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The Longest Now

Dorothea Lange
Tuesday September 30th 2008, 2:37 am
Filed under: Uncategorized

Ahh, the great depression.  The Lincoln Brigade.  The Bonus March.  It’s always nice to have a reason to revisit our nation’s young history.  We don’t have so much of it that it overwhelms; one can march through the centuries in a few hours’ contemplation. Dorothea Lange documented the Depression years in beautiful, riveting light; her work is worth a look.

We aren’t heading down that road yet, but it’s worth revisiting the conditions and social norms that prevailed in the late 1920’s, to remind ourselves of what to avoid in addition to the obvious issues from our immediate past.

2008 bailout visual comparisons

Here’s a tidy visual of our proposed bailout spending, and comparisons of what else we could do with those funds.  There are arguments to be made that the bailout monies would be returned eventually — but there is no guarantee of this; it is more likely that some significant percentage would be lost.  One could likewise claim that we received major returns on investment from Apollo, the latest stimulus package, and the like.  The worst of all scenarios is one in which a bailout provides temporary but not medium-term relief, and simply shifts costs for a necessary correction to a different audience — individual citizens and our national debt.

I personally don’t much care about where costs are shifted, but think that if we don’t find a way to effectively assess the magnitude of overvaluation that has occurred, and find ways to avoid similar trust-backed delusions in the future, we risk much larger disasters.  Financial systems only hold together when one trusts the notion of currencies.  Nations only holds together when one trusts the idea of a social compact.

do you think Maria Cantwell and colleagues did the right thing for the right reasons?

Comment by phoebe 10.02.08 @ 11:20 am

“But the problem with the legislation before us is that it is choosing winners and losers in corporate America. It is inserting the Federal Government in a role in which they decide, along with the private sector, exactly how funds should be allocated.”

Yes, this is spot on. An investment in /healthy/ parts of the market, also covering unhealthy parts where they seem likely to recover, and explicitly acknowledging that the most distressed securities and bets will fail and related portions of institutions will go bankrupt, would make significantly more sense. This is already being done to some degree — some bad securities will not be covered. But to note this explicitly, and treat this as a chance to spur the economy by supporting market members across the board, not just those who made bad risk assessments (indeed, biased somewhat /against/ those people) would be much more helpful in the long term,

Comment by SJ 10.02.08 @ 7:38 pm

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