{"id":110,"date":"2008-11-10T12:12:38","date_gmt":"2008-11-10T19:12:38","guid":{"rendered":"http:\/\/chasingeden.com\/?p=110"},"modified":"2008-11-18T14:45:33","modified_gmt":"2008-11-18T21:45:33","slug":"economicsthe-dismal-science","status":"publish","type":"post","link":"http:\/\/chasingeden.com\/?p=110","title":{"rendered":"Economics&#8230;the dismal science"},"content":{"rendered":"\t<div>Banks are not using the Fed bailout money to ease the tight credit market.\u00a0 They are using it to shore up their balance sheets and consider acquisitions of weaker banks who were perhaps not able to get as much bailout money.\u00a0 It is simply making the concept of &#8220;too big to fail&#8221; even worse since in this scenario the big will get bigger.<\/div>\n\t<div>\u00a0<\/div>\n\t<div>To the matter of &#8220;easing the tight credit market&#8221;&#8230;.I have a comment:\u00a0 How can more of the disease be the cure? If overly lax lending and inability to accurately assess the risk of debt led to the crisis, how can more debt and &#8220;easing the credit market&#8221; (aka more lending) fix it?\u00a0 Its just doing more of the same thing&#8230;.you can package it as a rescue if you like&#8230;it doesn&#8217;t change the fact that you can&#8217;t lend your way out of a crisis that was created by lending.<\/div>\n\t<div>\u00a0<\/div>\n\t<div>This is how capitalism works:\u00a0 Bad investments fail, the capital is liquidated, and re-allocated to more fit industries and companies.\u00a0 It is so two-faced to talk about the virtues of the free market with one breath while preventing it from working with another.<\/div>\n\t<div>\u00a0<\/div>\n\t<div>Why can&#8217;t banks fail?\u00a0 Because banks issue money.\u00a0 In a fractional banking system when banks lend, they create money.\u00a0 It goes back to a crisis of faith in our fiat money.\u00a0 If the issuers of the money fail&#8230;.then the money itself might fail.\u00a0 If the money fails, the government fails.\u00a0 That&#8217;s why its tricky to let banks fail.\u00a0 It is a matter of national self-interest (besides the army of lobbyist I&#8217;m sure the banking industry has).<\/div>\n\t<div>\u00a0<\/div>\n\t<div>What about General Motors?\u00a0 Is the government going to let them fail?\u00a0 They&#8217;ve been hemorrhaging money for years and keep asking for bailouts. The answer is NO.\u00a0 The government may allow some small part of the auto industry to fail, but in general, they will not allow the inefficient US automakers to fold.\u00a0 It is a matter of national self-interest.\u00a0 The government wants cars manufactured in the US because in case of a war the auto industry might need to be conscripted to make weapons (as was done in WWI and WWII) or ramped up to fill a void in the absence of car imports if we&#8217;re at war with say China (where presumably Japanese cars could no longer be imported).\u00a0 It is why the government continues to subsidize the farm industry in the US (when it clearly can&#8217;t compete with cheap imports from 3rd world countries).\u00a0 If we are a war, we need to be able to produce our own food in the absence of imports.<\/div>\n\t<div>I also want to comment on the red and blue states and the election results.\u00a0 A map of the states that voted Republican also fairly closely matches a map of states with the worst poverty and most income inequality&#8230;exactly the issues the Democrats try to deal with.\u00a0 Why is it that those who stand to gain most from the Democrats being in office vote against them?\u00a0 It doesn&#8217;t make sense.\u00a0 The Republican states are also generally less educated, with less health care coverage, and lose more jobs to free-trade agreements.\u00a0 The Democrats also try to deal with those issues.\u00a0 I truly don&#8217;t understand.\u00a0 Is gay marriage,\u00a0handguns,\u00a0and abortion policy really THAT important to the poor?<\/div>\n\t<div>\u00a0<\/div>\n\t<div>Finally, I want to re-comment on Economics, the dismal science.\u00a0 It has been shown even more dismal than imagined over the past few months.\u00a0 Why is it, with all the economists in the world, that so few predicted the current crisis?\u00a0 If economics is a science, it should&#8217;ve done better.\u00a0 If it is a science then it should have something more prescriptive to say in terms of actions to take to remedy the crisis.\u00a0 Instead Bernake and Paulson were able to blank check the banking industry&#8230;allowing them to do whatever they want with essentially as much money as they want&#8230;.and call it the &#8220;best&#8221; plan of action to avert the crisis.\u00a0 &#8220;Best&#8221; based on what?\u00a0 Economics.\u00a0 Now that is dismal.<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Banks are not using the Fed bailout money to ease the tight credit market.\u00a0 They are using it to shore up their balance sheets and consider acquisitions of weaker banks who were perhaps not able to get as much bailout money.\u00a0 It is simply making the concept of &#8220;too big to fail&#8221; even worse since [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_newsletter_tier_id":0},"categories":[11],"tags":[28],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3IMYj-1M","jetpack-related-posts":[{"id":214,"url":"http:\/\/chasingeden.com\/?p=214","url_meta":{"origin":110,"position":0},"title":"Why we bailed out the financial sector: Debt is money","author":"kellio","date":"August 21, 2009","format":false,"excerpt":"I pride myself for being a hack, weekend economist.\u00a0 I admit it isn't going to make me rich, but it is interesting. 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