Teetering on the brink of the new Depression

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stray S
stray Sep 23, 2008 19:08:49
Replying to grufty jim

grufty jim wrote:
. But there is one single factor that makes me think that something along the lines of my suggestion should be attempted... which is: I don't think this bail-out is going to work.

And let's face it, that's a good enough reason to try something -- anything! -- else.

So given the choice between two bail-out plans which may not work, I will choose the one that prioritises the homeowners, rather than the one that prioritises the financial sector.

I myself don't have that much faith in the current bail out plan, however it is much too early to say it will fail. We don't know how the fund is going to be managed, and we also do not know how the debt will eventually be sold back into the market (potentially making a profit for the govt).

What you seem to be arguing for is completely removing the debt from the market by allowing the govt to write it off completely (rather than the current plan of taking it out of the market to be reintroduced later).

What you seem to be arguing for is a completely no-risk mortgage market. Can you imagine how the market would behave in the future once you've set this precedent ? It's bad enough that no govt can afford the banks to collapse thereby assuring some kinda bailout, but to simply pay off the outstanding loans for those who hold them would be insane. The message would be 'don't worry if you cant pay your mortgage, the govt will pick up the tab'. This would completely overheat the housing market making things much, much worse. In fact, there would no longer be a market. You also cannot say 'oh, this is a one time deal', a market doesnt understand one time deals from it's govt, they always become precedents for it and they subsequently act accordingly.

No, we cannot allow this debt to vanish, it just has to be taken away, managed, then sold back.

If there was an alternative to this bail out then a set of small deals, for each bank, a la the AIG deal might work. The AIG deal is not a bail out, it is still going to go to wall and collapse. All the fed is doing is making sure it does it slowly, in a piecemeal fashion so it doesnt take the whole banking sector down with it. These debts, (noone knows which are good or bad), aren't worth a lot right now, without the underwriting of them by AIG nothing would be worth shit. As they are offloaded from the makret, a little bit more of AIG will be slowly buried.

If I've got what you're arguing for wrong though, I apologise, you'll have to set me straight.

G grufty jim
grufty jim Sep 23, 2008 20:46:03
Replying to stray

stray wrote:
If I've got what you're arguing for wrong though, I apologise, you'll have to set me straight.
To an extent you have my position right, stray. Though you're seeing it through a rather narrow filter (no fault of yours, I've not explained it and I don't expect you to be psychic).

What needs to be understood about my position is that it's far more extreme and wide-ranging than you suggested. I'm talking about a top-to-bottom restructuring of our entire society.

I do not claim to be in possession of a detailed plan of how this can be achieved, though I am going to start working on one fairly soon (as soon as I complete my current project).

I believe that our society is suffering from a psychosis. And I use that word in the literal sense. As you may or may not know I'm just about to complete a Masters degree in Psychoanalytic Studies, specialising in Group Psychodynamics. I believe I can demonstrate that the twin mechanisms of a global free-market in resources and the international media have generated a collective psyche that includes most of the human race. I also believe this collective psyche is suffering from a psychosis.

Indeed, it is my thesis that the following two statements are saying the same thing in different language (the first in the language of environmental systems theory, the second in the language of group psychodynamics):

1. "This society is unsustainable"
2. "The collective mind generated by this society is suffering from a psychosis"

My point about the credit crisis is that I believe the sooner we begin this process of radical restructuring the more likely we are to succeed (though I also feel there's a chance it may already be too late). The money being used in this bail-out could instead be used to kick-start this process.

It won't be of course. And I'm not suggesting that there's even a sliver of hope that the Dubya Bush administration would be so forward-thinking or so radical. I'm merely expressing my opinion on the issue.

EDIT: For those interested in Group Psychodynamics; the field has evolved significantly over the past 100 years. Briefly (and therefore not very accurately) it begins with Freud's "Civilization and Its Discontents" and evolves through the work of Bion, Fromm, Reich and finally to arguably the most important person in the field, Gregory Bateson. If anyone wants suggestions as to further reading in the area, I'd be happy to make some recommendations.