The Bailout

[Lemur]

I'm getting more than a little freaked out about the bailouts that are going around. Here's a comparative graph that shows the scale of the U.S. banking nationalization bailout:

Disturbing ruminations from FT:

The Bush administration all but nationalised Citigroup, the world’s largest bank. For good measure it threw another, yes another, $800bn into the effort to thaw US credit markets. Everywhere you look, Keynes’s demand management is replacing Adam Smith’s invisible hand; printing money, a mortal sin under the fracturing Washington consensus, is the new prudence.

Something big is happening. What started out as a series of pragmatic ad hoc responses by governments and central banks is moving the boundary between state and market. Politicians are now overlaying expediency with ideology. Government is no longer a term of abuse.

Things could move still faster in the months ahead. With their myriad rescue schemes and loan guarantees, the US and British governments have nationalised their respective banking systems in all but name. The banks pretend they are still answerable to their shareholders, but it is a charade. They survive only with the explicit financial guarantee of the state.

Still, the markets remain frozen, starving business of the oxygen of credit. Unless things change soon, the politicians will have little choice but to take direct control, and quite possibly, ownership, of the banks. Nationalisation could be the first act of an Obama presidency. That at least would put some substance into all those loose analogies with FDR.

Thoughts? There seems to be an orthodoxy that no matter the cost, we must bail out these financial institutions. I don't see this being contested anywhere, which makes me nervous. Was the failure of Lehman really so deadly? Someone please explain to me why we aren't even thinking about allowing some of these banks to go into bankruptcy.

[ICantSpellDawg]

I'm getting more than a little freaked out about the bailouts that are going around. Here's a comparative graph that shows the scale of the U.S. banking nationalization bailout:

Disturbing ruminations from FT:

The Bush administration all but nationalised Citigroup, the world’s largest bank. For good measure it threw another, yes another, $800bn into the effort to thaw US credit markets. Everywhere you look, Keynes’s demand management is replacing Adam Smith’s invisible hand; printing money, a mortal sin under the fracturing Washington consensus, is the new prudence.

Something big is happening. What started out as a series of pragmatic ad hoc responses by governments and central banks is moving the boundary between state and market. Politicians are now overlaying expediency with ideology. Government is no longer a term of abuse.

Things could move still faster in the months ahead. With their myriad rescue schemes and loan guarantees, the US and British governments have nationalised their respective banking systems in all but name. The banks pretend they are still answerable to their shareholders, but it is a charade. They survive only with the explicit financial guarantee of the state.

Still, the markets remain frozen, starving business of the oxygen of credit. Unless things change soon, the politicians will have little choice but to take direct control, and quite possibly, ownership, of the banks. Nationalisation could be the first act of an Obama presidency. That at least would put some substance into all those loose analogies with FDR.

Thoughts? There seems to be an orthodoxy that no matter the cost, we must bail out these financial institutions. I don't see this being contested anywhere, which makes me nervous. Was the failure of Lehman really so deadly? Someone please explain to me why we aren't even thinking about allowing some of these banks to go into bankruptcy.

It is utterly insane. Our government has totally failed us and ruined us all.

I'm trying to find a graph that shows the change in GDP over the years.

We still have a healthy GDP compared to national debt. ND has skyrocketed, but not by an absurd margin compared to income. Isn't that important?

[Alexanderofmacedon]

The bad part is, we've screwed everyone else with us...

[naut]

You dirty communists.

[seireikhaan]

You dirty communists.

I do feel dirty...

Our government has sexually assaulted the very meaning of what conservative is supposed to be. Fiscal pragmatism is now dead. The gov't, however, has seeming developed a bad case of necrophelia.

[rasoforos]

Soon a hammer and sickle will be added to the American flag and the president will grow a beard.

As for us Europeans we will need to ally ourselves with Russia to protect our western values from the new communist threat.







Seriously now, it seems (and this might change) that economies with more sensible forms of capitalism than the US are surviving this much better. The US seems to be trapped into having to save 'too big to fail' corporations and the danger of doing that is the fact that, at the moment, there is nothing better for a big corporation than to fail and get a hand on this sweet juicy stack of government money. But it cannot do otherwise...how can you let the citigroup fail? Someone has to be there to finance the economy when the bears give their place to the bulls.