Continued investigation, further light

Have I ever shown you a picture of my siblings? I'm the youngest of seven, just like my tiny Mack. I love all my brothers and sisters.

Front row: Mike (1954), Keith (1957), Dave (1953)
Back row: Alyson (1968), Sherri (1951), Joan (1963), Shauna (1955)
Taken November 2007

We just got back from camping with my sister Joan and her family; she has three children who are the same ages as my Libby, Jackson, and Ethan. But the others, as you can see from the birth years, are quite substantially older than I am and we might not have as much in common. I kind of hero-worship my three elder brothers, and of the three I speak the most, via email, with Mike.

Mike reads extensively about politics, votes, economy, etc. I've discovered these past few weeks my grasp on science and ability to understand it, feeble though it may be, is gargantuan compared to my knowledge of economics. So I keep emailing Mike to get the situation translated into layman's terms. Here's what he said about Monday's failed Bailout Plan vote:

As simple as possible: Crafting the bailout must be dictated by an understanding of cause. There are two fundamentally incompatible views as to cause—

1. It was a failure of the market. Solution: regulation out the tailpipe.
2. It was a government caused failure of the market. Solution: let the markets work it out.

To me it's quite clear that B describes the cause. However, the problem is too big for the markets to sort out in the short term. (For example, if we think there are problems right now, contemplate what things might look like if the markets seize up and no one can get loans, at least for a while.) History taught us that the great depression came as a result of government distortion of the markets (a huge credit bubble, sound familiar?), followed by government doing the wrong thing (i.e. nothing) when the markets froze up because there was no liquidity (free cash) left. Businesses failed. Unemployment was huge. And the problem became much, much larger than it had to be.

Since Congress distorted the market by threatening harsh consequences if lenders did not make housing more affordable and did not lend to favored classes of people (i.e. those who were not credit worthy), government (i.e. taxpayers) must now step up and spread around the risk and the loss that their representatives created and encouraged. Congress (Remocrats and Depublicans alike) long ago wrote the check and committed us as taxpayers. The check is now simply being presented for payment.

An even more fundamental problem comes from putting the same people who created the problem in charge of solving it, and (of course) never holding them accountable. I am greatly worried by the fact that the bill didn't pass.

You know I am as free-market and anti-regulation and -intervention as they come. But, I am among those who say: something must be done.

See: http://online.wsj.com/article/SB122264821035984089.html for further along these lines.

Which was a good and interesting article, if we can trust the WSJ as an impartial source of commentary about the situation on Wall Street. Of course I'm nervous about another depression, particularly because I can't see the masses knocking down the door in desperate need of graphic design during a depression. So I'm all for market correction without market crash.