According to Establishment cheerleaders and evangelists, the housing crisis is now over. It conjures in my mind an accident scene: "C'mon people. Keep moving. There's nothing to see here." Hmmmm...Just about a week ago, the Federal Reserve contributed mightily to the primary ingredient that caused the housing crisis in the first place. By socializing the liabilities for stupid investments, Timothy Geithner's plan for dealing with bad bank assets makes the economic situation even worse.
Those who really think the housing crisis is over don't understand the problem.
Problem #1: Federal Reserve Prints More Funny Money.
On March 19th, the Federal Reserve produced more of what it's best at producing--funny money.
With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy.This is supposed to fix something? They know
I'm feeling so warm and fuzzy with reassurance now that I must have just peed my pants.
it won't fix the housing crisis, and they're gambling on the likelihood that you won't know that.But hey, the housing crisis is over regardless of reality! To the Light Brigade, I say, "Charge!" To the Titanic, I say, "It's just an ice cube!" Reuters reports that we have nothing to fear. So, by gum, it must be.
With a new infusion of drugs to the American economic crack addict, the housing problem that needs time to right itself will be exacerbated. Much of the glut
But hey, the housing crisis is over regardless of reality! To the Light Brigade, I say, "Charge!" To the Titanic, I say, "It's just an ice cube!"
of vacant housing that would have gradually been reduced will now sit idle for a longer period of time as lenders run pell mell to lend the Fed's new money, and the construction industry interprets that as a signal that they should build more new houses. It's a violation of Economics 101 all over again. Prepare for housing crisis #2.Problem #2: Timothy Geither and the March to Public-Private Socialism
From one perspective, socialism is the distribution of risk and the results of failure evenly across society. I don't know about you, but I'd rather be on the hook my my own mistakes only. I've made enough of them for myself. I just haven't gotten used to paying for the failures of politicians and their friends on Wall Street.
I'll never get used to it, but the Federal Government,
The problem will go away of its own accord (without bureaucratic tinkering), similar to how the sun gradually dries out the muddy ground after a sustained thunderstorm. But every time the Federal Reserve tries to fix it, such actions have made and will make the problem both longer and worse.
both Republican and Democrat is "banking" that you will. On top of bailout packages and stimulus plans comes now the socialization of (your) responsibility for bad bank assets. Along the lines of this latest economy-destroying tactic, Timothy Geithner, the United States Treasury Secretary, came out with a poppycock plan for our economy a couple of days ago, under the title of "My Plan for Bad Bank Assets".Geithner's explanation of the bad bank assets was just as poppycocky as his plan. He said:
..this crisis was caused by banks taking too much risk...If he was interesting in speaking the truth, what he would have said would have been more along the lines of:
...this crisis was caused by the Federal Reserve injecting too much liquidity into the system, which signaled that the economy was far more robust than it really was, which in turned caused the banks to take too much risk...But then that would be, for the former head of the New York Federal Reserve, to admit guilt, wouldn't it?
Geithner tries to reassure America that
...the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer...I'm feeling so warm and fuzzy with reassurance now that I must have just peed my pants. Under the plan, you and I will only ever have to pay for the effects of half of the financial institutions' malinvestments.
I'll admit I was surprised to hear something mature come out of Joe Biden's mouth with regard to the economic crisis:
"We're in a position where in order to rebuild this economy, it can't be built on a false bubble," the former senator said. "We have to get down to rebuilding an economy that produces a solid foundation..."Whether or not he means it is another matter. If he'd chastised the Federal Reserve in the same breath, I'd have believed he did mean it. But no.
. . .
So if you think the housing crisis might be over, go ahead and say it like a mantra. That won't make the reality any less of a contrast to your wishful thinking.
The problem will go away of its own accord (without bureaucratic tinkering), similar to how the sun gradually dries out the muddy ground after a sustained thunderstorm. But every time the Federal Reserve tries to fix it, such actions have made and will make the problem both longer and worse.
Much of what you say may well be right. However, once again you've hit a snag in your definition of socialism.
ReplyDeleteFrom one perspective, socialism is the distribution of risk and the results of failure evenly across society.
When left to their own devices, without any government or social restrictions, market participants are hellbent on externalizing the risks and results of failure on others. Is that socialism?
Good question. From the traditional definition of socialism, which implies government control of the means of production, I would say: not exactly, except when government control allows the externalization of those risks.
ReplyDeleteAt any rate, "externalization" of risk is, I think, the same as "socialization" of risk while maintaining a private benefit. If government facilitates such socialization of risk, then it is socialism. An excellent example is the promise of President Obama that, if an automaker goes out of business, the government will honor any extant new-car warranties.
And so when government in pursuit of does not restrict the emissions of a factory, for example, allowing the costs of their production are born (externalized/socialized) by the surrounding population (contamination of air and drinking water, leading to rising health costs in that population), that is socialization to you? Or when the government allows companies to force their employees to bear the costs of production by not providing safe working conditions, so that they develop illness or risk death. Since in that case the corporations unevenly distribute risks (ie, those that risk the most do not stand to gain the most from success). Is that socialism?
ReplyDeleteCorporations should never be able to externalize (socialize) their risks.
ReplyDeleteCorporations should have to pay for the external costs of their production instead of foisting an unclean environment on the rest of the people. By the same token, corporations should not be allowed to hide the health risk costs of production from their employees.
As for the issues you raise, it is a valid function of government to ensure that they do not happen, or punish (corporate) offenders if they do occur. Our government does not do a very good job of this.
So when politicians or pundits insist that government should not enact environmental or employee protection legislation on the grounds that such regulation interferes with the workings of the market, they are actually being socialist?
ReplyDeleteI know I'm probably going to regret giving a yes or a no to a non-trival question, but...
ReplyDelete...yes.
In a very general sense of the term, whenever anyone is successful at hiding or pawning off the risks or effects of an activity onto others, they are socializing those risks and effects.
In my mind, this is socialism because it succeeds by force (or deception). One of the main differences between socialism and the LDS doctrine of the Law of Consecration is that consecration is completely voluntary.
Whoops, somehow missed your last response on this.
ReplyDeleteI appreciate your consistency in your answer. But this is what I meant about the most extreme possible definition of socialism (in that other post). There are roads which I will never use, the creation and maintenance of which benefits others, and which my taxes help pay. Some of my money will go to schools which neither I nor my children will never attend. But I have no problem with being "forced" to share those and other financial burdens, because I know all of the community indirectly benefits from the maintenance of those services. Do you not agree? If we are going to label every single instance in which others are "forced" to share the cost of something with a such an incendiary term as socialism, then the debate will become meaningless.