(no subject)

[ksmith]

By way of Talking Points Memo, another take on the financial meltdown: Journalists, start your skepticism.

The Administration has scared the markets and some key legislative leaders, but it has not laid out a coherent, specific and compelling need for this enormous proposal, which is the equivalent of a one-time 55 percent income tax surcharge. (Instead the money will be borrowed, so ask from whom and how this much can be raised so quickly if the credit markets are nearly seized up with fear.)

Ask this question -- are the credit markets really about to seize up?

Comments

[scbutler.livejournal.com]

Yes. Liquidation of money market funds, 3 mo t-bills trading at .02% (not 2%). That's pretty much the definition of a liquidity seize up.

[kristine-smith.livejournal.com]

But can it shake out by itself, or does it need a trillion dollars' worth of grease to do the job? Can we do it with less, or differently?

I'm getting lost in all the various proposals, but I prefer those like the one put forward by Bernie Sanders, which rebuilds from the bottom up instead of from the top down.

[scbutler.livejournal.com]

There's a good article in the NYT today that explans why this is about fixing things as quickly as possible, and that there will be plenty of time for assigning blame later. He also points out the difference between the initial cost ($700BN+) and what the eventual cost (?) may be. This is the crux of assigning the price that the Treasury will pay for these securities.

http://www.nytimes.com/2008/09/24/business/24leonhardt.html?_r=1&ref=business&oref=slogin

I haven't read the Bernie Sanders proposal, but there's nothing particularly wrong with the current propsal once a few of the Dem's provisions get added on. As to whether or not things can shake out by themselves, I'd say no. That's what the market told us last week. Letting things shake out by themselves is why we had depressions in the 1930s, 1890s, and 1870s.