During the crash of ’29, Winston Churchill, who just happened to be in New York at the time reported:
“A gentleman cast himself down 15 storeys and was dashed to pieces.”
This past weekend a London banker “haunted by the pressures of dealing with the credit crunch,” according to the Daily Mail, was the first reported victim of the credit crisis. He “died in the path of a 100mph express train at the Taplow railway station,” said the paper.
Churchill had a way with words:
“The United States invariably does the right thing, after having exhausted every other alternative,” he said.
And yesterday, the stock market thought Churchill was right. Congress was running out of time…and alternatives. Investors figured the fix would be in soon.
The party line is that the world needs a bailout. Everyone says so. And now the Senate, in its magisterial wisdom, has vowed to get back on the case until it comes up with something. That’s probably why stocks shot up Tuesday. Investors know the money’s on its way. So, the Dow went up more than 400 points. Oil went back to $100. The dollar rose against the euro. And gold fell $11.
Churchill was not a great military strategist, but when the chips were down, he had the words that Britain needed. At Britain’s finest hour, Winston Churchill led the nation. At least, that is the party line…
And now the chips are down in the world’s financial markets. And now the party line is that Congress has made a big mistake…
“The House failed to lead and the market plunged,” says the lead editorial in yesterday’s International Herald Tribune.
We looked on the facing page for our favorite columnist, Thomas L. Friedman. Amid all this doom and gloom talk, we thought Friedman’s views might give us some comic relief. Instead, we found David Brooks. Like Friedman, Brooks is a world-improver. And like Friedman, he has little curiosity about the way Homo sapiens economensis actually functions. Instead, the two of them always have some gimcrack plan for solving the world’s problems – ignoring the fact that the problems were generally caused by their last gimcrack plan.
Naturally, Brooks is for a bailout. Predictably, he cites Franklin Roosevelt as a role model. “He understood that his first job was to restore confidence…” he writes. He is surely unaware that it was too much confidence that got the United States into its present jamb. And it has probably never occurred to him that the kind of ersatz swagger you get from a scalawag politician is not exactly bankable. Nor does he seem to recognize Roosevelt’s confidence-building programs were such feebleminded claptrap that they actually retarded a recovery. What got the U.S. economy going at full speed again was the biggest public works program of all time – WWII.
Brooks calls Congressmen who voted against the bailout ‘nihilists.’ What is it with these neo-cons? Friedman calls people who object to the reckless use of U.S. military power in the Mideast “nihilists.” What’s nihilistic about either group? We have no idea. We assume they mean “stupid.” But can’t they think of any other pejoratives? How about meatheads…or dimwits…or goofballs? These fellows need a little of Churchill’s magic!
Brooks has no clue about the world’s financial system or how it should be managed. But he knows what he likes. And what he likes is what all political scoundrels like – authority.
“…now we have a crisis of political authority on top of the crisis of financial authority….”
We understand the words. We understand the practice. What eludes us is the theory.
Political authorities boss other people around. What do financial authorities do? Isn’t an economy a different thing…isn’t it based on persuasion rather than force…on markets rather than politics? If we think a potato is worth 50 cents. And the farmer agrees to sell it to us for 50 cents, what business does a financial authority have telling us both that the price is a dollar? The world has been down that road. The Soviets tried financial authority for 70 years – look where it got them.
At least Brooks is hip to the danger.
“What we need in this situation is authority. Not heavy-handed government regulation, but the steady and powerful hand of some public institutions that can guard against the corrupting influences of sloppy money and then prevent destructive contagions when the credit dries up.”
Thus does he line up the words. One after another…leading nowhere. Again, we want to know more about the theory. What does this powerful hand do? What does it look like? And how is the fat mitt of a political appointee less susceptible to the corrupting influences than the jittery hands of a man whose own money is on the line? And where is money ever sloppier than in the public till?
But there is no point in fighting against it. The battle against a bailout is a lost cause. Yesterday’s report from Shiller/Case showed house prices are falling faster than ever – down 16.3% from a year ago. George W. Bush approved a loan to the auto industry – it too is in trouble.
Need money? Here’s a bank that can’t say no…
From a blog… “If we can socialize the banking industry, why can’t we socialize the health insurance industry? Big government is back…”
for Markets and Money