As I have said before: a little extreme pain right now, can prevent a never ending ache. Let’s get the major surgery over, have some therapy, and get on with our lives.

It seems that the govt believes that Deflation has been defeated. I hope that they’re correct.

poof.

here’s another link, for the curious: http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

If you do not think that such a possibility has just narrowly been averted, then I can understand not wanting the govt to intervene. But if you agree with me, you might well believe that we’re not out of the woods yet.

I understand that many people might not get where I’m coming from, so I’m supplying a good link about Fisher:

http://www.economist.com/businessfinance/displaystory.cfm?story_id=13104022

In the 50′s and 60′s there were very bright lines of behavior, that people did not cross and as a result the regulatory system performed in a significantly better way. What got us into this tragic mess is the wholesale fraudulent crony capitalism practiced by our regulators, our politicians and Wall Street. Any economic system based on fraud is bound to fail sooner or later. This is our regulatory system now; it just smoke and mirrors. This crony capitalism is new and did not exist back then to anywhere near the extent of today.

To create more government intrusion will only make matters worse. Any cartel or government intrusion into the private sector is fraught with opportunities for market manipulation, unless there are clear transparent rules that are enforced. We are a long way for transparent rules that are enforced. Those in power, particularly at the Fed and Treasury, now routinely violate the law, and are never held to account or brought to justice.

Add the fact that today’s media, unlike the media of yesteryear are just the spin doctors for the fraud. They rarely report the vast amount of market manipulation, and regularly present a dishonest picture to hide the manipulations of those in power.

When the markets were crumbling and AIG bonuses were being paid, it looked like there was a political tide against bailouts. But it turned out that there was a political tide against falling markets; once the markets were talked up, the pressure fell away.

The path of least resistance is to agree to the bailout. Refusing the bailout causes (a) the nonzero risk the equity market declines; (b) complaining from affected stakeholders. Granting the bailout, well, that’s just following precedent.

Also, some of their small business clients are among their creditors.

I agree CIT should not be bailed out, but they will be because this administration makes decisions for sentimental and not economic reasons.

My question is – since we’ve made the commitment to absolve bankers of their losses, if we absolve only the losses from the biggest companies, aren’t we creating further incentive for additional consolidation? Where’s the “competition and dynamism” in that?

Is that what we’ve wanted all along? The best and brightest working at just a couple of really big institutions, so that no matter what they do, the feds will HAVE to spread out the TARP to catch them when they fall? Who’ll use a smaller bank if they know that it will not be supported, should it fail? But Goldman and Chase WILL get the full backing of the feds?

It seems that instead of moving away from “too-big-to-fail” – our policies in recent months have cemented it into place forever.

(I don’t know what it is like where you live, but I happen to think that the electorate is feeling plenty of pain right now, at least over here in the flyover zone. What we need is the leaders of the financial institutions – the people who oversaw the risky behaviors that led to the collapse – to perhaps share in some of the downsides of the catastrophe – but that’s not happening at all – and does not look like it will ever happen.)