(Edited) Why It’s Not Over, Part III
The end of the series and where I get into the really wishful thinking.
Ever since the meltdown a week or so back, economists and Wall Street analysts have been thinking and talking about a variety of alternatives to the Paulson plan and fortunately for me, these people have been writing all over the internet. I’m sharing some of the ideas I’ve read as links below, because we were all deprived of the opportunity to think about and weigh any options. Again, I don’t doubt that there is a real crisis here. And maybe we need to put some money into a fix. But if something is to be done, it should be in a way that actually provides some reassurances that we won’t be back in the same bind anytime in our lifetimes. And if something is to be done, then Congress and the Administration can speak to us like the tax-paying adults we are to ask for some considered support, and not more fearmongering. So here goes:
Nouriel Roubini runs a highly regarded newsletter and he has been telling the world the sky is falling for more than a year now. A thing that got him vilified by the financial press. But he locates some of the historical problems with the Paulson bailout and provides more discussion of his own recommendations. (Normally this is a paid newsletter, but he has opened it up for this time being.)
Barry Ritholtz’s solution focuses in in trying to fix the toxic mortgages.
Brad DeLong has been talking up a nationalization program that worked well when Sweden was hit with a meltdown similar to ours. If you read Krugman’s blog over at the NYT, he has been speaking pretty favorably about this. (EDITED to fix link — thank you Geek’s Dad!)
The WSJ wants to know why we can’t replicate the lessons of Buffett’s deal with Goldman Sachs.
Time presents the view of a couple of economists who argue that letting the banks fail may be tough sledding, but is the long term solution.
And then there’s Joseph Stiglitz who I posted about in Part II and who also finds something to think about in the Swedish plan and the Buffett approach.
There’s plenty more, certainly. Perhaps you’ve read of some and want to share them here. But the bottom line is that there are serious and real alternatives that address these issues in a more systemic and permanent way than throwing good money after bad in a way that seems absolutely a path to making sure we are back fixing it all again.
Unfortunately, I still think that the alternatives out there are not going to see the light of day except among those among us who have become obsessive about looking for them. If Stephanopolus is right, the Administration’s and Congress’s focus is going to be still on the solution that Paulson framed. Except this time it probably gets porked up with repub handouts. If I were Pelosi, I think that I would be pushing a Plan B that at least gets the dike fixed enough to get room for real hearings to listen to all of these folks who were knowledgeable enough about the situation to be ready to discuss multiple options to address the problem. Bet they were ready to speak to legislators too. But a bandaid would likely be passed with a D majority and get all of us some time to weigh additional options.
ADDING — And Now For Something Completely Different. Won’t raise enough money, but I can imagine this would be satisfying.
Tags: Bush's Fubar Economy
On a partisan note, I think the fact that Obama is up to 70% in IEM trading and McCain continue to tank demonstrates that people want a progressive solution to this.
We have right wing Republicans to thank for saving us from our milqtoast centerists.
Cassandra–the ONLY thing I can give a good economist credit for is adjusting the interest rate. Otherwise, any valid opinion they have is retrospective–and not in line with the current state of affairs. This is unchartered waters….when has the US ever been so co-mingled with global markets, and dependent on foreign resources? Yet, we bring to the table American creativity, and resourcefulness, that is the envy of all…and commands all eyes on us. Keep our 700 billion moored to America, for every American. Putting it “out there” to the cyberfinancial world will be “pissing in the ocean”….mixed and gone w/ everything else, and then what? Cut our losses now….ECONOMIC CLEANSING!!!
Actually, it is not uncharted waters as a number of these guys point out. Sweden, Noway, Finland went through a credit meltdown like this and got out smart. The Japanese went though a credit meltdown like this and did NOT get out smart. You may not agree with it and that is OK, but there is very real knowledge out there that can be quite useful in thinking about a solution to our own problems.
Economic cleansing? should we gather up all the money and shoot it?
cassandra
Props for this post; best collection of links on the subject I’ve seen yet (I had only read three of them).
The key point: legislate in haste, repent in poverty.
“Yet, we bring to the table American creativity, and resourcefulness, that is the envy of all”
Oh, for goodness’ sake. This is tripe.
“…and commands all eyes on us.”
All eyes are on us because the rest of the world’s currencies are tied to ours. Get over your American exceptionalism.
Geezer is right. Where as this statement
Yet, we bring to the table American creativity, and resourcefulness, that is the envy of all…and commands all eyes on us.
might apply as the Clinton years cusped, the last 8 have done much to tarnish our global reputation..
Mostly it can be summed up in this question…
“What from ourselves, can we sell?”
?????
Porn?
Blood?
Guns?
Souls?
Joanne… somehow I suspect that in “economic cleansing,” the rich will get gently wiped off and patted dry, while the working class and middle class will get scrubbed raw. Can’t we manage it differently this time?
Wouldn’t it be nice if there was a way to fix the economy by raising taxes only for Republicans?
cassandra–sorry, your “read more” links didn’t appear until after I wrote and then refreshed…but I had seen these before except for the Roubini report. I still don’t see these other countries, as anymore than a case study, rather than a template for direction. And yes Geezer, like it or not, we are both victor and victim of our American “exceptionalism”. What other GNP is so diverse from agriculture to xray, and business to beaches that we need to listen to the prognosticators who reference economies based on fishing?maybe vodka, or some furniture? OK –perhaps some solar…my point being…those smaller countries were at a much greater vulnerability, due to their limited contribution in the overall global economy. We contribute at practically all levels–and are big “contributors”…..why in the world would I want to contribute another 700billion to HOPE, when it should be used for the concrete problem of WHAT HAPPENS? I’m willing to wait it out, and not lose on both sides.
And as an aside….how about all those “tax relief” checks we were recipient of not but a few months ago….how’s that working for us? Not but another fumbling economist shooting in the dark….it’s all retrospect….don’t fall for it…Not Brian…where are you now? Any further insight..digression…etc….
Guns, Blood & Porn/Sex……. all things that’ll sell in a pinch.
I think that the Bailout Bill that was defeated did contain a lot of the provisions from the program that Sweden used in the early 1990’s. I am attaching a link to the National Association of Realtors web site. The article is biased toward passage of a bailout bill but it also gives a good explaination of the provisions included in the bill that was defeated on Monday.
http://takeaction.realtoractioncenter.com/campaign/eesa/explanation
Thanks, Mr. Geek!
Thank you Geek’s Dad! I had the wrong link in for Brad Delong’s entry. It is fixed now, plus I added another — possibly more satisfying — option that I read today.
(as Archie Bunker) awww jeeeez, there goes the neighborhood!
If we’re still considering serious bail-out alternatives, consider this one (a long technical read, but convincing)
http://asecondhandconjecture.com/index.php/2008/10/01/my-favorite-proposal-for-helping-financial-institutions/#more-5823
Thanks, Steve!