Thursday, February 14, 2008
Helicopter Ben in the Sandbox
"Monetary policy, the management of global companies and the workings of Wall Street are indisputably the realms of the mature: one searches the gallery of Federal Reserve chairman portraits in vain for a full head of hair. ... When you're trying to bring a massive tanker to port amid stormy seas, the last thing you want to see is a 12-year-old apprentice steering the tugboat. ... Of course, 'giving in to a tantruming child just reinforces the demand,' said Dr. Wendy Mogel, a clinical psychologist in Los Angeles. ... Mogel puts it in starkly financial terms: 'Indulge tantrums and you get short-term gains and long-term loss.' ... Like proto-teens, bankers are incapable of exercising independent judgment. Which is why every bank--from the staid Swiss to the sharp trading houses on Wall Street--got caught up in the subprime debacle. ... Harvard economist Ricardo Hausmann, who characterized America as 'whiner of first resort,' believes the rush to stimulus is being led more by a concern for Wall Street than a concern for Main Street. Rather than take their lumps after several years of exceptional returns, the banks are furiously lobbying for help. They're getting it", my emphasis, Daniel Gross (DG) at Newsweek, 11 February 2008.
I largely agree with DG, but bankers need not lobby an administration full of "former" Goldman Sachs (GS) guys. The "former" GS guys tell us homeowners' defaults would be horrible and do not tell us how horrible a dollar default would be. Every interest rate reduction is a tax on dollars in "grandma's" savings account to benefit seven and eight-figure per year Wall Street geniuses who suck at the public trough. Where are our "economists" explaining to the public in simple terms: who gains from Helicopter Ben's policies and who loses instead of conjuring up monsters like "recession"? As long as bankers can "externalize" their losses, they will. See my 10 December 2007 post.