Friday, September 19, 2008

Bernake and Paulson: Failure

I have previously said that I would not vote for Ben Bernake (Fed chief) or Henry Paulson (Treasury Secretary) as dogcatcher of Mt. Ida, Arkansas (town in which I grew up).   I should probably have said "treasurer" instead of "dogcatcher".
 
I have not changed mind.  Today, Bernake and Paulson are riding in on white horses to "save" us all, with OUR MONEY (taxpayer's money).  Bernake and Paulson have now established the principle of massive government intervention to address economic problems for the foreseeable future.  It is not an exaggeration to say that The Federal Government is now finding it necessary to bail out not only all of Wall Street, but our entire financial system, including all of our banks (whether they all need it or not). 
 
As I previously said, this means that Bernake and Paulson are FAILURES.  They FAILED to stop the "system" from getting to this point.  For example, I think it is a good idea to do something about predatory short selling.  In yet another example of greed, short sellers had been able to conduct virtual raids on companies.   This was helped by elimination of the old "uptick" rule, which required that you be unable to sell a stock short (betting on it going down), unless the stock had sold at a HIGHTER price just before.  There were also leveraging moves where short sellers could "sell short" without ever "borrowing" the underlying stock.  You don't need to understand this things to realize that it was NOT necessary to wait for a crisis to do something about this, and maybe somebody should figure out how to do something about the massive computer program, momentum trading that has been augmenting both up and down moves.  But addressing these systemic problems involved NO taxpayer money.  Letting the system get to this point is costing MASSIVE amounts of taxpayer money.
 
Bernake and Paulson let the situation get to this point even AFTER Bear Stearns (several months ago). That is FAILURE.  It is failure on an unimaginable scale.  Bernake and Paulson are NO our "saviours".  They are the people who got us in this mess, along with Congress (Democrats had two years) and the Bush Administration.  Did Obama propose anything that would have stopped this debacle since he has been in the Senate?  Not on your life.  Just calling for "more regulation" was NOT helpful.  Did Jhon McCain propose anything likely to work, beyond his prescient warnings about Fannie Mae and Freddie Mac in 2005?   Nope.  Did either Obama or McCain talk about needing to do something about the housing "bubble" when house prices were still going UP?  Nope.  Did either Greenspan (former Fed chief) or Bernake WARN strongly about the developing housing "bubble" when house prices were going up?  Did the treasury secretary?  Did they recognize the signs of "irrational exuberance" and start cracking down on excesses while things were GOOD (too good).  Nope.  his is FAILURE on an unimaginable scale.  It shows again that "regulation" is NOT a "solutioin".  We had ENOUGH regulatory power.  What we did not have is enough BRAINS in the head s of the regulators, and we never will have enough.  Unless we can figure out a way to help the system be self-correcting, and able to survive individual failures, then we are eventually doomed.
 
Central planning, government (taxpayer) intervention on a massive scale will WORK--until it doesn't.  And that time it doesn't will be catatrophic.  Because that time, as is always true of central planning, will involve not just Wall STreet but the bankruptcy of the whole country. 
 
How are politicians now going to oppose continual "bail outs" of individuals?  So AIG was "too big to faile".  So we could not let Wall STreet and banks go under because it would have destroyed the whole economy?  All right.  Why do we not then have a duty to bail out EVERYONE.  Why should only the "rick" get bailed out?  I don't think there is an answer to that question, no matter how conservatives try to spin it. The only real answer is:  We can't afford it.
 
Silver lining:  That is the silver lining.  For Obama to continue to talk about tax INCREASES now, for ANYONE, ins INSANE.  Any tax increases now, beyond the most minimal, will destroy the economy.  Writing $1000.00 checks to every family is now also an insanity.  Bernake and Paulson have decided where we will put the taxpayer money.  We CANNOT do both these bail outs and write checks to everyone, despite the problem in explaining why we can write checks to banks but not to poor and middle class Americans.  The answer is that eventually you kill the golden goose.
 
It is the same with Obama's TRILLIONS of dollars in new spending.  We are simply not going to be able to afford massive new social programs.  I don't think we ever could afford them, and they are counterproductive anyway--especially on a Federal level.  But the merest DUNCE should realize that we can't afford new "entitlements", and massive new Federal spending, at this time.
 
The question is:  Can conservatism survive this developing "consensus" that the Federal Government must intervene on a massive scale to prevent us from all pain, even as the ongoing Federal Government proves itself incapable of preventing these "crises" with central planning?  I have doubted it for some time, and this admission of failure by Bernake and Paulson is not making me more optimistic. 
 
We are far down the road to accepting the discredited premise of socialism:  that central planning can handle all of the major problems of our economy and our lives.  As I said above, as happened with the Soviet Union:  It will work until it doesn't.  Then look out below.

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