As a general proposition, when told by unanimous elites that a particular course of action is urgent and necessary to avoid disaster, there's a lot to be said for going fishing.
Tuesday, September 30, 2008
Quote of the Day...
Apropos of my earlier post, Mark Steyn says:
Bailout and Meltdown Thoughts...
A number of you have asked what my opinion is on the bailout proposal, and the threat of meltdown in the financial world. The short answer: I'm confused.
My confusion stems from this: the panic from Wall Street and Washington doesn't seem to jibe with anything I can observe myself. In other words, from where I sit I don't see any reason why Wall Street and Washington are panicking. All the usual measurements of economic health are looking good: the unemployment rate is near historic lows, inflation is low, lending rates are high, GNP is growing, etc., etc. Nothing looks like a recession is imminent, much less a depression.
So what is all this talk about a meltdown on Wall Street based on? Lots of very credible people, with lots of expertise in the markets, are acting very much like the world is about to end. I certainly understand that a number of big financial institutions are sitting on a bunch of bad debt. I understand that this started with mandates from Congress for mortgages to be made to people who really wouldn't qualify under rational rules, and that the machinery set up to allow these mortgages encouraged more and more risky mortgages to be made. What I don't understand is why this all adds up to the end of the world. Companies succeeding and failing is what capitalism is all about; it's the core of what makes our system work.
My instinctive reaction to the bailout is that it's a really, really bad idea. Fundamentally the companies that are in trouble now are in trouble because they managed risk badly. They took investors' money and made bad choices with how they invested it. In the natural capitalistic scheme of things, these companies should fail, their managers should be weeded out, and companies who made better choices should be rewarded with more business. Rescuing these badly managed companies distorts this natural capitalistic process by allowing the failures to survive, and removing the reward from the successful companies. The distortion might even be worse – it might end up that the rescued companies end up making large profits after the bailout, which is exactly the opposite of what should happen.
As many others have observed, the bailout smacks of socialism. It's the kind of thing one expects to see happen in France, not in the United States. Hell, it's the kind of thing we once laughed at France for...
My confusion stems from this: the panic from Wall Street and Washington doesn't seem to jibe with anything I can observe myself. In other words, from where I sit I don't see any reason why Wall Street and Washington are panicking. All the usual measurements of economic health are looking good: the unemployment rate is near historic lows, inflation is low, lending rates are high, GNP is growing, etc., etc. Nothing looks like a recession is imminent, much less a depression.
So what is all this talk about a meltdown on Wall Street based on? Lots of very credible people, with lots of expertise in the markets, are acting very much like the world is about to end. I certainly understand that a number of big financial institutions are sitting on a bunch of bad debt. I understand that this started with mandates from Congress for mortgages to be made to people who really wouldn't qualify under rational rules, and that the machinery set up to allow these mortgages encouraged more and more risky mortgages to be made. What I don't understand is why this all adds up to the end of the world. Companies succeeding and failing is what capitalism is all about; it's the core of what makes our system work.
My instinctive reaction to the bailout is that it's a really, really bad idea. Fundamentally the companies that are in trouble now are in trouble because they managed risk badly. They took investors' money and made bad choices with how they invested it. In the natural capitalistic scheme of things, these companies should fail, their managers should be weeded out, and companies who made better choices should be rewarded with more business. Rescuing these badly managed companies distorts this natural capitalistic process by allowing the failures to survive, and removing the reward from the successful companies. The distortion might even be worse – it might end up that the rescued companies end up making large profits after the bailout, which is exactly the opposite of what should happen.
As many others have observed, the bailout smacks of socialism. It's the kind of thing one expects to see happen in France, not in the United States. Hell, it's the kind of thing we once laughed at France for...
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