brothers continued this week. Nomura Group of Japan bought Lehman’s Asia-Pacific unit and agreed to acquire Lehman’s European and Middle Eastern operations.
-- Thursday, Washington Mutual (WaMu) took the dubious place in U.S. history as the largest bank failure . . . so far! The USG seized control of the bank and sold its assets to J.P. Morgan Chase.
-- Congress passed an unusual, six-month, US$630B, omnibus, budget extension to keep the Federal government in operation until spring.
-- Secretary of the Treasury Henry Merritt ‘Hank’ Paulson, Jr., and Chairman of the Board of Governors of the United States Federal Reserve Ben Shalom Bernanke, testified before the House and Senate banking committees, forecasting dire consequences if swift action to blunt the credit crisis is not taken.
-- Congress wrangled with the details of the so-called Paulson Plan, and various reports suggested a deal has been struck.
A couple points of amplification or clarification from my comments regarding last week’s historic events . . . depending upon one’s perspective:
1. Congress grappled with a number of mechanical issues regarding the administration’s extraordinary bad-debt absorption scheme. One of those elements was a provision to prevent golden parachutes and exorbitant executive compensation for those companies that are to be saved. I’m good with as severe a penalty as can be mustered. If there are insufficient grounds for criminal prosecution and punishment, then I strongly recommend they be shown the door with no severance or other compensation. If we need them to work, then minimum wage with 99.999% ‘at risk’ compensation for finite performance objectives seems appropriate. Why should they get more than the janitor? At least the latter did his job and did not injure the company, stockholders, customers and other disassociated citizens.
2. Business and capitalism is about risk. We need businessmen to take risks – an essential ingredient for advancement and success. Risk can be reckless. Risk also entails a constant, perpetual assessment of consequences and collateral effects. It is one thing to risk my own life riding a motorcycle or jumping out of airplanes; but, it is an entirely different risk to do the same things with a family who loves you and depends upon you. So it is in business. I do not claim comprehensive knowledge of the factors involved in this current banking crisis, but from what I do know, we had far too many bankers, from small to gigantic, who should have know better than to take such foolish risks with sub-prime mortgages to so many people who did not have the ability to sustain their debt in even a slight market downturn. The flip side of the risk balance might be best represented by bad boy Joe Stalin who banished under performing managers to the Siberian Gulag or shot them – not exactly conducive to risk taking. In our anger over what so many foolish people did to themselves, and greedy bankers aided and abetted with their blind lending, we must resist the temptation to overreact and constrain risk-taking in business; yet, we must institute some degree of safeguards to protect the innocents among us from the extraordinary damage wrought by such foolish, rampant, risk-taking.
3. The marketplace is NOT the wild, Wild West, where anything goes, survival-of-the-fittest conduct can be tolerated, like shootouts on Main Street. While the Old West tolerated such conduct for many reasons, the consequences of stray bullets in crowded cities are far too great. So, in principle, a truly free marketplace is self-regulating, just as communism is a utopian ideal where everyone is truly equal. Neither is realistic or pragmatic. A truly free market engenders the ruthlessness of the Wild West, and the potential for collateral damage is far too great. There must be rules to govern marketplace behavior just as there must be laws for Main Street conduct. Perhaps the law was commensurate with and reflective of the ‘irrational exuberance’ that marked the late 1990’s, but I respectfully submit the law did not serve We, the People, very well. The free marketplace is a pipe-dream just as much as communism is wishful thinking. We need laws to protect the innocent from injury.
4. Should We, the People, save a citizen from himself? Does a citizen who witnessed wild, irrational, escalation in home prices in California, decided he wanted some of that action, took out a 125%, adjustable-rate mortgage on a value five times the cost of replacement, and expected to flip the property in 2-3 years for double his purchase price deserve our compassion and salvation; or, a couple in Florida who bought five condominiums for business or speculation, only to find no customers? Please, let us remember where this credit crisis began – not on Wall Street, not with investment banks, not with mortgage companies – with that individual citizen sitting at a table with legal papers in front of him and an ink pen in his hand. The sad reality remains that we had millions of our fellow citizens who believed they had a foolproof get-rich scheme, who believed they could get something for nothing, who wanted a home they could not afford, who truly believed the downside could not happen to them. The banks blindly accumulated these faux-mortgages, and now the bill has come due.
5. Lots of talking-head pundit-isms regarding the USG bad-debt absorption plan were bandied about this week with words and phrases like ‘blank check,’ ‘rubber-stamp,’ ‘bailout,’ ‘blind faith,’ et cetera. We can wail about the administration’s US$700B+ rescue plan as much as we like, but that does not alter reality. We have trusted the USG with billions of Treasury dollars before, many times, and we are going to have to trust them again, to do the correct things to limit the damage and destruction looming over us in this financial crisis. Time is of the essence; action is far better than inaction considering the risks involved. We can seek retribution and deal with recriminations after the bleeding has stopped and the patient is recovering. Now is not the time to hesitate in thoughtful rumination.
All that said . . .
Is the administration’s proposed bad-debt absorption plan the right thing to do? No! Yet, in 1935, was allowing the Nazis march toward war the right thing to do? The longer we wait, the higher the price tag will be. There are two elements:
A. Credit, the life-blood of modern business and finance, has nearly been choked off, partly because of the mountain of bad-debt. The physical action of removing that bad-debt from the marketplace is essential to the necessary money-flow for vital business. And, here we have two choices: the easy way or the hard way. The only question is how much pain do We, the People, wish to endure for decisions we did not make?
B. The administration plan, by itself, will not solve the problem. I believe it will address the tangible mechanical aspect, i.e., take the bad debt off the books of banks and mortgage companies, thus infusing massive amounts of money into the system. Yet, the other critical element can only be addressed indirectly – confidence. No matter how much money is available, banks will (or should) only lend money when they have confidence they can recover their investment and make a reasonable profit in the process. Without confidence in the economy and the process, money will not be available for business or private use.
Of the two elements, the USG plan attempts to deal with Part A, with hope that Part B will come along naturally. The longer it takes to address Part A, we shall suffer an amplified time for Part B. Without both Parts A and B, we will face recession or depression. The bottom line is action must be taken – any action is better than inaction. Let’s get on with it.
A contributor provided a timely and relevant link to this article:
“What Happened to Market Discipline?”
by John Stossel
RealClearPolitics.com
Published: September 24, 2008
http://www.realclearpolitics.com/articles/2008/09/what_happened_to_market_discip.html
My opinion:
I do not agree with Stossel's presentation. Sure, the interference of government in the free market has been around for 70+ years. I do not agree that an unregulated, truly free market is self-regulating, no more than I would agree that government without checks & balances will be inherently good. There will always be greedy selfish egocentric bastards in the marketplace, just as there are megalomaniacs in politics & government. The system must be sufficiently regulated to protect citizens from the abuses of the few without constraining the reasonable risk-taking that is the life blood of business.
“That's just my opinion, but I could be wrong.”
. . . to which came this reply:
“It is a tough call. While I have strong libertarian tendencies in many things, it is difficult to well up the courage to sit idle, do nothing, and let the market solve it. Perhaps if we did, the market would solve it in time, but that is not going to happen. Something is going to be done. Unfortunately, regulations grow like weeds and where it stops nobody knows. How do you tell private enterprise how much to pay someone and not become less of a free market? Does it stop with large financial corporations? Or does it extend to small business as well? Where do we draw the line? It appears we are going to take a giant step toward the European government-market model to get out of this mess. I hope it is the right move. We all have much at stake for freedom.
“Unfortunately, this mess has taken our eye off the biggest threat we face - terrorism. But, if we do more than put a band aid on the problem and actually solve it (if we can find someone smart and wise enough to know what to do), then perhaps we can get back to fighting the war on terror to preserve not only our way of life, but life itself as we know it on this planet.”
. . . et ma réponse:
We share libertarian views. Yet, libertarianism taken to its extreme could easily rationalize no police, no armed forces, no diplomatic service, ad infinitum – every man for himself. The criterion for me remains public injury. When the actions of anyone injure another citizen, then government has a proper interest and task to perform.
You posed some interesting related questions:
1. How do you tell private enterprise how much to pay someone and not become less of a free market?
The simple answer . . . we don’t and shouldn’t. The marketplace should define compensation. Yet, history tells us businessmen of the day were quite content and happy to enslave workers, pay them a pittance for their hard labor, and literally consume human beings as an expendable commodity. Unscrupulous businessmen were/are no different from dictators, rabid clergy, or any of the myriad of megalomaniacs among us.
2. Does it stop with large financial corporations? No.
3. Or does it extend to small business as well? Yes, if appropriate.
4. Where do we draw the line?
The answer depends upon many factors, e.g., criminality, expanse, severity, et cetera. The salient element in the current crisis and proposed remedy is the potential consequences of further credit constriction and loss of confidence. We are at the edge of the abyss, just as we were in 1929. The difference today is the aggressive action of the government to stem the tide. History shall judge our performance. I, for one, have a stable mortgage, I pay my bills, and I try to treat people with respect and let others live as they wish to live. When so many others got greedy, signed foolish mortgage papers, and took on more than they should have, they were on the verge of affecting my family, my job, my welfare, my ability to pay my bills. The potential for the injury to my family by the actions of others is real. The line was crossed four or more years ago, but at least the government is attempting to limit the destruction and injury.
The bottom line for me is the damage was done 10-20 years ago, and the longer we wait to do something to reenergize the credit market, the worse and more damaging the consequence will be. Inaction will simply take us closer toward bona fide economic depression. The choice is ours.
No comments from Update no.353:
My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
This was the week we fulfilled my Mother’s last wish. With the help of Jeanne, my sister and brother, we organized a family gathering in Monterey, California, to celebrate Mom’s life and return her ashes to the Pacific Ocean. Taylor, Sherri, Jeanne and I arrived midday Thursday, to check the lay of the land, to find the spots we needed to be, and to finalize preparations. We enjoyed lunch at Bubba Gump’s Shrimp Company on Cannery Row in Pacific Grove – ‘the’ Cannery Row made famous by John Steinbeck. We visited the various sites for our planned events to validate directions, identify parking options, and note other relevant variables not previously anticipated. After accomplishment of the day’s assigned tasks, we checked into the hotel, got settled, refreshed, and then took a leisurely journey along the famous 17-Mile Drive to enjoy the magnificent scenery and see how the rich folk live . . . well, only the façade of the dwellings and grounds of their not-so-humble abodes. We putt-putt’ed along ‘the’ Pebble Beach with its multitude of stacked rock columns and caught glimpses of the famous golf course by the same name. Taylor and Sherri felt the urge to dip their toes in the Pacific Ocean on the beach at Carmel-by-the-Sea as we witnessed the Sun set behind the ever-present, offshore fog bank that enveloped the coast every evening. We savored a delightful evening meal at Clint Eastwood’s former establishment, the Hog’s Breath in Carmel. Friday, we met with Captain Dan Musker – the boat owner who would take us the legally required 500 yards offshore for the purpose of our trip – to confirm our meeting place, timing, boarding procedures, and other related formalities. We also toured Veterans Memorial Park, adjacent to the U.S. Army’s Presidio at Monterey, where our planned picnic celebration of my Mom’s life would be held. Those members of the family who arrived Friday, met at Fandango’s Ristorante in Pacific Grove for a sumptuous meal and renewal with family. The appointed day for fulfillment of my Mom’s wishes was Saturday. My sister, brother and I, along with my oldest and youngest boys plus Melissa’s daughter boarded Captain Dan’s sailboat and headed out of Monterey Harbor to Lover’s Point – the northern corner of the Monterey Peninsula. We made our peace, rendered the words significant to each of us, and I scattered her ashes in the Pacific Ocean. We added brightly colored, assorted flowers to the spot. Upon our return to shore, we gathered at the park with a couple of dozen other members of our family including Mom’s sister, cousin, and brothers-in-law along with grandchildren, nephews, nieces . . . all in all, four generations. A family picnic seemed the most appropriate venue to celebration my Mother’s life – thank you Melissa for reminding me. Melissa Louise and Melissa Sue provided the exquisite sustenance. My mission accomplished, we scattered again. Jeanne and I remained in California to visit her sister and husband, and take a few extra days just for ourselves, which is one reason this Update is late to the wire.
The follow-up news items:
-- Grand Dear Leader Umpa-Lumpa may or may not be ailing, but his cronies apparently are frustrated with the lack of attention they have been shown since they blew up the cooling tower at the DPRK’s nuclear reactor at Yongbyon [293]. North Koreans expelled the IAEA inspectors, and indications suggest they have begun reactivating the reactor.
The first McCain-Obama debate that was, then wasn’t, then was, happened Friday night as originally scheduled. Unfortunately, I had a family event at the same time as noted above, and I was not able to watch the debate. I have seen snippets as the Press decided to edit the event, and I have listened to the talking-heads pronounce one or the other as the winner. I have insufficient information to render judgment or an opinion. Next, we look to the Biden-Palin debate, which should be quite entertaining.
More history in the bad-debt, credit-crunch crisis this week:
-- The two remaining Wall Street investment banks – Morgan Stanley and Goldman Sachs – were reclassified as bank holding companies, bringing them under stricter oversight and tighter financial constraints.
-- Goldman Sachs reached an agreement to sell US$5B in perpetual preferred stock with a 10% dividend to Warren Buffet’s Berkshire Hathaway, and to sell US$2.5B in common stock to the public.
-- We learned on Tuesday about the FBI’s criminal fraud investigations into a string of companies in the headlines [352, 353] – Fannie Mae, Freddie Mac, Countrywide, Lehman Brothers, AIG . . . 26 companies in total, so far. I suspect there will be a bunch more folks going to prison and deservedly so.
-- Carving up the carcass of the once venerable Lehman Brothers continued this week. Nomura Group of Japan bought Lehman’s Asia-Pacific unit and agreed to acquire Lehman’s European and Middle Eastern operations.
-- Thursday, Washington Mutual (WaMu) took the dubious place in U.S. history as the largest bank failure . . . so far! The USG seized control of the bank and sold its assets to J.P. Morgan Chase.
-- Congress passed an unusual, six-month, US$630B, omnibus, budget extension to keep the Federal government in operation until spring.
-- Secretary of the Treasury Henry Merritt ‘Hank’ Paulson, Jr., and Chairman of the Board of Governors of the United States Federal Reserve Ben Shalom Bernanke, testified before the House and Senate banking committees, forecasting dire consequences if swift action to blunt the credit crisis is not taken.
-- Congress wrangled with the details of the so-called Paulson Plan, and various reports suggested a deal has been struck.
A couple points of amplification or clarification from my comments regarding last week’s historic events . . . depending upon one’s perspective:
1. Congress grappled with a number of mechanical issues regarding the administration’s extraordinary bad-debt absorption scheme. One of those elements was a provision to prevent golden parachutes and exorbitant executive compensation for those companies that are to be saved. I’m good with as severe a penalty as can be mustered. If there are insufficient grounds for criminal prosecution and punishment, then I strongly recommend they be shown the door with no severance or other compensation. If we need them to work, then minimum wage with 99.999% ‘at risk’ compensation for finite performance objectives seems appropriate. Why should they get more than the janitor? At least the latter did his job and did not injure the company, stockholders, customers and other disassociated citizens.
2. Business and capitalism is about risk. We need businessmen to take risks – an essential ingredient for advancement and success. Risk can be reckless. Risk also entails a constant, perpetual assessment of consequences and collateral effects. It is one thing to risk my own life riding a motorcycle or jumping out of airplanes; but, it is an entirely different risk to do the same things with a family who loves you and depends upon you. So it is in business. I do not claim comprehensive knowledge of the factors involved in this current banking crisis, but from what I do know, we had far too many bankers, from small to gigantic, who should have know better than to take such foolish risks with sub-prime mortgages to so many people who did not have the ability to sustain their debt in even a slight market downturn. The flip side of the risk balance might be best represented by bad boy Joe Stalin who banished under performing managers to the Siberian Gulag or shot them – not exactly conducive to risk taking. In our anger over what so many foolish people did to themselves, and greedy bankers aided and abetted with their blind lending, we must resist the temptation to overreact and constrain risk-taking in business; yet, we must institute some degree of safeguards to protect the innocents among us from the extraordinary damage wrought by such foolish, rampant, risk-taking.
3. The marketplace is NOT the wild, Wild West, where anything goes, survival-of-the-fittest conduct can be tolerated, like shootouts on Main Street. While the Old West tolerated such conduct for many reasons, the consequences of stray bullets in crowded cities are far too great. So, in principle, a truly free marketplace is self-regulating, just as communism is a utopian ideal where everyone is truly equal. Neither is realistic or pragmatic. A truly free market engenders the ruthlessness of the Wild West, and the potential for collateral damage is far too great. There must be rules to govern marketplace behavior just as there must be laws for Main Street conduct. Perhaps the law was commensurate with and reflective of the ‘irrational exuberance’ that marked the late 1990’s, but I respectfully submit the law did not serve We, the People, very well. The free marketplace is a pipe-dream just as much as communism is wishful thinking. We need laws to protect the innocent from injury.
4. Should We, the People, save a citizen from himself? Does a citizen who witnessed wild, irrational, escalation in home prices in California, decided he wanted some of that action, took out a 125%, adjustable-rate mortgage on a value five times the cost of replacement, and expected to flip the property in 2-3 years for double his purchase price deserve our compassion and salvation; or, a couple in Florida who bought five condominiums for business or speculation, only to find no customers? Please, let us remember where this credit crisis began – not on Wall Street, not with investment banks, not with mortgage companies – with that individual citizen sitting at a table with legal papers in front of him and an ink pen in his hand. The sad reality remains that we had millions of our fellow citizens who believed they had a foolproof get-rich scheme, who believed they could get something for nothing, who wanted a home they could not afford, who truly believed the downside could not happen to them. The banks blindly accumulated these faux-mortgages, and now the bill has come due.
5. Lots of talking-head pundit-isms regarding the USG bad-debt absorption plan were bandied about this week with words and phrases like ‘blank check,’ ‘rubber-stamp,’ ‘bailout,’ ‘blind faith,’ et cetera. We can wail about the administration’s US$700B+ rescue plan as much as we like, but that does not alter reality. We have trusted the USG with billions of Treasury dollars before, many times, and we are going to have to trust them again, to do the correct things to limit the damage and destruction looming over us in this financial crisis. Time is of the essence; action is far better than inaction considering the risks involved. We can seek retribution and deal with recriminations after the bleeding has stopped and the patient is recovering. Now is not the time to hesitate in thoughtful rumination.
All that said . . .
Is the administration’s proposed bad-debt absorption plan the right thing to do? No! Yet, in 1935, was allowing the Nazis march toward war the right thing to do? The longer we wait, the higher the price tag will be. There are two elements:
A. Credit, the life-blood of modern business and finance, has nearly been choked off, partly because of the mountain of bad-debt. The physical action of removing that bad-debt from the marketplace is essential to the necessary money-flow for vital business. And, here we have two choices: the easy way or the hard way. The only question is how much pain do We, the People, wish to endure for decisions we did not make?
B. The administration plan, by itself, will not solve the problem. I believe it will address the tangible mechanical aspect, i.e., take the bad debt off the books of banks and mortgage companies, thus infusing massive amounts of money into the system. Yet, the other critical element can only be addressed indirectly – confidence. No matter how much money is available, banks will (or should) only lend money when they have confidence they can recover their investment and make a reasonable profit in the process. Without confidence in the economy and the process, money will not be available for business or private use.
Of the two elements, the USG plan attempts to deal with Part A, with hope that Part B will come along naturally. The longer it takes to address Part A, we shall suffer an amplified time for Part B. Without both Parts A and B, we will face recession or depression. The bottom line is action must be taken – any action is better than inaction. Let’s get on with it.
A contributor provided a timely and relevant link to this article:
“What Happened to Market Discipline?”
by John Stossel
RealClearPolitics.com
Published: September 24, 2008
http://www.realclearpolitics.com/articles/2008/09/what_happened_to_market_discip.html
My opinion:
I do not agree with Stossel's presentation. Sure, the interference of government in the free market has been around for 70+ years. I do not agree that an unregulated, truly free market is self-regulating, no more than I would agree that government without checks & balances will be inherently good. There will always be greedy selfish egocentric bastards in the marketplace, just as there are megalomaniacs in politics & government. The system must be sufficiently regulated to protect citizens from the abuses of the few without constraining the reasonable risk-taking that is the life blood of business.
“That's just my opinion, but I could be wrong.”
. . . to which came this reply:
“It is a tough call. While I have strong libertarian tendencies in many things, it is difficult to well up the courage to sit idle, do nothing, and let the market solve it. Perhaps if we did, the market would solve it in time, but that is not going to happen. Something is going to be done. Unfortunately, regulations grow like weeds and where it stops nobody knows. How do you tell private enterprise how much to pay someone and not become less of a free market? Does it stop with large financial corporations? Or does it extend to small business as well? Where do we draw the line? It appears we are going to take a giant step toward the European government-market model to get out of this mess. I hope it is the right move. We all have much at stake for freedom.
“Unfortunately, this mess has taken our eye off the biggest threat we face - terrorism. But, if we do more than put a band aid on the problem and actually solve it (if we can find someone smart and wise enough to know what to do), then perhaps we can get back to fighting the war on terror to preserve not only our way of life, but life itself as we know it on this planet.”
. . . et ma réponse:
We share libertarian views. Yet, libertarianism taken to its extreme could easily rationalize no police, no armed forces, no diplomatic service, ad infinitum – every man for himself. The criterion for me remains public injury. When the actions of anyone injure another citizen, then government has a proper interest and task to perform.
You posed some interesting related questions:
1. How do you tell private enterprise how much to pay someone and not become less of a free market?
The simple answer . . . we don’t and shouldn’t. The marketplace should define compensation. Yet, history tells us businessmen of the day were quite content and happy to enslave workers, pay them a pittance for their hard labor, and literally consume human beings as an expendable commodity. Unscrupulous businessmen were/are no different from dictators, rabid clergy, or any of the myriad of megalomaniacs among us.
2. Does it stop with large financial corporations? No.
3. Or does it extend to small business as well? Yes, if appropriate.
4. Where do we draw the line?
The answer depends upon many factors, e.g., criminality, expanse, severity, et cetera. The salient element in the current crisis and proposed remedy is the potential consequences of further credit constriction and loss of confidence. We are at the edge of the abyss, just as we were in 1929. The difference today is the aggressive action of the government to stem the tide. History shall judge our performance. I, for one, have a stable mortgage, I pay my bills, and I try to treat people with respect and let others live as they wish to live. When so many others got greedy, signed foolish mortgage papers, and took on more than they should have, they were on the verge of affecting my family, my job, my welfare, my ability to pay my bills. The potential for the injury to my family by the actions of others is real. The line was crossed four or more years ago, but at least the government is attempting to limit the destruction and injury.
The bottom line for me is the damage was done 10-20 years ago, and the longer we wait to do something to reenergize the credit market, the worse and more damaging the consequence will be. Inaction will simply take us closer toward bona fide economic depression. The choice is ours.
No comments from Update no.353:
My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
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