Skip to comments.Economists say bailout plan is flawed and isn't needed
Posted on 09/27/2008 4:03:55 PM PDT by Tempest
"It's more hype than real risk," said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. "A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry."
Another doubter of the Great Depression theme is Kenneth Rogoff, a Harvard University economics professor, who thinks the intervention may prevent or delay the necessary failure of weak financial institutions.
"It is time to take stock of the crisis and recognize that the financial industry is undergoing fundamental shifts, and is not simply the victim of speculative panic against housing loans," he wrote in a syndicated column. "Certainly better regulation is part of the answer over the longer run, but it is no panacea. Today's financial firm equity and bond holders must bear the main cost, or there is little hope they will behave more responsibly in the future."
(Excerpt) Read more at miamiherald.com ...
Mercifully, in the long run, we'll all be dead and won't care.
Can he knock down a Lone Star and eat BBQ?
Possibly. Or it is entirely possible that a downturn could change the fundamentals and lead to a situation where the market never actually self-corrects. Or at least self-corrects to where it was prior to the downturn. There is also the question of, assuming the market will self-correct, how long of a time period that could be. If the market would take too long to self-correct what are the chances that a mass of people push for a "solution" that could be much worse than what is being done currently?
That only proves that rushing for an answer is foolish.
Acorn wants money. Why not have the FBI invetigate them all.Our government is killing this country and it should be against the law.
Senator Shelby does not belong in that top photo labeled as “supporting the bailout”.
The markets are in the state they are NOT because they are “lying” about strong fundamentals in our economy. Markets are telling the truth. The assets that have plunged in value are worth about the market is willing pay for them.
The market is in its current state because faith in the US financial system has been shattered. IT DOES NOT HELP that banks are being forced to merge in hours or days in order to stave off government seizure. IT DOES NOT HELP that Henry Paulson can, by fiat, decide to seize (AIG) one company, decide to forego that route on another (Lehman), rape and gut another for the sake of his pals (WaMu and Bear Stearns)
These arbitrary moves have the effect of chasing capital AWAY from the financial system. The issue is trust. Should the US experience capital flight on a large scale; and signs of this are now occurring, the outcome will be ferociously ugly.
This bailout, in its original form or in any of its’ derived forms, is only a continuation of a “black box with overwhelming force” policy that is continuing the effects we have already seen. And therefore, no bailout (along these lines) is going to have the desired effect. It will be seen and prove to be only a prop-up of the status quo. Pumping money into the banks will only result in increased hoarding of cash and international revulsion at the arbitrary nature of these moves. These banks and their offerings have already created enough international damage. Foreigners are withholding investment in the US because they have burned repeatedly. And their actions are justified. They have been defrauded and lied to. This is one time we had damn well better be concered about what foreigners think about us. We are incontrovertibly dependent upon their capital, both for our economy, but to continue to finance our out-of-control debt. Temporarily, we can buy their continued forebearance by making good the toxic debt we sold them, but they are not eager to reinvest in what they see as a third-world financial system.
No bailout that fails to address the pure notion of trust will work, in anything more than the very short term. News of a bailout will likley pop the stock market for a few days, but please realize this shall be seen as a mere diversion to the larger picture: The US has not, as yet, “chalked up” a recession, but it is vertually certain to go into one. Corporate earnings are bound to follow. This will undoubtedly crater the stock market and create even more labor and economic activity deterioration and dislocation.
If we do not restore trust to our markets, any of these asinine bailout plans will only delay the restructuring that the world economy will absolute force us to do, whether by choice or by force. If we choose to ignore this certain outcome, when the reality hits, it will occur with stunning violence.
One of the funny things about money is it is created out of thin air, by the mere act of taking on debt. Maybe what is happening is not enough people are borrowing so not enough money is being created. Fine create the money another way. I'll be happy to take some of it.
You don’t restore trust by allowing the same corrupt entities to exist. I also take contention with your statement that “we” sold them the toxic paper.
Hence since I had nothing to do with it and everyone knows whom are the parties responsible. It’s only fitting that they pay the price for faith to be restored.
“No damn bailout needed. Bush has lost his mind.”
Couldn’t agree with you more...it’s like he is trying to save his legacy, but doesn’t this remind you of the way he sold us the war ? all the BS to make us invade Iraq....
As far as the bail out plan, check out www.opensecrets.org and they list ALL the money these Congressfolk are receiving from these organizations, it’s like they are working for these companies and not us....they were paid in full ! It just seems to me if these businesses fail by their own accord, let em go BK and they will be replaced by another firm eager to make an honest living....I think these fat cats are so used to the present system, they are looking for another buck to get back in the game ....like a gambler who has lost his ass and is trying to borrow whatever he can to get back in the game to try and recoup his losses.
Missed the “v” and hit the “m”. I like you guesses. Paulson worries me after it came out that Obama got inside info via Paulson’s old company before the meeting with Pres Bush et al.
I don’t think he is.
Yep alot of people are holding out thinking that housing prices will go lower.
James K. Galbraith must have studied under Milton Friedman rather than his Dad. How did that happen?
In the sense of just rushing into a "knee-jerk" response, correct. However, something needs to be done to deal with this financial crisis. Just waiting for the market to self-correct would not be a wise move, particularly because it may not correct, or at least could likely take a long period of time.
While the bailout plan is not perfect, and some of the earmarks in it undoubtedly need to go, it on its face is a fairly good idea. I do agree with some other economists that capital needs to be provided in addition to the liquidity that the bailout provides, but that can be addressed later.
You started down the path to nowhere when stated that handing the government unchecked finaancial powers was a fairly good idea.
Have you evenn stopped to consider the House Republicans plan or is there just not enough pork in that for you?
I’m so tired of the Wall Street shills.
Dang it! you anti-bailout people are making TOO MUCH SENSE! Still rethinking my position...