[lbo-talk] Discussing the Crisis/Bailout

[John Thornton]

Doug Henwood wrote:
>
> On Oct 6, 2008, at 3:56 PM, James Heartfield wrote:
>
>> it won't work
>
> Who knows? It's odd to see someone as sophisticated as Krugman 
> pronounce it a failure less than a week after passage without the 
> Treasury having bought a single asset.
>
>> it avoids addressing the underlying problem
>
> What's the underlying problem? If it's lots of bad assets on bank 
> balance sheets, the program will address that directly. if it's 
> renegotiating the underlying mortgages, that's going to happen, though 
> it'll take some time.
>
>> it rewards the institutions that created the problem
>
> We don't know that that will happen. Besides, should we punish 
> ourselves to avoid rewarding them?
>
>> it increases moral hazard
>
> That could happen, but it doesn't have to. Paulson will be gone in 
> three months - who knows what a new admin would do?
>
>> it is more of the same extension of credit that fuelled the problem 
>> in the first place
>
> So the answer is to follow Andrew Mellon and liquidate, liquidate, 
> liquidate?
>
>> it deepens the US economy's dependence on credit
>
> See above.
>
>> it puts off the problem to tomorrow
>
> Not sure what that means. If it means that it's going to take time to 
> work through this, I couldn't think of anything more obvious. If it 
> means we should have a depression today for some Calvinist moral 
> reasons, count me out.
>
>> it damages the credibility of the US economy
>> it damages the credibility of the US government
>> it damages the credibility of the US financial sector
>
> And allowing everything to go under wouldn't?

"You have not refuted his arguments. You are just yelping like an angry 
chihuahua."    Dymtri Kleiner

I was surprised to see Krugman pronounce it a failure immediately 
especially after he endorsed it 5 days ago.
I think he doesn't know his own mind on the matter.

John Thornton