Some More Bailout Notes

  • Hammerin’ Hank Paulson and the geniuses at the Treasury are already over the $350 billion available to them.  In other words, the bailout needs a bailout.
  • Hmm…we get into a financial mess in part because of people making loans to people they shouldn’t be loaning money to (like the “ninja” mortgages—no income, no job, no assets).  What does GM do as soon as they get bailout money?  Start a plan to make loans to people they shouldn’t be loaning money to! This bailout is the gift that keeps on giving.
  • Chrysler’s $4 billion loan went through. Expect them to beg for some more corporate welfare in a month.
  • Two industries that are doing quite well?  Lawyers and lobbyists. Tyler Cowen’s absolutely right:  we’re “in a race to see whether politics will become the dominant means of allocating financial wealth in this country.”  This is outright disgusting.
  • Gazprom is having major financial troubles as well. State-run businesses look nice in good times, but they leak money like a sieve.  When things get bad, these companies hurt.  Given that many of the state-run companies hurting the most are run by enemies of the United States, schadenfreude is the flavor of the day.  This is, however, a good warning for those who want to increase government control of businesses:  things can get much, much worse.
  • Mickey Kaus sees the bright side of life. Kaus points out that there are across-the-board wage cuts among a good number of employers.  This means that the “wages are sticky-downwards” assumption does not always hold.  Sticky-downward wages were a key assumption of orthodox Keynesian theory (where the New Keynesians focus more on “menu costs:”  the non-zero costs of changing prices), and seeing its refutation in action is enlightening.  Unfortunately, those who believe in sticky-downwards wages holding strictly (or at least enough to require some other form of action) won’t be paying attention…

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