Comments on: confidence tricks

By: Michel

Michel — Wed, 01 Oct 2008 10:49:08 +0000

So what do you think about the Soros plan ? (http://thehill.com/leading-the-news/soros-floats-alternative-bailout-plan-with-dems-2008-09-30.html)

I don’t know enough to really judge it, but to me it seems much simpler.

By: Owen Blacker

Owen Blacker — Wed, 01 Oct 2008 09:30:46 +0000

Danny: Fair point, and I’m well aware that I Just Don’t Get It™. Maybe we should discuss it over beer next time you’re on this side of The Pond? :o)

By: Danny O'Brien

Danny O'Brien — Tue, 30 Sep 2008 22:33:36 +0000

Craig, I think that's an entirely valid concern. Russell, OMG drive-by Austrian Economist! For those of you who want here you go -- and also Russell's own take on the current mess, see his own blog. Remember: Russ may be right, and I may be wrong: opinions can go up as well as down. The sad thing is that I think if Russ had read on, the his disagreement with that anecdote wouldn't have meant that he'd disagree with the rest of the entry, but hey! Owen, I'd be interested to know what the difference is between Thatcher destroying the economy to pursue her economic idealism, and you destroying the economy to pursue yours.

By: Craig Hughes

Craig Hughes — Tue, 30 Sep 2008 16:31:18 +0000

So the problem I have with the theory of “it’s all just a con to get the market to be more confident” is that if that’s the case, $700 billion is WAY TOO SMALL A NUMBER. When $700 billion in money dumped into the market fails to restore enough confidence, and the $n trillion of vaporized derivatives’ value is still weighing things down, then what? You’ve just made things so much worse by adding to the market mindset the notion that even the Federal Government’s most ambitious bailout plan, a whole whacking $700 billion, was not enough. If they can’t do it, then we’re truly all fucked. There was actually another argument for the $700 billion number, which came up in congressional testimony. It was stated that they reckoned on needing $50 billion per month for about a year (and I guess they rounded up). To which, of course, the Dem committee wondered why they should saddle the next administration with this one’s massive plan, rather than just giving them $50 billion per month until the plan changed. Either way, it’s not very confidence inspiring for me. The rest of the market seems to be thinking similarly, given its performance the last week or two.

By: Russell Nelson

Russell Nelson — Tue, 30 Sep 2008 15:15:29 +0000

“Unfortunately, one of the key engines of inflation are wage increases.”

I can see that you’re not worth listening to. When you start from Wrong, you can only get to More Wrong, Wronger, and Wrongest.

By: Owen Blacker

Owen Blacker — Tue, 30 Sep 2008 11:51:04 +0000

Jeez, and I can’t even type my name right! :o)

By: Owen Blcaker

Owen Blcaker — Tue, 30 Sep 2008 11:50:35 +0000

So we can have the economy back without paying lots of bankers shitloads of tax-dollars and tax-pounds to prop up their obscene bonuses, just so long as we sound like we will do? And house prices *can* tank so that property is actually affordable by anyone?

I don’t pretend to understand economics, but I’m more concerned by the idea that lots of taxpayers’ money is gonna go and ensure that lots of people who are already filthy rich remain so, whilst doing fuck all to help people who were already struggling to afford to put food on the table.

I’m still not sure I see why it’s a bad idea to allow the construct of global capitalism — which seems to do an awful lot that is in outright opposition to social justice — to collapse around itself and partly-ruin a lot of people who became filthy rich from stupid gambles with fictional money in the process.

I don’t get why moving bits around that pretend to represent real money and have no effect on the real world apart from to destroy small economies, such as the Asian Tigers before the IMF and World Bank enforced more Friedmanite neoliberalism and impoverished already-poor peoples, is in any way a good thing.

So why do we need to throw trillions of dollars and pounds at the money markets? Why can’t we just do all the good socialist things we bloody should have done in the first place — like creating affordable social housing — and allow to go ahead the foreclosures on loans that should never have been offered in the first place but only were in order to sate the ridiculous idiocy that was Reaganomics and Thatcherite bullshit, based on mercenary (and, frankly, evil) bullshit theories like Chicago School Economics?

Sorry, Danny, I still don’t get it…

By: Danny O'Brien

Danny O'Brien — Tue, 30 Sep 2008 10:58:22 +0000

So sometime between 2000 and now I realised that the real world equivalent of sharehold (Gavin and I trying to out what a secondary market in housing equity could/would look like) was real estate property derivatives. But I’m not sure how popular derivatives are going to be after this all shakes out…

http://findarticles.com/p/articles/mi_m0EIN/is_/ai_n24387417

By: Gavin

Gavin — Tue, 30 Sep 2008 10:26:28 +0000

so now might be a good time for Sharehold?
(cast your mind back to a train journey to Brighton in 2000…)

By: Danny O'Brien

Danny O'Brien — Tue, 30 Sep 2008 10:22:37 +0000

No, the bailout is prevent the damage caused by mortgage payers not being able to pay back their loans percolating through the rest of the financial system. It doesn’t have anything to do with shoring up house prices. Certainly, some people bought houses speculatively and assumed they could resell to pay off their debts and make some profit, but their motivation has no effect on the key fact, which is that they now can’t keep up their payments. And whether a mortgage company can do something to regain the money by selling the house at a certain price-level is almost a side-issue to preserving the wider financial system.

Having ‘negative equity’ in your house just means you’re stuck with a debt you’ve already agreed to pay. It’s the self-reinforcing collapse of borrowers who cannot pay back that debt which is significant.