April 13, 2009

• Treasury’s Strategy?

  Go here and watch the video introducing the Congressional panel overseeing the administration of the TARP program.  http://cop.senate.gov/reports/library/report-040709-cop.cfm

  I read both dissenting arguments and a good chunk of the report itself too. It’s quite fascinating stuff and rather disturbing.

  Basically the super simple gist of it all is that there is a question of whether the government is doing too little or too much. The consenting view of the report is that while we can’t know for sure, there’s a great deal of evidence from other countries and our own nation’s history to suggest that there may well be very good reason to believe that we are doing too little.  The dissenter, effectively are worried that we might go overboard and do too much, interfering with private industry, and whatnot. 

  The dissenting view very much pisses me off. Because implicit in this idea is that it’s ok if we do too little. But a moments introspection suggests the exact opposite. I mean think about it. If we go overboard sure there will be problematic consquences but the real problem, the huge mess we are in RIGHT NOW will be fixed. There’s no risk of that not happening. Liquidating the banks will fix banking and pave the way to recovery. Taking them over very likely will do the same. Both strategies have worked in numerous major crises in the past. It may not be the best solution but it certainly is *A* solution.

  The problem with pussy-footing it instead is that it very much might NOT work. Trying to be clever and do all kinds a sneaky run arounds to fix the banking system might just push the moment when we have to do the major solution back and back all the while the economy suffers. If it did work, it’d be great as it might avoid some of the distasteful disadvantages of the more extreme alternatives, but what if it DOESN’T work? Where will we be in a year or five or ten?

  Most likely the answer to that is that we’ll be in the same situation only much worse. Some stress to the system will happen sooner rather than later and the Federal Government will realize that they can’t play around anymore and have to do some extreme response then. The only difference is by then we’ll have lost months or years of time and growth and trillions of dollars. What’s more during the course of that period, the gap between the rich and the poor will have continued to expand and public discontent and distrust of everything the government could do will grow.

  And the people’s cynicism will be well justified. If things got worse and we were forced in an Emergency situation to do what we should have done months or years ago isn’t the risk of going overboard in our counterreaction all that much higher? I mean if the people are pissed off the environment will be such that grandstanding politicians will do just about anything to regain public suport.

  If you’re going to have to do some sort of extreme action, it’s better to get it out of the way SOONER for that very reason. The faster and more decisive the better. If not the risk and uncertainty just breeds more uncertainty, mroe doubt, more fear, and worse ultimate outcomes.

  We know an extreme solution would work? At least all the historical evidence points to that it will. If it doesn’t it would be a historically unprecedented event. So why is the government trying a tact with only a mixed success rate instead? Why, if we are calling this the GREATEST crises since the great Depression are we only trying solutions that are SMALLER and LESS comprehensive than solutions we’ve used successfully for other smaller crises in the past? How does that make sense?

  I am afraid things will look better for a small while giving us false confidence in a system that cannot work. And it’ll keep being like that for months and months that drag on into years where we think things are getting better and then a bit worse and then a bit better, but really we are stuck in stasis while the heart of the economy is stagnating. And in the worse case that crises will just bleed right into the next major crises that shatters our economic system. It could be, and probably will be our impending healthcare crises but it might be something smaller sooner. But if THAT happens, we’ll see a change to our social fabric unlike anything we can imagine right now.

  Stories of the great depression may one day seem quaint to us.

  So we better hope this fricking Treasury plan *works*. Or else they get smart and realize it’s not, much sooner rather than later.

  • 9:28 pm
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