Being There, the 1979 film starring Peter Sellers that takes place in Washington, D.C., is one of my favorite movies. Sellers plays the character Chance, an elderly gentleman that lives in a nursing home and is somewhat retarded, but who, through a series of accidents, comes to advise the President of the United States on the economy. Peter Sellers died in 1980, but his character Chance lives on in the Washington, D.C. of today. In fact, his character appears on TV news shows quite often, and only the discerning eye can catch a glimpse when he is reciting his words of wisdom.
The economy and the financial markets did not get into the position they are in today over night or in a few weeks or even a few months. This big of a mess was a long time in the making. It is now almost 10 years since Long Term Capital was bailed out by Wall Street. Now 10 years later, it is Bear Stearns that is the recipient of a bail out. The interesting thing about this is that Bear Stearns, often referred to in the newspapers as a brass knuckles outfit of Wall Street, chose not to participate in the bail out of Long Term Capital in 1998. As they say on the street, “what goes around, comes around.” At least there is a JP Morgan around that can now bail them out, and they did that this weekend for $2 a share.
The Fed and its Chairman Ben Bernanke have done some extraordinary things of late. Luckily Mr. Greenspan, the former Fed chairman is retired. His calcified mind set, which has some responsibility for the present situation, would be no match for the flexibility of thought that has produced the new set of tools that the Fed recently put into place. Ideology will only take you so far when a crisis of truly monumental proportions occurs, thinking creatively is the resource most cherished. This financial market mess will take months if not years to clean up. Do not worry who is going to pay for the clean up because you know it has the taxpayer already written across the top!
The next big question is: What is going to be done to try and prevent another crisis of confidence from happening again? No doubt as soon as the present situation is on the mend, lobbyists will be telling our legislators that more oversight and legislation is not needed. And so the lines will be drawn. Will no measures be taken to strengthen the system against abuse? Can anyone say that the present situation that the financial markets find themselves in today is not the result of several years of abuse and lack of sufficient oversight? Just like the automobile manufacturers years ago were reluctant to add seat belts and air bags, so too will the investment banks push against the specter of new measures of accountability and tighter controls. The question will be does the Congress have the guts to do the right thing by the people, as it is the people who are picking up the cost of this bail out. Stay tuned.
Last Wednesday, March 12, Moneythoughts wrote about the new actions being taken by the Fed to bring liquidity to the banks and investment houses. Today, Moneythoughts is watching the pretty talking heads of CNBC and they are talking about exactly what you read in Moneythoughts almost a week before. Now Moneythoughts is not very good looking, Moneythoughts will grant you that, but Moneythoughts is much more than a pretty talking head. Moneythoughts gave you the information five days ago and explained it in everyday English. So, when you want more than picture and a pretty face, tune in to Moneythoughts.
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4 comments:
The extent of new regulations depends on the extent those who are potentially regulated finance political campaigns, and how much spin they can put on tokens, trying to win back get those votes lost to disgust. We need a bloodhound. Where's Elliot Ness?
Here! Here!
I'm totally immersed and enjoying Moneythoughts posts instead of just listening to the talking lollipops on my evening newscasts!
Keep it coming! And when Mr. Moneythoughts decides to relax may I suggest another Peter Sellers movie, "The Party" to clear the mind!
Blondie
You had posted on my blog about yours. I took a look at your economic ideas. I think we're too different for me to enjoy reading for long.
My take on where we are now follows. Loose money by the Fed for half a decade encouraged borrowing (hence, the housing crisis) and depressed the dollar. The Fed's continuation of loose money is going to make things even worse.
Our current high energy prices have quite a few sources. Three very important sources are (1) the weak dollar, which causes us to pay so much more for imported oil (thanks, Greenspan and Bernanke) (2) ethanol mandates, which raise the price of manufacturing (3) environmental regulations which raise costs overall, especially with regard to refinery capacity in the U. S. (no new refineries for a few decades).
Further, ethanol subsidies are now wholly screwing up food prices. Everyone is planting corn, which is being used for ethanol. So the supply of all the foods that are in short supply are rising, including grains, hence meat, milk, cheese, etc.
To my eye, the problems I list above are due to government interference in the economy.So I am on the side of less less less less regulation.
I agree with you on some of the broad outlines. Yes, we need an energy policy. But my energy policy is called "free markets," so that we can drill more in the gulf and in Alaska, not take food off the table and put it in the tank.
If we could regulate our way to prosperity, France, Germany, Spain, etc. would be showing us the way.
My nonsense sentence: So the supply of all the foods that are in short supply are rising, including grains, hence meat, milk, cheese, etc.
should have read
So the prices of all the foods that are in short supply are rising, including grains, hence meat, milk, cheese, etc.
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