Part of MNb's post puts me in mind of a recent book ("The Prosecution of George W. Bush for Murder") by a famous former prosecutor, Vincent Bugliosi* (he won 21 out of 21 murder trials, or something like that).  He observes that, since Mondale in 1984, it seems to be verboten for a major presidential candidate to say anything about the poor.  (They speak fairly often of "the middle class," but it seems that often their definition of that includes people/households up to about the 97th percentile.)  That might be considered surprising in a country in which a little over 15% of the population is under the poverty line, after transfers.  As far as I know, that's the highest percentage of any major industrialized country (and much higher than most).  It's also about the same as the percentage with no health insurance (with another 15% or so being "underinsured," according to one estimate I recall).  A US government entity estimates that the number of excess deaths per year attributable to the lack of universal health insurance is in the tens of thousands, but that seems to be almost never mentioned.  Another factor is that the percentage of US businesses which offer health insurance to their employees has been falling for years, and is now at, I believe, 59%.


*Incidentally, when Bugliosi's book came out, he was virtually banned from appearing on TV to talk about it, while a few months earlier, some guy (who certainly doesn't have the kind of notable background Bugliosi does) with a book originally titled something like "Liberal Fascism:  From Mussolini to Hillary Clinton" appeared all over the place.

Why do so many people leave socialist countries to come to free market countries and yet so few leave western capitalist societies to move to socialist countries?


I've always wondered how socialists fit this apparent anamoly (if socialism works, this migration is the exact opposite of what would happen) into their world view.

Just curious.

I have a degree in economics, but am not a professional economist....  Far from it actually...I am a media hack.


I am not sure I would call this bailout plan any form of "capitalism" that I am familiar with. 

As a devout capitalist, I think the bailout is bad news.  Government policies and irresponsiveness created the "crisis"  so I am not too confident these same people are the ones to be solving this "crisis."

Meltzer is seminal, and I thinks he's on the mark here, as usual.

Authority and the state are always the benefactors of these types of fabricated "crisis." 

Financial blood in the streets (metaphorically, of course, not real hemoglobin) is what is needed.  In the form of people losing homes they never really owned anyway, several banking and financial institutions going under, and a general correction of the over-bubbled real-estate market.  

Life will go on for most people tomorrow just as it did yesterday.

My suggested "fix":
 
Step One:  Zero Capital Gains taxes.
Step Two:  3 Month rolling Market index.
Step Three:  Do nothing else.


I am reminded of Salvor Hardin in The Foundation who said something along these lines: 

"The secret to this crisis is nothing!   And that is exactly what I plan to do to solve this Seldon Crisis, absolutely nothing!"



Don't blame me, I voted for Kodos.

My sister sent me an email asking what I, an economist by profession, thought about this issue.  Here was my answer.

Frankly, it's all so complicated, that I am not sure.  However, my fundamental perspective is that almost anything done in haste, especially under a supposedly dire threat, is likely to be a mistake.  I am very concerned that this particular mistake will permanently commit vast federal funds that are badly needed to solve other problems.  I am no expert on the financial system, but I am at a loss to understand why financial markets, which are among the world's most efficient and best-functioning markets, can't be trusted to sort out the consequences of the general tumble of housing prices.  Prominent among those consequences is the increased risk of holding mortgage notes, and the consequent fall in value of this paper.  Of course, many mortgages have been aggregated and spun into complex derivatives whose value is so difficult to figure out that the market for them has collapsed.  But that is a problem for the people and institutions who own this paper, and no one else.   
 
Also from a policy perspective, there is absolutely no reason to be concerned by the general decline in equity (stock) prices: much of that is mere panic, and at bottom, there is still a relatively robust real economy of farms and factories backing up most equities.  Actually, I think that now is a great time to put money into equity, and that is exactly what Betty and I are doing.  The main victims of the fall in stock prices are people who are getting ready to retire and have a lot of their assets in equity.  Well, life is tough; everyone always knew that equity was a gamble.  The taxpayers don't owe anyone a favor just because they have too much of their retirement in equity, or just because they took on a mortgage debt that they find themselves unable to support. 
 
This problem may cause some institutions to go bankrupt (they can't get credit because too much of their balance sheet is in doubtful paper).  But it isn't obvious to me why the collapse of some investment banks and insurance companies should have any longterm impact on the economy.  These institutions own not only questionable paper, but plenty of truly valuable assets that potential rescuers would be willing to purchase at fair value.  It makes little difference to the economy if an asset winds up being owned by one house or another.  In fact even the most doubtful mortgage derivatives still have very considerable value, just much less than their owners wish they had. 
 
A very bad consequence of a bailout is that it would create a supposition that it's possible for a sufficiently large and "important" institution to take on great risk, and count on federal support in case the roll of the dice turns out badly.  That will actually increase our longterm difficulties, not reduce them.  The financial system functions most effectively when the risks and rewards of any given decision rest exclusively with the decision-makers.  Indeed any bailout would have a very strong whiff of welfare for the rich.  And this will somehow make them more responsible? 
 
Lurking behind all of this is the falling value of the dollar, caused mainly by years of rampant deficit spending (and the increasingly prevalent supposition among foreigners that we will ultimately have to print money to pay off our debts). The main problem is that this drives up the price of imports which are critically necessary to our substantially globalized economy.(not to mention the price of French wine!)  A $700 billion increment in the deficit will absolutely do nothing to help. 
 
The pro and con cases are fairly well represented at this link.  You will see that my views are essentially the same as those of Allan Meltzer, a very prominent expert on monetary policy.  I don't share what I assume to be his political perspective (he is a scholar in residence at the American Enterprise Institute), but I agree with him on this.
 
http://www.pbs.org/newshour/bb/business/july-dec08/aigbailout_09-17.html