[Politics][Economics] Matters of Scale

[digitaldiscipline]

So, just so I'm clear on this....

Conservative socio-fiscal policy is, in a nutshell, "No hand-outs."

Can someone explain, using small words and diagrams where necessary, at what point a business becomes big enough to become exempt from this, given the Fed's current stance of bailing out, supporting, and offering discounted loans to the financial institutions in the wake of their own risky behavior?

Because, really, I'm not seeing a hell of a lot of difference[1] right now, fundamentally, between Bear Stearns' stock price going from $141 to $2 per share and them needing to be rescued by a combination of the Fed and JP Morgan Chase (with the government's blessing and assistence) and, say, a guy who loses his job and can't get another because he's got a meth habit and a penchant for fucking disease-ridden raccoons and finds himself out on the street with his dick falling off.




[1]The difference, of course, is that the financial institutions can grease palms, and continue to do so; and conservatives will argue that a financial market crash hurts more people; to this latter point, I'd like to pose the following question: "How is an unsafe, artificially supported financial system on the verge of collapse superior to a post-crash one that's learning[2] from those mistakes?"

[2] Unless, of course, they don't learn from them; this is always an option, and frequently the case.

Comments

[sestree.livejournal.com]

Actually your title said it all: Matters Of Scale.

When the failure of a large entity can affect the global economy it's superman to the rescue.

Do I agree? No but then again I'm seething at the whole let's play in the interests rates again situation that -- in part -- led to the mess we're in at the moment.

*sigh*

[mighty-man.livejournal.com]

I don't really think it was so much the "let's play in the interest rates again," as the reserve rate is set by the Board of the Federal Reserve in response to fiscal policy.

The major downfall was the extension of credit (especially home loans) to the high risk category -- those who should never have qualified for loans and those who should never have qualified for loans as large as they were.

It was only a matter of time before the bad loans came back to bite people. And a 30 year loan is a darn long time...it's almost a full generation.

[serpentstar.livejournal.com]

What bugs me especially about the "logic" of that approach is that the exact same logic applies to the raccoon-shagging tweeker. It costs a lot less money to get him treated, rehabilitated, and back as a contributing member of society, than it does to clean up the mess he makes when he spends 20 years robbing and mugging people to pay for his habit(s).

[elixxir.livejournal.com]

Dude I work in Economic Development so my life revolves around the politics behind it. That 2 dollar meth hobo isn't reponsible for the jobs of thousands, not to mention the far reaching impact on convincing new companies to invest in your juridiction and create new jobs. All I do all day every day is work on strategies to attract new investment here. One failure like that has devastating impact on my ability to do my job. And Economic Development is just one tiny piece of the political pie when it comes to big business and economy...

[etcet.livejournal.com]

Since you have spicy inside brains (and a noxious ass, and a nice rack) - how does The Gubbmint justify having turned a blind eye to this for so long when the house of cards is revealed for what it is when the wind starts to blow and the table begins shaking?

[elixxir.livejournal.com]

Don't be silly baby, the gubberment can never admit it's a house of cards, ever, not even when they're standing there in the middle of a wind storm with no walls and a shitload of card-debris scattered everything. The same is true for every gubberment in every country around the world. Which is why one gubberment cannot in any way, shape or form admit to any weakness, in the face of everyone else playing Emperor's New Clothes. It's fucking maddening but I think it's a 'fake it til you make it' thing. They'd never ride the storm if they admitted weakness, by pretending everything is fine they can try to ride it out until it actually IS fine. Bah.

[etcet.livejournal.com]

Or until things are so not fine that, well... that government isn't around anymore, huh?

[elixxir.livejournal.com]

Pretty much. Everyone cycles out every 4-8 years depending on how good or bad of a job they are doing at The Game. Then it becomes someone else's problem and things effectively never actually get better. It depresses the shit out of me.

Literally, some days. :p

[y2kdragon.livejournal.com]

The problem remains surrounded by an SEP field for as long as the gubbmint can maintain it.

(SEP = Somebody Else's Problem field, as described in The Hitchhikers Guide to the Galaxy series)

[angledge.livejournal.com]

I don't have the book to hand ATM, but in Cadillac Desert, author Mark Reisner points out the same ideological inconsistency with regards to water development in the Western US - all these conservative, small-government Republicans get up in arms over food-stamp programs giving their money away to inner-city welfare moms, but don't even blush when they ask the US Bureau of Reclamation to build them a $2 billion dam.

Monosyllabic

[theonebob.livejournal.com]

It's not what you know, it's who you know. Or in this case, it's not what you do, it's who you know.

[anja13.livejournal.com]

The American market has been gently faceplanting over the last year or two and everyone outside of the U.S. saw it coming (and likely many in the U.S. but they didn't get press). Now that the rug has been pulled out from under the market, no amount of President Bush avoiding "the R word" is going to change the fact that everyone is going to hurt from this. In short, the Americans don't want to admit or want to try to avoid (which won't happen, in my opinion) a massive recession or depression, so they figure if they keep the panic as low as possible that Americans will continue to spend money they don't have and keep the economy going. I don't see it, but I'm no economist, therefore consider this the opinion of someone who edits business publications, not writes them. ;)

[anja13.livejournal.com]

And by "Americans" I mean "American government".

[razerwolfe.livejournal.com]

I've truly been amazed by the past two large economic bubbles (the 90's internet vaporware dot com poop and the aught's real estate idiocy) in that people(broad public and media darlings) honestly seem to be surprised when the wind drops outta over-puffed sails and seeks to return downward toward some more sane area. Entitlement (not from any particular political arena in this regard) infects the American psyche deep, deep, deep. Dang it! We deserve overvalued things! We deserve to somehow live forever at the edge of our means! We deserve to feed every single whim at a moment's notice -- thus reducing every desire's end to mere banality! To quote non-sequitorly from the movie Airplane: "I say, let'em crash!" I am not looking forward to the next dozen years or so of my dreams and desires being harder to achieve, but I can at least know that my ass is clean of shite on this and that our situation is rather stable considering that we didn't seek to overextend ourselves just cause some mortgage goon said: "Here's fuckloads of credit."

And no, there is no difference in handouts between beggar and corporation. I am anti-bailout to the core.

[geekers.livejournal.com]

w0rd, br0.

[yokes1971.livejournal.com]

Simple math

one person without a bailout hurts 1 person

a large enough company without a bailout potentially hurts millions

now what size that is depends I guess, see adelphia, enron other non bailed out companies

you have a good enough understanding of economics...