We both agreed on a couple of things:
1. That laying on a supply of pencils or apples isn't a priority. Governments made things worse in 1929 by either failing to act or acting in wierdly inappropriate (can you say "Hawley-Smoot"?) ways. We've learned a lot about macroeconomics since then, and the probability that the U.S. government will repeat the mistakes of the Hoover era is slim. The problems that took down Wall Street in '29 were not well understood at the time and deeply ingrained in the financial world of the day. The problems taking down Wall Street in 2008 are plain enough to see and were well known even before this mess. What was lacking was the willingness to stop the fiscal fiddling that was being used to generate short-term profit taking while setting up long term risk - here's Brad DeLong with a good summary of what has happened over the past year. The economic collapse we're seeing appears to be changing the laissiez faire (Republican for "fuck anyone but meeeeee!!!")approach to fiscal regulation. Finally.
2. The probability of some coming economic pain, though, is very likely in coming, and soon. And we both snarled about the illiberal way that this pain is going to be distributed. My comment was cribbed from a Napoleonic cartoon which has the insubordinate sailor sneering to his captain that he wishes that the roundshot will be distributed the same way the prize money will be: the greatest portion amongst the officers.
One interesting part of the recent tsuris has been the degree I see this as showing how far the U.S. Congress has fallen in terms of governance. The Master Chief disagrees. But my point is that the names you hear in the headlines are Secretary of the Treasury Paulson and Chairman of the Fed Bernanke. Where, you ask, is the Chairman of the House Financial Services Committee? Oh, you don't? Do you KNOW who's the Chairman of the House Finance Committee IS? Did you even know it was CALLED the "Financial Services Committee"? (Admission - I thought it was just the "Finance" committee...)
Or who runs the Banking, Housing and Urban Affairs Committee (Senate), Finance (Senate) or the Joint Economic Committee? One thing does seem obvious to me, though: the Congress is no longer primus inter pares. We no longer have three branches of government, seperate but coequal. We know this was true for war but now we can see that in peaceful matters the dominance of the Executive is clear. Perhaps the only remaining standard is in the Hearts of their Countrymen, and in that case, Nancy Pelosi is just a nose behind Dubya in a race for the bottom.
Over at Fabius Maximus the old Roman is waxing poetic on how this is the End of the Republic, how this is the first step towards economic and political caesarism, and that we will look back on the events of autumn 2008 as the last days of American republicanism. It's worth a look in - my man Fabius is always informative and always brings good arguments into the fray even when I disagree with his conclusions. For what it's worth, I agree with him - to a point...
Now you know how I feel about this; the game's been up for quite a while now. What we're seeing is just an open acknowledgement that government of the Rich, the Well-born, and the Able is going to govern for the Rich, the Well-born, and the Able. The Corporate Donor. The Military Contractor. The Friends of George (or John, or Sarah, or Barak...), Patriots, Rangers and all the other "players".
I'm not saying that you or I or Joe and Mary Lunchpail should just stop trying to pull the levers of power. But I will say that this should STFU the Randites and hardy free-marketeers over at Powerline and Instapundit and LGF. Yeah, you're all just economic proles like the rest of us wage-slaves, peckerheads. You and your crappy little house and your crappy little job mean bupkis to the wealthy people in the seats of power in this country. If destroying your job and foreclosing your house and putting your ass on the street will make AIG or Bank of America a nickel's profit, well, hellooooo homeless shelter! As DeLong says:
"...the market fundamentalists...will need to be quiet for quite a while. We have just seen financial markets rife with moral hazard, agency, and adverse selection problems crash spectacularly. Is this a situation in which we should move health care--also rife with moral hazard, agency, and adverse selection problems--toward a free market configuration? No. Market regulation needs to be smart. But first, market regulation needs to be."I think we're in for a hard, cold autumn.