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Is there a positive spin to this?
Fed announces commercial paper funding facility. Here is my post from yesterday. My best shot at a positive spin, just offered to Alex in my office, is this:
They wouldn't do it unless they had to. And if they had to do it, that they are doing it is very good news indeed.
I am not sure that Alex was persuaded. There are some good comments at the first link.
Posted by Tyler Cowen on October 7, 2008 at 09:48 AM in Economics | Permalink
Comments
Why do you TRY to put a "postive spin" on it? Is that your job?
When a bad bailout bill was put to vote you said "it was better than nothing".
When it was pointed out that 700 billion could be spend a lot of different ways you said "one could argue abot the most effective way to spend 700 billion, but I'll trust Paulson".
Unbiased analysis of the facts tells us there are more reasons not to trust Paulson and the bailout was not "better than nothing". Now you admit you are just trying to put a positive spin on things...is your conscience getting to you?
Posted by: Gabe at Oct 7, 2008 10:04:03 AM
They wouldn't do it unless they had to. And if they had to do it, that they are doing it is very good news indeed.
It's not clear from your post if you actually believe this, or if you are just saying, "Hypothetically speaking, Alex, suppose one wanted to spin this in a positive way... What would I say?"
Anyway, I just note that you could say that just about anytime the government crosses yet another line in its powers. E.g., they wouldn't be torturing people unless they had to. They wouldn't invade another country unless they had to. FDR wouldn't have propped up wages unless he thought he had to.
And if the response is, "No, because we have reason to trust Bernanke, but not other government officials," then I would like to know what the evidence for that is. If you know him personally, OK, that is a decent reason. But his handling of this crisis so far doesn't reassure me.
Posted by: Bob Murphy at Oct 7, 2008 10:14:48 AM
Gabe, you are not a subtle reader...
Posted by: Tyler Cowen at Oct 7, 2008 10:15:20 AM
Tyler, you are a subtle putdowner... :)
Posted by: anonymous at Oct 7, 2008 10:52:56 AM
True, that is a fault of mine. On the one I hand I understand that it can be better to have you writing in the NYT than say the 2nd or 3rd best economist/writer at the Brookings Institute. Even if it does mean you have to say things like "this baliout is better than nothing". However, the argument could be made that by gradually destroying the mojo of a economist on the good side by forcing him to degrade himself in this manner, it is a huge victory for the dark side.
The key turning point is, do you really believe that giving this massive new authority to a cabal of thieves was "better than nothing" or are you just consicously saying it becuase you seek to stay in good standing with the powerful?
A inner struggle to figure out a way to spin things positively shows your mind is focused on developing subtle propaganda more than on analyzing Paulson's true motives.
Posted by: Gabe at Oct 7, 2008 11:12:50 AM
It is demonstrable that things cannot be otherwise than as they are; for all being created for an end, all is necessarily for the best end. Observe, that the nose has been formed to bear spectacles—thus we have spectacles. Legs are visibly designed for stockings—and we have stockings. The commercial paper market obviously lacks liquidity-therefore we have a Commercial Paper Funding Facility. Consequently they who assert that all is well have said a foolish thing, they should have said all is for the best.
Posted by: Pangloss at Oct 7, 2008 11:35:50 AM
Gabe,
It may actually be better than nothing. Unfortunately, free banking wasn't on the menu.
The division of labor and the free market has done the best with the banking and credit system it was given. Starving it of even that malnutritious fare is not likely to result in an improvement.
Libertarians didn't have the sway to keep us from getting here, and we are here partly because of previous crises, and now that we are here, maybe the ones who do have some sway can only limit the damage from here out.
On the other hand, do all these special powers go away when we get out of the woods? Persuade me.
Posted by: Andrew at Oct 7, 2008 11:50:25 AM
"They wouldn't do it unless they had to. And if they had to do it, that they are doing it is very good news indeed."
That is the single dumbest thing I have heard this week. You should never trust a person in a position in power, not because they are good or evil, but because power corrupts, that's why we have checks and balances. I'm not being cynical I'm just being realistic.
Paulson, Bernake, and Bush all have immense power now, so if they have this power and taxpayers can basically do nothing about it, what is to stop them from acting in their own best interest and not in the interest of the country? Think about it for a second, Bush and Paulson have no incentive to act in the best interest of the country since he is gone in a few moths, Bernake is under contract, so why not help out yourself so when you leave power you will be taken care of.
I for one think this whole bailout is a complete scam. If you look at this objectively you will most likely come to this conclusion.
Posted by: torris187 at Oct 7, 2008 11:55:55 AM
"A inner struggle to figure out a way to spin things positively shows your mind is focused on developing subtle propaganda more than on analyzing Paulson's true motives."
Wow. Ernie Ironic you're not.
Posted by: Affe at Oct 7, 2008 11:56:28 AM
Andrew,
We will clearly only be out of the woods when the forest burns down.
Posted by: Yancey Ward at Oct 7, 2008 12:01:37 PM
of course the special powers don't go away and it is a sure thing that this "solution" will not lead us out of the woods. Just as the "solution" of having a federal reserve and a income tax in 1913 did not lead us out of the "woods" of periodic economic dowturns experienced earlier.
Just as the "solution" of WW1 did not lead us to permanemt peace.
We know that they will use whatever powers we give them to further attack us.
If bush, paulson and the Fed ask for further powers from the people then it is because the powers will be used against us...so we already know it is a bad thing simply because they are asking/threatening for it.
Posted by: gabe at Oct 7, 2008 12:06:43 PM
Here are examples of irony without subtlety.
So, in other words, I sure hope we attack Iran!
And I damn-sure hope they give me the full body cavity search the next time I fly to Poughkeepsie.
Posted by: Andrew at Oct 7, 2008 12:51:35 PM
I'm scared :( Not so much by the government intervention, but by the fact that CP got so frozen up in the first place. What's next?
Posted by: pants at Oct 7, 2008 12:56:43 PM
So, Gabe, are you saying that all of the governments of the modern economic
world have joined together to make one final power grab and establish a
consolidated global oligarchy? Or are France, England, Germany, Russia,
Iceland, et al, merely the remaining, unwitting pawns in Cheney's endgame?
Posted by: Jarndyce at Oct 7, 2008 1:00:47 PM
Gabe, you are not a subtle reader...
Not when he's off his meds.
Again.
Posted by: at Oct 7, 2008 1:03:20 PM
So, Gabe, are you saying that all of the governments of the modern economic
world have joined together to make one final power grab and establish a
consolidated global oligarchy?
Yes, yes he is.
Posted by: at Oct 7, 2008 1:04:41 PM
So, Gabe, are you saying that all of the governments of the modern economic
world have joined together to make one final power grab and establish a
consolidated global oligarchy?
And only Gabe stands between us and a consolidated global oligarchy. Hold out!
Posted by: at Oct 7, 2008 1:06:19 PM
My take is that if the government is doing it, then it is late to the party and completely meaningless.
How's that spin?
Posted by: Andrew at Oct 7, 2008 1:36:46 PM
Calculated Risk had a Google Ad at a bottom that said "These banks are about to close...Is yours one of them? Click here to find out before it's too late."
How exactly can it be "too late" with FDIC insurance? That's not the kind of mentality we need now.
Posted by: Matt at Oct 7, 2008 1:41:55 PM
No, I'm not saying that. However, it does seem that at this rate we will lurch from crisis to crisis. With each new "crisis" we will be presented with a choice(because this is democracy)...the choice will be something like accept "martial law" or "regionalized currencies"...."personalized carbon footprint audits" or an "escalated war on terror" the thoughtful serious thinkers such as yourselves will say this must be neccesary or else they wouldn't be proposing it. After all we have to trust our leader/slavemaster."
Increased taxes are "the lesser of two evils" so we must do it. "Sure there a few crazed people who oppose the premise that these are our only two choices, but they are just conspiracy theorist, anti-semites or they need to be medicated more. All serious people agree that we must give more power to the chancellor"
Posted by: gabe at Oct 7, 2008 1:54:40 PM
My take is that if the government is doing it, then it is late to the party and completely meaningless.
Andrew,
I can understand that reasoning to some degree. However, I bet most of us agree that it is important to combat the dangerous idea that "free-markets and lack of regulation" caused this problem? Likewise, we should also be ready to combat the idea that too small of a bailout package caused the next crisis.
Posted by: Gabe at Oct 7, 2008 2:06:06 PM
I would greatly appreciate if somebody could answer the following questions:
1. The fed guarantees a 6% return to its private stockholders. Can you tell me exactly how much money is paid to the private investors?
2. Do you feel the fed has a right to pay money to its private stock holders that it earns from treasuries it purchased with printed money?
3. How do the people of the country benefit from having to pay interest on printed money? If the government needs to print money, why not just
print it? Why have to pay interest in addition?
4. Can you tell me who the stock owners of the federal reserve actually are in percentage of ownership stake?
Posted by: JK at Oct 7, 2008 2:18:05 PM
"Even in the midst of a severe meltdown on Wall Street, Federal Reserve officials at their September meeting believed the risks from weaker growth and higher inflation were roughly equal. The meeting occurred a day investment bank Lehman Brothers collapsed."
ruh-roh
http://biz.yahoo.com/ap/081007/fed_economy.html
Posted by: Andrew at Oct 7, 2008 2:46:16 PM
"No, I'm not saying that. However, it does seem that at this rate we will lurch from crisis to crisis. With each new "crisis" we will be presented with a choice(because this is democracy)...the choice will be something like accept "martial law" or "regionalized currencies"...."personalized carbon footprint audits" or an "escalated war on terror" the thoughtful serious thinkers such as yourselves will say this must be neccesary or else they wouldn't be proposing it. After all we have to trust our leader/slavemaster."
Listen to the Gabe.
One obvious step at a time the US marches towards dictatorship.
FEMA
PATRIOT ACT
Homeland Security Agency
Blackwater
De facto Suspension of Habeus Corpus
NSA Spying on Americans
FISA
De facto Suspension of Posse Comitatus (Hello NORTHCOM!)
And Now Playing At A Theatre Near You:
The Nationalization of the Financial System
----
But no, on second thought, you guys are probably right to put a postive spin on things. Don't want to frighten anybody, now do we?
Posted by: Cassandra at Oct 7, 2008 2:56:41 PM
JK,
question #1, I had the opportuninty and asked the president of the Boston Federal Reserve Bank this exact question.
He said that the banks had to be compensated for "the capital they provided"....this made no sense to me because the fed can create it's own capital....why does it need to borrow from the member banks? he avoided that question and jsut said that it took some capital to run the whole thing and it was only fair for the member banks to be reimbursed.
When asked how this could be jsutified on moral grounds his attitude was that all of government is wasteful and surely there are more wasteful things being done by other parts of the government that had lower IQ's than the Fed employees.
the answer I got sucked...I'd bet money that you will not get a better answer from any of the "serious" economist. They simply like to pretend the fed is awesome.
wiki-cognitive dissonance
"Forbidden toy study"
"experiment by Aronson and Carlsmith (1963)"
This is the best explanation I have found for the inability to get questions on this topic answered.
"The Fed Supporter not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them."
Posted by: Gabe at Oct 7, 2008 3:59:19 PM
