– Tim Geithner’s five big misconceptions. Geithner’s plan is a massive public-private partnership, and I’m quite wary of them for the same reason Jim Lindgren is: private profits, public (i.e., taxpayer) losses. This greatly increases risks because the risk-takers don’t lose anything near what the real value of the loss is. Tyler Cowen shows how you can game the Geithner plan, and I expect it to happen. Regulation is slower than regulatory entrepreneurship, and that’s assuming that the regulators are actually interested in stopping this. Considering that most of the players will be those who put money into Dodd, Frank, and Obama’s election funds, why do I get the feeling that they’ll just look the other way? Oh, that’s right: because they already did once.
– On the plus side, the market’s gone up. This could be a bottoming out effect or could be due to the fact that existing businesses are going to get quite the handout from the government. This is a good reason why stock markets are an imperfect measure of economic policy ramifications—they measure one particular set of interests. Geithner’s plan is very good for existing businesses and very bad for taxpayers.
– Barney Frank knows what executives should make. How about we regulate Barney Frank’s salary? Better yet, vote him out of office, Massachusetteans. And Democrats are sounding more and more like mobsters.
– Big business likes regulation. Why? Because big business profits from regulation. Regulations are often written by large, existing firms and are written with an eye toward locking out new competitors. Big Steel wants carbon cap-and-trade because they know they’ll get another barrier to entry for new firms, thereby allowing existing firms to charge higher prices. On a related note.
– The newspaper bailout won’t create any capture problems for newspaper reporters, but that’s only because they’re already in the bag for Democrats.
– Bob Murphy points out that this idea to kill 10% of cash holding value is a bad one. Instead of people “being glad to lend at negative 2%,” they would get out of US dollars. If I’m expecting that 10% of my cash holdings (which, fortunately, are nearly $0) go poof, I’m switching to Canadian dollars. Wait…did I just say that out loud?
– Also from Murphy: Bernanke will face more problems soon. As soon as monetary demand drops (which will occur when people start to think that we’re near the bottom of our recession), all of that extra money that Bernanke pumped into the system will turn into inflation unless he raises interest rates and performs open market operations to remove the dollars. He won’t do that because then we’ll have a knock-off recession, and because his political masters won’t let him. Once again, I must continue to say that the Federal Reserve is not independent and is under Congressional and Presidential control. A truly independent Federal Reserve might produce a chairman willing to take those lumps—Paul Volcker did—but in this climate? Absolutely not.
– On the plus side, we don’t hear much about global warming anymore. Incidentally, wild, anthropogenic global warming is still a myth, and over the past few years, global warming itself has been a myth.