[lbo-talk] Risk and Keynesian Uncertainty

[Cseniornyc at aol.com]

Doug Henwood says : "The state keeps rescuing capital when it gets in  
trouble - every 
disaster you list was bailed out either through lowered  interest 
rates, soothing words from the central bankers, or actual state  
expenditures. Moral hazard may increase the risk, but until they let  
some big ones go down and hang the macro consequences, the Greenspan 
put  remains unexpired."
Comment: This is only partially true."Too big too fail"  firms with high 
direct political connections such as Enron, WorldCom,  Globalcrossing, Arthur 
Andersen, Adelphia, just to name a few have been left to  "go down". Same in the 
UK, where old biggies such as MG, Rover and Rolls Royce  are gone. Similarly in 
Italy/France , Fiat and huge Permalat, the European  Enron,  were left to 
meltdown implosion.. Even big states have their rescue  limits, they know that 
and they do not want to test them all the time just in  case they run the risk 
of disappearing in one of those crisis.. The SLA's and  LTM Capital were 
rescued not as individual firms but because the systemic  risk involved threatened a 
very large portion of the whole financial  industry.And of the upcoming 
bankruptcies, do you think GM will be rescued  again? I don't think so.We have 
found ou lately, that the elasticity of the  system to bail itself out is larger 
than it was previously believed. But it  still has an upper boundary and it 
needs a lot of foreign support in the form of  dollar recycling from trade 
surplus economies.
Cristobal  Senior
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