Other Perspectives On The Current Paulson Plan
I've spent the last thirty minutes clicking through to financial blogs and financial press on the internet to see what others may be saying. Sadly, there doesn't appear to be much in the way of any reporting this weekend.
The change in my tone since last Friday will become apparent as I have time to formulate further posts on my initial remarks over time. That said, I believe my posted remarks are enough to bring into serious question the form of this bailout plan.
As I have consistently and adamantly said since Bernanke started lowering rates, I fully support government involvement in the resolution of these crises. And I have fully supported all of the steps taken to date. But, I simply cannot in good conscience support something that I know will likely have significant unintended consequences and potentially make this crisis longer and deeper than it will already be. And, I cannot support plans that I know do not address the primary interests of a free society when there are clearly better choices available. Rushing this process without time for thought and without any legal opportunity to question it in the future is not in the best interests of anyone.
Along those lines, I would encourage you to click through and read this post on Progressive Conditions for a Bailout and Why You Should Hate the Treasury Bailout Proposal
Update:
I'm moving a reply I made to a question to the front of the blog as I believe the question is an important one.
Question: What is the potential for this bailout to re-inflate the credit bubble? And will the Fed feel comfortable enough with the plan to let rates rise?
My reply:
I think I wrote in a post over this past week that this will not likely have any effect on asset deflation. The perspectives on deflation being driven by debt, that are fueling broad support for this plan, are misguided in my estimation. Other drivers are at work pushing deflation.
If I am right, there are other primary data points that I believe would need to be addressed to re-ignite a strong credit cycle. That doesn't mean asset markets might not rally for some period of time but I think that will be relatively short lived, if at all. We shall have to see. We are very oversold and right at a level where I wrote we would see some type of interim bottom but I'm dubious in this environment.
Additionally, I see an extremely low probability of rates rising for any reason other than a rising bankruptcy cycle. That is a surety regardless of what this bailout plan looks like.
Central bankers look at this from a dogmatic perspective that I believe is fundamentally illogical and inacurrate. I believe it is a fundamental flaw with Bernanke's view of the Great Depression and why we are repeating history.
Finally, , I believe this fiddling with the markets by the SEC in concert with the Treasury has a very serious potential to have the exact opposite effect they intend. If fiddling with markets would so easily affect outcomes in a constructive fashion, our economic model would surely take this into consideration. For, to give any credence to solutions created by concentrated power would surely not be missed by those in a position to realize it.
When government tries to dictate policy in markets with millions of moving parts, it most always has significant unintended consequences. Much of their plan will likely result in substantially reduced market liquidity and create pricing vacuums and air pockets in the market. Just ask the Russians about this one.
The change in my tone since last Friday will become apparent as I have time to formulate further posts on my initial remarks over time. That said, I believe my posted remarks are enough to bring into serious question the form of this bailout plan.
As I have consistently and adamantly said since Bernanke started lowering rates, I fully support government involvement in the resolution of these crises. And I have fully supported all of the steps taken to date. But, I simply cannot in good conscience support something that I know will likely have significant unintended consequences and potentially make this crisis longer and deeper than it will already be. And, I cannot support plans that I know do not address the primary interests of a free society when there are clearly better choices available. Rushing this process without time for thought and without any legal opportunity to question it in the future is not in the best interests of anyone.
Along those lines, I would encourage you to click through and read this post on Progressive Conditions for a Bailout and Why You Should Hate the Treasury Bailout Proposal
Update:
I'm moving a reply I made to a question to the front of the blog as I believe the question is an important one.
Question: What is the potential for this bailout to re-inflate the credit bubble? And will the Fed feel comfortable enough with the plan to let rates rise?
My reply:
I think I wrote in a post over this past week that this will not likely have any effect on asset deflation. The perspectives on deflation being driven by debt, that are fueling broad support for this plan, are misguided in my estimation. Other drivers are at work pushing deflation.
If I am right, there are other primary data points that I believe would need to be addressed to re-ignite a strong credit cycle. That doesn't mean asset markets might not rally for some period of time but I think that will be relatively short lived, if at all. We shall have to see. We are very oversold and right at a level where I wrote we would see some type of interim bottom but I'm dubious in this environment.
Additionally, I see an extremely low probability of rates rising for any reason other than a rising bankruptcy cycle. That is a surety regardless of what this bailout plan looks like.
Central bankers look at this from a dogmatic perspective that I believe is fundamentally illogical and inacurrate. I believe it is a fundamental flaw with Bernanke's view of the Great Depression and why we are repeating history.
Finally, , I believe this fiddling with the markets by the SEC in concert with the Treasury has a very serious potential to have the exact opposite effect they intend. If fiddling with markets would so easily affect outcomes in a constructive fashion, our economic model would surely take this into consideration. For, to give any credence to solutions created by concentrated power would surely not be missed by those in a position to realize it.
When government tries to dictate policy in markets with millions of moving parts, it most always has significant unintended consequences. Much of their plan will likely result in substantially reduced market liquidity and create pricing vacuums and air pockets in the market. Just ask the Russians about this one.
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