Posted on 04/02/2008 9:13:24 AM PDT by ovrtaxt
Why Rescues Don't Work |
"...Just like natural organisms, the financial system must have death to evolve into a better form..."
NOW THAT HE'S wearing some sort of do-good government hat, even Hank Paulson is not thinking straight.
Regulate in New York and finance goes to Toronto. Regulate in London, it goes to Frankfurt or Paris - and since Toronto, Frankfurt and Paris are run by the same nervous bureaucrat-types, we can reckon soon enough that the entire financial markets will be hosted out of Singapore and Shanghai.
There they will accept the risks as well as the rewards, to their very considerable long-term benefit.
You simply cannot enjoy being the financial center of the world but start bleating for government bailout whenever asset prices dip a few percent. As Paulson is demonstrating, the regulatory price for being bailed out is far too high. We must all grow up and take a full measure of punishment. The banks must take theirs.
Let the shareholders and depositors take theirs too. Just like natural organisms the financial system must have death to evolve into a better form.
Paulson's plan is a dressed-up confiscation of the profits of the cautious, and a transfer of those profits straight back to unreconstructed gamblers in the worst offending banks. This is very unwise.
In these difficult times, profit (or more accurately the avoidance of loss) should be benefiting those who troubled to understand the risks in the system, and avoided them. But Paulson's plan is currency creation, and a devaluation of the good quality assets owned by the cautious. He fails to understand that unless the system occasionally rewards caution there is no reason ever to be cautious again.
The market works better without these rescues. Only by appropriate economic reward to the cautious, when they are right and everyone else is wrong, will caution sit well beside risk-taking in the financial system. The real threat to New York's and London's continued dominance of the world's future financial system is government regulation itself.
Mr. Paulson should read Hayek's classic The Road to Serfdom, and he would understand the inevitable failure of his rescue plans. He would see how these top down rules remove society's flexibility until one day we all wake up in a paralyzed "command" economy, where nothing can be done without official sanction.
Instead, he has forgotten what a command economy means. He should study the history of communism's economic successes. It won't take him long.
_____
© 2008 Paul Tustain
You were just saying...
Exactly right! If there are no REAL consequences for poor choices, there's no incentive to make better decisions or better choices. It actually encourages corruption to flourish.
I saw someone else post this idea the other day- if they’re going to bail out foreclosures, what’s to stop me from just missing a few payments and applying?
That’s the point: you should start thinking on ways to act corruptly, also, obviously, you’ll start getting ahead.
The system is rewarding lawbreakers (illegals) and the greedy.
Rescue killed Chrysler
Rescue killed NY City
Rescue killed...oh never mind.
Sure why not. Maybe I'll run for office.
—Rescue killed Chrysler—
Not true. After Chrysler was bailed out in 1979, it not only pioneered the first successful US built front wheel drive cars (built on the K and E chassis), but debuted the first minivans in model year 1984 (on the same K and E frames); these were among the most sucessful vehicles in history. 1980s tariffs on imported motocycles saved Harley-Davidson, also.
Cool....I’ll be your new best friend....it’ll only cost you a few hundred thousand. : )
No problem. I’ll have it printed right up.
I read his comment with incredulity. Chrysler rebounded tremendously following that bail out, and Iaccoca repayed the gov. loans years ahead of schedule.
hehehe
I’m sorry I wasn’t clear. my remarks were meant to be sarcastic.
Hahah. You guys are funny, put a smile on my face. How you been overtaxt? I am going to be running for Congress. My staff will hate me along with every other Congressmen/women, Senator etc. I will be one term guy to attempt to shake things up.
I am a marketing guy with some good resources. I don’t need special interests ‘sponsors’ to get elected and I have worked for 3 of the last four POTUS nominees so I have as good a shot as anyone. It will cost me money based on current payscale but some of us must step up to the plate and fight the good fight, win lose or draw.
btt
Are you series? Cool, I want a job bro. Interns for everyone! Call Bawney the Fwank, we’ll need a plan, a strategy, and he’s the expert!
By the way, do you know, there are more brothels per square mile in DC than any other US city?
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