More Pessimism

I’ve let my links build up over the past few days, so I have plenty of kvetching to do.

South Park on the economy.  Special guest star:  Tim Geithner, landing on Bailout.

Geithner “is open to” an international basket of currencies.  Aside from causing the dollar to tumble (until he “clarified” his remarks), this wouldn’t work in any practical sense, as it would allow for currency arbitrage and would be well beyond the optimal currency area.  Following from Robert Mundell’s research, you could argue that the US itself is too large an area for a single currency, and though Mundell supported a common currency among European countries, the different situations of various countries indicates that one monetary policy is inefficient, but that’s all you get with one currency.  Here is Tim Geithner’s next press conference.

Geithner’s new plan remains a bad idea.  Private profits and public losses lead to excessive risk-taking because the risk-takers aren’t the losers.  Doesn’t this sound familiar?

Obama throws one of the two or three Treasury officials out there under the bus.

George Selgin has good sense.  Naturally, those in power will ignore him.  A couple years ago, I was flirting with the idea of free banking but didn’t know how it would work.  Selgin’s work has me practically convinced.  At the very worst, it couldn’t be worse than government-run banking and currency.

– There is an idea out there that the Federal Reserve could float its own debt to avoid inflation.  Robert Murphy is absolutely right in pointing out that this just delays the inevitable, and in the process increases what the rate of inflation will be.  Because this is a bad idea, I expect it to be put into practice.

– In good news, Obama asked Paul Volcker to head a tax reform panel.  There are three stated goals:  collecting uncollected taxes, closing loopholes, and simplifying the tax code.  Even if Obama were serious about legitimate tax reform (something I doubt), this sounds suspiciously like the 1985 tax reform.  I remember reading something James Buchanan wrote a decade or so later:  he was glad that he was able to get down on paper before the reform kicked in his prediction of what would happen, namely that within a few years, all of those old loopholes would be put right back in.  A complex tax code is an equilibrium situation, and the only way to get out of that equilibrium is to prevent Congress from allowing loopholes to begin with, and that means a fixed tax rate and unalterable definitions of income.  Although this is pie-in-the-sky, it is an ideal we should try to approximate, but the only way to do this is on the constitutional level, not the level of legislature.

Good thing the adults are in charge, right?

– On the bright side, Congress is shelving its AIG tax.  The dark side is that people in Congress even proposed it.

Jonah Goldberg points out that big business and the left actually fit better than big business and the fusionist right.  Far from scorning big business with its legislation, “progressives” often allowed large firms to write the rules and regulations on industries (especially during Franklin Roosevelt’s administration), to the detriment of small firms and potential competitors.  Companies on top want to keep their advantage by increasing the cost of entry, and the left has the same goals (though for different reasons).  It’s those free-market radicals who oppose these “rational” policies.  Unfortunately, we’re a minority in either party, and politicians have to deal with these firms as an interest.  Like a midwesterner going up against ethanol, trying to break the big government-big business combination is practically a fool’s errand.