Tuesday, September 23, 2008

The Current Financial Mess, Again Reconsidered

Dr. Pournelle's turn:

Pournelle's take on this is interesting because he blends in a theme he's been discussing quite often of late: the criminalizing of political actions, which he states was one of the causes of the fall of the Roman Republic. If this sounds bizarre (criminializing politics), I direct your attention to the candidate for Vermont attorney general who promises to prosecute George W. Bush for actions he performed legally as President. Or consider the attempted prosecution of Bill Clinton, or the outrage that Democrats felt about Gerald Ford pardoning Richard Nixon before he could be prosecuted. Pournelle examines this phenomenon in his usual logical detail.

I speculated on recently that it might be cheaper to let some of these large mortgage firms to fail and to pay out unemployment insurance to their workers than to let a trillion-dollar bailout go forward. However, a full-scale panic is on in Washington, as there's an election soon, and incumbents need to be seen DOING SOMETHING, even if that SOMETHING is very, very bad. Can we, as taxpayers, stop this madness? I don't really care for all the finger pointing ("It was Reagan's fault for deregulating the banking industry!" "No, it was Carter's and Clinton's fault for forcing banks to give loans to high-risk borrowers!"). However, it might be better for the country if the congress continues to argue from now until election day instead of passing this very, very bad and expensive idea.

Again: where will the money come from? Us. How will that come about? By printing more money and raising taxes. The illness (financial instability) is bad; the proposed cure (government takeover of the mortgage industry) is potentially much, much worse and will last much longer.

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