http://krugman.blogs.nytimes.com/2009/03/21/despair-over-financial-policy/

Quote :

"The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved. ... this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem. Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard."

And to be honest neither am I. At what point do we reach a level of spending thats worse than all the damage that would be caused by just letting things play out and not trying to re-inflate a popped balloon?

3/21/2009 10:48:25 PM

I couldn't help myself, I found this Krugman entry funny.

http://krugman.blogs.nytimes.com/2009/03/20/not-guilty-as-charged/

Quote :

"Not guilty as charged Um. Several of the comments on my AIG post run along these lines: Where were all of you so-called experts when Bush was running the economy in the ground via obscene spending on Iraq and the most massive redistribution of wealth in our history, the “Trickle Down” theory of tax cuts for the richest 2% of the population? …. isn’t it easy to blame the new cooks for stuff that happened over the last 8 years? Where were you then? No complaints from your site because everything was run so smoothly? I’ve made a lot of mistakes in my life. But failing to complain over the last 8 years wasn’t one of them."

3/21/2009 11:25:50 PM

ha, yeah. someone is obviously unfamiliar with Krugman's point of views.....


on the Geithner plan - it's getting weird.
Krugman doesn't like, and perpetual (and Conservative) bears like Denninger are jumping on board
http://market-ticker.denninger.net/archives/889-Toxic-Assets-Promise,-But-Also-Peril.html

Quote :

"Now the plan itself is not necessarily bad. In fact it would be an interesting gambling exercise were I so inclined (and had a bunch of people I knew with a lot of money) to pony up a few billion and take a gamble such as this. If you're wrong and the assets never come back in value, continuing to decline (or go to zero) then you lose the entirety of what you put up. But with anywhere from 20:1 to 50:1 leverage if you're right the gains will be enormous - even if you do have to share them with the Treasury. Indeed, drawn properly this plan can actually work. Why? Because there are a lot of people who will take this gamble if their losses are limited to capital put in but their upside is some multiple of that capital. This activity can and will attract a lot of very bright analytical types who can comb through these assets and assign what they think is a probable value down the road if held to maturity, and then discount that back to current price. If there is a delta, multiplied by the leverage advantage in that calculation this is a very nice risk:reward bet, and one that anyone with a brain would fall all over themselves to participate in with a piece of their risk-based capital. The key though is the "drawn properly" part."

3/21/2009 11:32:31 PM