Libertarianism: Your Key to a Complete Economic Collapse

Mark Ames, Matt Taibbi's former partner in the Russian mag The eXile, in the New York Press presents a (doubtless largely invented) conversation with a Wall Street villain with a fresh take on why libertarianism would doom our nation: mostly, that a firm application of the rule of law to fraud and a stern refusal to bail out big financial market failures would, supposedly, cause every single big-money financier to go on a mad selling spree that would collapse all asset values everywhere.

The alleged conclusion from the mouth of Ames' alleged Wall Street insider pal:

"I think it's great that you and your friends memorized Road to Serfdom in between Star Trek episodes—no really, I'm happy for you. Yeah, we're all so proud. But here's the thing: We grown-ups are really, really busy now trying to sort out the free-market mess you made with that Lehman move of yours. Yeah, so why don't you run along to your libertarian chat rooms and have your little debates about Jekyll Island and the gold standard, because it really means a lot to us. And report back to me as soon as you have it all figured out, m'kay? Just get the fuck out of my face and leave the adults alone."

Oo, what a burn. For some more serious libertarian analysis of the causes and cures for financial crises, start here with Michael Flynn's January 2009 Reason magazine story "Anatomy of a Breakdown."

Comments

[Cosmonaut]

Any ex-partner of Taibbi is bound to be as stupid as Taibbi himself.

[JB]

Wah, we want free money when we act like stupid cocksuckers.

So when is Goldman paying back the money they got when AIG was bailed out?

They are as bad as GM if they claim they have paid back the money they got.

[PIRS]

Because everybody know all all us libertarians supported the Wall Street bailout and other forms of corporate welfare.

We also supported forcing banks to give home loans to people who could not pay them back.

[PIRS]

Wow, huge typos. Make that "Because everybody knows all us libertarians ..."

[John Thacker]

You misread; he's saying that failing to support bailing out Lehman Bros. made the whole thing much worse.

[PIRS]

Thanks, yea, I realized that shortly after I posted that. Scratch everything I said in the above post. It has been a very long day. I should not be posting when I am worn out. I am just addicted.

[Hazel Meade]

Well, HE isn't, but his Wall-Street sock puppet guy is.

But the authors position is skepical of that position, and the Wall-Street guy's arguments seem intended to be unconvincing.

[John Thacker]

Yes, I agree with you on that, looking at the article itself.

It's almost got enough snark and convoluted sarcasm to be a Tim Cavanaugh post.

[Tim Cavanaugh]

Why am I getting dragged into a discussion of some 50 million-word pile that reads like it was written by one of the anti-libertard trolls who haunt the comments? Except that the trolls couldn't go past 20 million words without saying "How does it feel to have so-and-so's cock in your mouth?"

[AA]

More like 5 million word without the cock-in-mouth comment.

[&]

from the mouth of Ames' alleged Wall Street insider pal...

I was going to exclaim, "Lefiti/Tony/Chad is a Wall Street insider?!" but Tim's comment is so much better.

[Seward]

I would just note that none of the counter-parties which Lehman was involved in actually went belly-up. In reality - despite claims about contagion - the theory of contagion isn't backed up by much in the way if empirical evidence or historical examples.

[mark]

Indeed we would have likely seen a meltdown in the "fake" economy, felt deeply by the political class and the media, and a rapid resurgence of the "real economy", felt by everyone else. Perhaps one bad year and then all the "rot" in the system would have been purged. Now it's one giant ponzi scheme that will be papered over, literally.

[mark]

And yes, that's a reference to Treasury Secretary Andrew Mellon:

"Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate? it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people" [ref]

Unfortunately Hoover failed to appreciate Mellon's advice and we've had "bubblenomics" ever since.

[Andrew Mellon's Camp]

Liquidation is for wussies. Gassification all the way!

[Jason]

I think they're going on the butterfly effect.

[Hazel Meade]

Isn't Lehman's bankruptcy already tidily resolved?

Does anyone seriously think that our current financial problems have anything to do with allowing Lehman to fail?

[PIRS]

Mark Ames does apparently.

[PIRS]

Scratch my above statement, I think Hazel Meade is correct on this one. I should not post while exhausted. In fact I think I will sign off for the night.

[Brian Doherty]

That guy, or Ames's phantom imagination, sure seems to. If you care, read the whole thing, though it is long.

[Colin]

The pal has to be either Tony or Chad.

[Hazel Meade]

Actually reading the article, it is ironically pro-libertarian.

The point being, that the (supposed) guy bashing libertarians is basically corrupt Wall Street insider (or a paranody of one) who's argument is that the government should keep a big con game going and keep inflating bubbles to keep the economy going.

Anyway, the article ends with this:
That may be true, but all bubbles to eventually burst, all Ponzi schemes do collapse. The only question is when. For those of us not on the verge of retiring, the sooner we have this day of reckoning and get it over with, the better.

Which is essentially a refutation of the libertarian-bashing position of the Wall Street guy, and an argument that we *should* let the markets collapse, sooner, rather than later.

Which is, fundamentally, the libertarian position.

[PIRS]

Thank you.

+1

[Mo]

Well, that was Ames, not the PE d-bag. I hesitate to claim that that guy was made up because I know people exactly like that and got in an argument with a buddy of mine that's a Treasuries trader that thinks very similar things to him.

[Jason]

The point being, that the (supposed) guy bashing libertarians is basically [a] corrupt Wall Street insider (or a paranody of one) who's [sic] argument is that the government should keep a big con game going and keep inflating bubbles to keep the economy going.

A corrupt Wall Street insider advocating Keynesianism??? Shocking!

[Jesse Walker]

The most intriguing thing here is that Ames' sock puppet refuses to distinguish Ames' socialist stance from a libertarian position, even as Ames keeps insisting that they're different. If you figure (as I do) that the Wall Street guy is a, shall we say, "literary device," that raises some interesting questions about the story's intended moral.

[John Thacker]

My usual understanding is that the intended moral is supposed to be fairly obvious in a persuasive piece, even if it's obvious satire. This piece goes rather far, though.

[John Thacker]

I think he's pulled off the rare double-strawman in this article.

[blueGrass]

Is that a difficulty rating of 9, or 9.5?

[SIV]

If Ames thinks a laissez faire minarchy won't make the trains run on time result in an optimal social outcome perhaps he supports it as an "intermediate stage" before all the Cato types and other libertarian consequentialists capitulate and switch to socialism.

[Hazel Meade]

You could read it as the standard lefty position that high finance is all a shell game - Marx's fetishism of commodities.

What's odd is that he seems willing to let a crash happen on the grounds that his 401(k) portfolio will do better in the long run if the bubble pops sooner rather than later.

Which is sort of a wierd position for a socialist to take.

[Doc Merlin]

There are no socialists, only capitalists who want to use coercion to control others and those who don't.

[Hazel Meade]

Dude, I thought we were all socialists now.

Socialists who want our 401(k)s to appreciate in value.

[Groovus Maximus]

Not to mention our traditional and Roth IRAs to grow and mature.

[JW]

Groovus. Go to bed.

Which is sort of a wierd position for a socialist to take.

Not really. When you consider that a socialist typically wants to maximize his own wealth and well-being by coercing everyone else to subsidize it through their labor, capital and risk-taking, it's perfectly consistent.

They're just as "greedy" as everyone else, just unable to admit to their own truly selfish and craven methods to satisfy that desire.

[Michael Moore]

You hit on the truth, JW.

[Groovus Maximus]

Groovus. Go to bed

What was that for? I have very odd hours and I don't sleep a lot.

[Gabe E]

It actually doesn't matter if it's a literary device or not. I've met plenty of Wall St. types who sound exactly like this.

[Jerry]

The twit Mark Ames never heard of Bear Stearns apparently.

[Dude]

"I think there's a bigger problem here, which is that too much of our growth in the last decade was in finance, and EVER SINCE WE WENT OFF OF THE GOLD STANDARD, (which was necessary for economic management purposes)"...

http://www.realclearpolitics.c.....spect.html

Even though he adds, of course, his "but..." statement here, I think it's amazing that such a mainstream politician is able to perceive the (to me) obvious connection between the creation of an infinite supply of fiat currency, and the increasing dominance of a financial aristocracy who can manipulate it at will, being there is no longer a connection to physical reality.

Yes, it is sad that he is ultimately unable to get rid of his liberal attachment to the idea that the economy must be managed, but still.

[Dude]

Forgot to mention, for those who don't want to watch the video, it's a speech by Bill Clinton.

P.S. is there something wrong with me for wishing that Bill Clinton had never left office, and for think he's the best president we've had in recent history?

I mean, he was fairly free market, at least compared to the rest... socially liberal, didn't make me feel he was deranged or willfully driving the country directly off a cliff...

Well, there was the kooky UFO stuff with Laurence Rockefeller, Hillary, etc. But that's just kind of good for a laugh.

Bush was funny for only a little while, until we finally the extreme depth of the incompetence, corruption, idiocy of him and everyone in his administration. After that, making fun of them felt like making fun of mentally disabled children.

[Brian E]

You're nuts for ascribing for anything other than the philandering to Clinton. Under different circumstances he would have been every bit as wretched as Bush or Obama. The actual man in the suit doesn't do anything but smile; by the time anything gets to him for a decision, all he's doing is picking between the choices that have been preselected.

[alan]

I liked Sobran's stab at a Clinton rehabilitation. The gist of it being that he did all of us a favor by bringing the high and mighty office of the imperial presidency down several notches with his hillbilly antics.

Then again, though this recent example is not one of those moments (have the SPLC been told Clinton is a gold bug?), you can always count on Bill to say some stupid shit to make you hate him all over again.

His greatest legacy, IMHO, is he took the wind out the sails of the modern statist feminist movement. If it had kept on that oppressive course with the foul and cynical public atmosphere it created, professional interaction between men and women would now be impossible.

I still know guys conditioned during those times who have not learned to relax and breathe easily. The hypocrisy of the left feminist by ignoring their own rhetoric concerning office politics and inequities in corporate hierarchies when it came time to stand by their own man set us all free, brothers.

Than you, Bill!

[PapayaSF]

Yes, there's something wrong with you. Clinton was far more corrupt than Bush, and the best thing he did was get a Republican Congress elected in '94. They were somewhat libertarianish for a few years afterwards (reformed welfare, almost succeeded in getting rid of farm subsidies!). Beyond that, he had the luck to take advantage of the end of the Reagan boom, got to cut defense due to the death of the USSR, and rode the tech wave. Plus you are forgetting all the idiocies: Lani Guinier, midnight basketball, the V-chip, etc. etc. Far from the "best" anything, IMHO.

[GOP]

We must say even we're amazed at the contorted inventiveness of your technique. How DO you manage to suck our cocks so well while standing on your head balancing a fishbowl atop your feet?

[Jim Treacher]

Substantive.

[mark]

Unfortunately, "economic management" is a pretty bad euphemism for "undemocratic militarism".

[mark]

This is a pretty awesome quote, and a vindication.

[Max]

Just get the fuck out of my face and leave the adults alone...and stop sucking Ron Paul's cock!

[Warty]

Lefiti! Shut the fuck up, Edward.

[Ron L]

Max|5.3.10 @ 9:24PM|#
"...leave the adults alone..."

How would *you* know when you were in the company of adults?

[Tim Cavanaugh]

stop sucking Ron Paul's cock!

Ha! Works every time. See my comment above.

What is it with you guys and your mouths and cocks? If that's your bag, just own it. We won't judge. People are cool about that stuff these days.

[Groovus Maximus]

If that's your bag, just own tea it.

FTFY Tim. You gotta be consistent with the times. Plurality, you know.

[alan]

What is it with you guys and your mouths and cocks?

Not me, man. I'm all about the anuses.

Remember this classic from your old National Lampoon collection?

Why Johnny Can't Cuss --

On hundreds of playgrounds across this great country we are witnessing an epidemic of curse word illiteracy. Misapplied phrases such as these are commonly heard --

'Suck on my anus, you big fat piece of fuck!'

[Brian E]

Oddly prescient, that.

[alan]

Issue would have been around 1980. My older brother was a sailor, and I was a little heathen who inherited his old issues of National Lampoon and Heavy Metal. Good Times!

[Groovus Maximus]

Not me, man. I'm all about the anuses.

I was a little heathen who inherited his old issues of National Lampoon and Heavy Metal. Good Times!

Is this where you acquired your yen for Den, alan?

[alan]

LOL! I was and am a bigger fan of Druillet and Moebis than Corbett.

Though he is most famous for those gigantic wieners, he can paint a really nice pair of titties, I have to give him that.

[alan]

BTW, I don't have eidetic memory, I recreated the lede of that article from scratch. It is likely to be pretty accurate in tone and humor as the original. I don't admit this because I'm an incredibly honest guy (the editors know too much for me to even think of getting away with that) but because I want that awesome phrase 'Suck on my anus, you big fat piece of fuck!' to be properly attributed. I mean, look at it! The internal rhyme scheme, how it scans, damn, it's now my masterpiece.

[economist]

Edward, I know you get off to the thought of cocksucking, but the adults here are trying to have a mature conversation.

[Warty]

People seem to have a good time arguing with the libertarian inside their heads. That guy's a fucking asshole, apparently.

[Brian E]

He should know better. Not all libertarians are up to the level of Warty. I'm only a minor asshole myself.

[Episiarch]

Yes. Yes you are.

[mark]

It's a common habit among elite New Yorkers, who are leeching off a broken system and should really be doing something about it but are just too comfortable, so they argue with the strawman. They've gone from Soft Republican to Hard Democrat for obvious reasons.

[The Libertarian Guy]

What the fuck is wrong with "a firm application of the rule of law to fraud"?

[Mr. FIFY]

Liberals only like libertarians when they're anti-war and anti-drug war. Otherwise, they treat them like shit.

[blueGrass]

Sounds like Republicans, only when we're talking small government.

[SIV]

Most liberals are pro-drug war. They just wish to fight it differently. You think people who want to ban salt, trans-fats,fur, SUVs,foie gras, firecrackers and guns are for legal heroin and steroids?

[AA]

Good point.

[cynical]

Most liberals are pro-war too, they just prefer to be the ones calling the shots.

[Brian E]

"a firm application of the rule of law to fraud and a stern refusal to bail out big financial market failures would, supposedly, cause every single big-money financier to go on a mad selling spree that would collapse all asset values everywhere"

Which is rather unlike the slow deflationary fart of our current economy during which the well-connected have enough time to bail out and profit.

[Johnathan Reale]

Get the fuck out of my face and leave the adults alone, but if it's not too much trouble, leave your checkbook on the coffee table before you head out.

[C-Dog]

I love how the most fiscally irresponsible generation of liberals claims to be "the adults." It's a modern shtick and it's wearing thin, especially when they act like fucking teenagers. Competence is officially an outdated bourgeois value.

[Marc]

Is it just me, or are we (libertarians) catching more derision, ridicule, and general flak than ever?

And is anyone else taking heart from this, since this situation is a necessary prelude to our ideas eventually winning out?

[Episiarch]

It feels more like scapegoating than winning. Especially since no one besides libertarians can seem to understand what libertarian principles are. The best they can seem to do is create some idiotic caricature of their TEAM RED TEAM BLUE opponents.

[Slut Bunwalla]

"I think of a Republican, and remove reason and accountability."

[Hugh Akston]

Since the unregulated free market is to blame for the financial collapse, the moral collapse, the war in Iraq, and the heartbreak of psoriasis, it's really no wonder that we're getting so much of the blame.

I'm just surprised we're not on the terrorism watch list.

[Janet Napolitano]

Oh, but you are on the list, Hugh. And one of these days, we're going to turn some incident into a reason to put the slapdown on you ungrateful, seditious swine.

Too bad the NYC bomb attempt didn't trigger it sufficiently. Ahh, there's always tomorrow.

[SIV]

Drink?

[Hazel Meade]

Aparrently we're being noticed.

[AA]

I dig all the new attention myself.

They are just scared of increased competition from new ideas. Better to blame us now, see how many people they can get to believe it before Libertarians become more popular.

[Anon]

"First they ignore you, then they laugh at you, then they fight you, then you win."

[Chad]

that a firm application of the rule of law to fraud and a stern refusal to bail out big financial market failures would

Strange, I have seen nothing of the sort from libertarians. Rather, I see you defending in narrow, lawyerly ways the obvious fraud that has been ruling Wall Street for the last few decades.

In my mind, peddling crap with one hand while betting against it with the other is the very epitome of fraud, and any firm caught engaging in such behavior should have its executives imprisoned forever, and ten years (or more, if it was going on longer) of profits and bonuses disgorged.

When I see libertarians calling for some Wall Street heads to roll, then and only then will I consider you serious about "fraud".

Of course, you don't seem to understand "bailouts" either. The problem with bailouts is that we are all in the same damned boat. We get stuck in positions where we HAVE to bail them out, because to do otherwise means we all to down together. In this case, we have to save the ship AND THEN THROW THE RATS OVERBOARD.

Why you can't figure this out is beyond me.

[Dave]

What the fuck are you talking about? Why do liberals have this notion that everyone, everywhere has the same experience and suffers the same consequences? Maybe if we all shared thoughts and had a Borg Queen this would be true, but I don't see how the "bailouts" were nothing more than not-so cleverly hidden acts of theft designed to transfer large amounts of money to the wealthy before the whole house came down.

Ah fuck it, shut your fucking gob, troll.

[The Libertarian Guy]

Chad thinks everyone is entitled to equality of outcome AND equality of opportunity.

Either that, or he wants the politicians to be the only ones with three square meals, personal transportation, and two-ply toilet paper. The rest of us should be happy with a daily pancake from the people's neighborhood dispensary while riding our bikes to work for the common good.

[Tony]

You missed his point entirely. The bailouts were necessary to avoid economic collapse--assert otherwise if you will, but that was the opinion shared by everyone, including immediately reformed laissez-faire advocates across the board. That doesn't mean they were morally laudable or politically palatable. Neither is martial law in a time of invasion.

Already millions of jobs have been lost because of the myopic fraud committed by these guys. And libertarians still in their own little world are persisting blaming those unemployed for their lot in life and barely giving whimpering lip service to the notion that the men whose fraud was responsible should be punished.

[AA]

"The bailouts were necessary to avoid economic collapse"

Explain what our economy would look like right now minus bailouts.

[Chad]

The early 30s. Thousands of businesses would have been dragged under, forcing more layoffs, causing more businesses to fail...

Why is this so hard for you nut-jobs to grasp?

[FDR's Repentant Ghost]

How about the early 20s, which saw a relatively quick recovery unhampered by the likes of you (and me).

[nekoxgirl]

The early 30s are happening right now. The problem with our current economy and during the Great Depression is that we are trying to bring back the boom, thereby perpetuating the bust. With the stimulus plan we'll likely see some temporary improvement (just like from 1934-1936) but once the stimulus ends, the market will again attempt to correct itself (just like it did in 1937).

[AA]

So since your so much smarter than us nut jobs, why would it have ended up like 1930 and not 1920?

The are some good answers in that direction below from Hazel and Fluffy.

[tkwelge]

The hoover administration and the federal reserve of the era encouraged cartelization, price controls, and increased liquidity in order to end the downturn that had occurred. When the great depression developed even further, FDR came into power and doubled down on the exact same policies. In face, before FDR became the president, he accused Hoover of sending our country down the road of socialism. Hoover was the furthest thing from a free market capitalist. He believed in the engineering of the economy, ever since he worked in the government during the 1920 to 1921 crash. He failed to get his ideas implemented until the great depression, however.

[Hazel Meade]

I don't think anyone here is suggesting that fraud investigations shouldn't happen. I'd certainly welcome them.

The problem with the assertion that the whole economy would have collapsed is that it makes the assumption that the underlying assets (including non-real-estate ones) upon which it is based have no inherent value.

A crash would cause a lot of stocks to fall in the short term, but unless they are genuinely valueless, the ones that are worth something aren't going to stay zero for long.

But the policy has been that we can't let asset valuations fall because it would gut people's 401(k)'s and pension funds.

Well, that's tough shit. Artificially inflating asset prices so that the paper value of people's pension funds is preserved does nobody any good in the long run. Then you really are *advocating* engaging in fraud. Fraud on a societal scale.

[Chad]

Hazel, were did you get the perception that I was at all concerned with the stock market. It is just a piss-poor measurement tool of the real phenomenon that we should care about.

I didn't say "the whole economy" would collapse, but a lot more of it would have. We would have gone into something similar to the Great Depression, if we had listed to the dimwits from your fantasy world who honestly believe that businesses are do independant that one's failure has litte effect on the next.

[Fluffy]

Chad, the problem with your argument is that the empirical evidence doesn't support it.

Every "panic" in the 19th century ended quite quickly and was followed by robust growth after the liquidation phase ended.

The Great Depression didn't end quickly, but it was also the economic event where the government tried hardest to avoid the necessity of liquidation.

This recession also was long by historical standards, and it also featured extensive [and ongoing] attempts to resist liquidation and to support highly leveraged system participants.

And, with regard to your other point, if a client walks into my office and says, "I want to bet against mortgage bonds" and another client walks in five minutes later and says, "I want to bet FOR mortgage bonds" if I underwrite an instrument that lets them both do that I haven't defrauded anyone. If I go to Vegas and say, "I want to bet on the Nets" I'm sure the bookies laugh at me in their emails, but they aren't defrauding me if they take my bet or match me up with someone who wants to bet on the Cavaliers.

I think Goldman is guilty of rent-seeking, but it was assholes like you that let them accomplish that when you supported the bailout. Letting stupid people make stupid bets that they are bound and determined to make isn't fraud. Sorry.

[AA]

Would taking the SUNS over the SPURS be a good bet?

[Fluffy]

fantasy world who honestly believe that businesses are do independant that one's failure has litte effect on the next.

Actually, that's not what I believe at all.

I believe that if your business is dependent on businesses that fail, that you deserve to lose.

If we protect companies from counterparty risk, we are protecting them from losses that they deserve to realize.

In fact, in many ways I am slowly being driven into a camp where I'm almost a class warrior - because so much of our wealthiest class is now made up of rent seekers and people who were protected from bets they deserved to lose that I no longer have the faith in the justice of our economic arrangements that I may once have had. In a kleptocracy, wanting to burn the rich ceases to be a dark leftist impulse and becomes an appropriate outlook.

[JohnD]

Hmm. Tony defending Chad. What a joke... I guess that should shut all you doubters up.... yeah, right!

[Invisible Finger]

but that was the opinion shared by everyone, including immediately reformed laissez-faire advocates across the board.

I'd love to see you name two.

[Tony]

Alan Greenspan. George W. Bush.

[Hazel Meade]

As if Bush was a laissez-faire advocate.

[Aresen]

Chad, unwrapping a Hershey Bar is beyond you.

[mark]

Sadly, Chad fails to appreciate the efficiency of the free market in apportioning justice on Wall Street.

You can be sure that the heads that eventually roll under the SEC will be mostly symbolic, as compared to the mountain of heads that would have piled up sans TARP.

[SIV]

"Mountain of heads"?I always figured without TARP the Wall Street losers not jumping out of windows would be walking around wearing barrels.

[Hazel Meade]

You can be sure that the heads that eventually roll under the SEC will be mostly symbolic, as compared to the mountain of heads that would have piled up sans TARP.

Indeed.

Of course, Chad buys the bullshit that if they had let other banks fail that the entire world economy would have imploded.

I do admit it would have been painful. But the pain most likely would have lasted only months, as the failed banks liquidated and others bought their assets at bargain basement discounts. We mgiht even have seen those 20% unemployment numbers for a couple of months, before the same companies rehired everyone after they identified some new lenders. Net result would be a wrenching readjustment as the losers went down and some new and unfamiliar players entered the scene to take over.

[AA]

Those new, unfamiliar players would also be more aware of what NOT to do. Isn't that what we want? More opportunity for new people, while having the bad ones go down?

[Chad]

Again, Hazel jumps straight to the straw man of exaggerated hyperbole.

You must be out of ideas today.

[JohnD]

You should pay more attention to Hazel. You might learn something... on the other hand, maybe not. You're too closed minded to learn anything.

[Zeb]

How does exaggerated hyperbole differ from regular hyperbole?

[Ron L]

Chad|5.3.10 @ 10:31PM|#
"that a firm application of the rule of law to fraud and a stern refusal to bail out big financial market failures would..."
"Strange, I have seen nothing of the sort from libertarians."

Strange, you've shown that you can't see the nose on your face, so admitting you haven't seen this is no surprise. Much as your sock MNG admitted s/he 'hadn't seen' that public school teachers can't be fired.
I could suggest you open your eyes and learn something, but that's asking entirely too much.

[Chad]

So Ron can't refute me either. He has to run off and attack an entirely different person.

LoL.

If both Hazel and Ron have to immediately run to the most droll of rhetoric tricks, I guess I am right.

[Ron L]

Chad|5.3.10 @ 10:31PM|#
"...In my mind,...."

That's GREAT. I'm still laughing. I'll bet you got a million of 'em.

[Edwin]

Chad, Tony - no one here is defending the fraud perpetrated by Wall Street. Of course they should be convicted. But as long as the same system that caused the collapse keeps running, and the next collapse is just looming over our heads, that all seems besides the point.

Hey, I'm all for the bailouts from the justification you guys give. The problem is nothing is going to seriously change in the long run, and we're just going to have to keep giving bailout every 40 or so years for every bubble-burst. The right-now seems trivial compared to the risk of the government going bankrupt.

And what we blame is different, to put it simply. Our whole regulatory-economic system basically puts our entire dinner right in front of the pig. When the pig eats the dinner, you idiots blame the pig. We (libertarians) have been telling you for years that THAT'S WHAT'S GOING TO HAPPEN IF YOU LEAVE YOUR DINNER IN FRONT OF A PIG. So until we return to a real, competitive financial-market system, one that doesn't encourage false growth by having the government buy up mortgages, and in general one that isn't so huge and doesn't force everyone into the same boat, we're going to keep having bubbles and busts.

[tkwelge]

"In this case, we have to save the ship AND THEN THROW THE RATS OVERBOARD.

Why you can't figure this out is beyond me."

This is a bad analogy. Rats don't cause a ship to sink. And even if they did, they wouldn't ask for more cheese as a remedy. The cliche is, "like rats escaping a sinking ship."

If I was going to make a rat-analogy, I would point out that the government's response to rats eating all of the cheese left out on the table is to put more cheese on the table.

[BakedPenguin]

Here's my conversation with a person who claimed to be a former associate of Mark Ames:

BP: So Mark really liked pig fucking, did he?

FA: You couldn't keep him away from the sty. His biggest disappointment was that after he got the strap-on on the pig, it would run away. He really wanted to be on the bottom. He desperately wanted to do some catching.

BP: Did he try anything else?

FA: He tried it all. Pig hormones, wallowing in shit, nothing worked. He sometimes got his sadness out by having crack whores shit on him, but he said it wasn't the same. Even when they crapped in his mouth, he said it was like swallowing failure.

BP: Did it interfere with his professional life?

FA: Well, it's hard to interview people when you smell like pig shit, so he generally tended to just make stuff up and pretend like he'd done the interviews. Hardly anyone noticed though, because who wants to read Mark Ames?

BP: Thanks.

[LBJ]

Well, I'd like to see Mark Ames deny it.

[Slut Bunwalla]

He's been slow to respond thus far.

[Episiarch]

It's all true! I believe every word, because I want to!

[alan]

I suspected this was the case given the general creepiness of his prose, but sadly, this just confirms it.

[Sigmund]

It is in the sexual sphere of our lives that our hidden neuroses become manifestly apparent. Perhaps that is why most of mankind has always insisted on a veil of privacy regarding our sex lives.

[shrike]

TARP bailed out the bank depositors - not the shareholders.

The FDIC has little in the way of funds (a billion or so) so Too Big To Fail intervention prevented millions of Citi depositors lining up for miles claiming its $1 trillion in assets in bankruptcy court. And then the bank runs would start. That is why the Bushpigs were planning martial law. Some "liberty", huh?

So Cro-Magnon Libertarians are pre-1850, pre-FDIC, pre-Fed types, right?

Its not gonna happen, boys. That is why you are laughed at.

[SIV]

FDIC only insured up to 100k at the time.
The FDIC and Citi's assets could have covered that.

[Ron L]

shrike|5.3.10 @ 11:34PM|#
"TARP bailed out the bank depositors - not the shareholders."

Cite please.

[shrike]

Paulson, Bernanke, and Geithner had demonstrated their comfort in effectively killing off the equity value of WaMu, Bear, Lehman, Merrill, AIG, Fannie, and Freddie in order to prevent further systemic damage.

The stockholders were deservedly shown the door.

Fannie and Freddie trade at a buck only because they CANNOT declare bankruptcy since the Treasury would have to make good on trillions in government backed bonds.

Its more cost effective to ply $127 billion into them than make good on a 50% haircut on $10 trillion in bonds.

"Doing Nothing" would have been an unmitigated worldwide disaster.

[capitol l]

Shrike, what the hell happened to you, man. You have transformed into a cheap chad knock-off from a rabble rousing wacko. The shrike I know would welcome an "unmitigated worldwide disaster", not talk about bonds and shit.

[Groovus Maximus]

I suspect he has come into money outright or is reaping the rewards of financial windfall. Either way, he does sound more like a limo progressive than an out-and-out post-dystopian collectivist.

[engineer]

Shrike had a forced lobotomy after crapping on a prostitute in public while smoking weed, shooting up heroine, and waving his AK-47 around. As a result, he is now a dull little version of his former self, reduced to fail trolling on the days when the group home lets him use the internet connection.

[engineer]

Shit, should be "heroin".

[Groovus Maximus]

The first spelling was better; it exposes his latent, deep-rooted misogyny, a trait crucial establishing the need for a transorbital lobotomy.

[Sigmund]

He probably shoots up "heroines", too - maybe with the AK-47.

[capitol l]

If shrike, at his age, smoked grass...
He'd have one hell of a trip.

shrike you are a lame ass and a poor excuse for a nihilistic agitator. The day you stopped putting female protagonists into your veins is the day you died to me.

[alan]

Apparently, he got religion, drunk the Jesus juice, became born again.

[ducks]

[alan]

But, if I ever hear shrike say, 'that Thomas Friedman sure is making a lot of sense these days', out of respect for the shrike of old, I will be the big tall Indian to his Jack Nicholson. I owe him at least that much.

[Hazel Meade]

Well, there's "doing nothing", and then theres "Too Big to Fail".

I'm not certain that there weren't some actions the government could have taken that didn't involve bailing out Goldman Sachs et. al.

Say, lifting mark-to-market, for instance. Temporarily loosening capital reserve requirements.

Why couldn't Goldman Sach's shareholders take a hit like everyone else?

[tkwelge]

"Fannie and Freddie trade at a buck only because they CANNOT declare bankruptcy since the Treasury would have to make good on trillions in government backed bonds.

Its more cost effective to ply $127 billion into them than make good on a 50% haircut on $10 trillion in bonds."

I like how you defend the bailouts without at all thinking about how these problems can be prevented in the future. The fact of the matter is that the formation of the federal reserve and the ending of the gold standard has led directly to this moment. I don't think that the bankruptcy of the entities that you mentioned above would have caused the treasury to have to cough up 5 trillion dollars.

[tkwelge]

Plus, the federal reserve has already put trillions into the system to support "government backed bonds." There were some estimates that the federal reserve poured 6 trillion into the system by lending through its discount window to institutions that would have gone under and buying their toxic assets.

[Cassandra]

I sympathize with Hayekians in particular and libertarians in general.

It is maddening to correctly predict the dire long-run consequences of economic misbehavior. Until our predictions come true, we not believed. When they do come true, we are blamed.

[Cassandra]

I sympathize with Hayekians in particular and libertarians in general.

It is maddening to correctly predict the dire long-run consequences of economic misbehavior. Until our predictions come true, we are not believed. When they do come true, we are blamed.

[AA]

"Its not gonna happen, boys. That is why you are laughed at."

At least we didn't cause the problems.

[AA]

And have different, better solutions.

[Drax the Destroyer]

And have different, better actual solutions.

[alan]

The FDIC has little in the way of funds (a billion or so) so Too Big

They expanded the deposit insurance to $250,000 at the very time you claim they had a billion at their disposal? Does that make any sense, even to you? Actually, they have up to half a trillion guaranteed for paper by law from the Tresury -- it would run up inflation, but shit that never stopped them. Get your story straight, sweet cheeks. I am tired of doing it for you.

[alan]

it would run up inflation, but shit that never stopped them. Get your story straight, sweet cheeks. I am tired of doing it for you.

Covering funds that have already been wiped out theoretically should not affect inflation, but given the velocity is higher for paper being moved around under those conditions, I suspect inflation would have occurred, as it has in the past under conditions like these.

[shrike]

It makes perfect sense. FDIC limits were raised to prevent withdrawals and preserve capital in troubled banks.

And $500 billion in Treasury emergency funds was/is a poor second option to $700 billion in LOANS.

[alan]

This:

And $500 billion in Treasury emergency funds was/is a poor second option to $700 billion in LOANS.

is an admission of that:

The FDIC has little in the way of funds (a billion or so) so Too Big To Fail intervention prevented millions of Citi depositors lining up for miles claiming its $1 trillion in assets in bankruptcy court. And then the bank runs would start. That is why the Bushpigs were planning martial law. Some "liberty", huh?

being a misstatement of fact.

[Invisible Finger]

It makes perfect sense. FDIC limits were raised to prevent withdrawals and preserve capital in troubled banks.

Deposits are a liability on a bank balance sheet, not capital.

[Random Dude]

"Its not gonna happen, boys. That is why you are laughed at."

It will happen, because you cannot grow an economy on exponentially increasing debt while having periodic, cyclical downturns.

The Fed's days (and that of Wall Street with their 100-to-1 leverage ratios) are numbered. Credit-backed ponzi schemes always fail. At some point, the excess consumption created by central management placing interest rates too low consumes the capital necessary for future production. When this happens, everyone goes to the storehouse for the winter and realizes that it's full of IOUs and no food.

When the CRE resets start in 2011 in the EU and the American i-banks delever their market holdings, people in the U.S. will realize that this point has already arrived. The March 2009 decision to suspend mark-to-market in the U.S. was a terrible decision. It just prolonged the insolvency of U.S. banks holding mainly subprime loans, so that it could coincide with an alt-A, option-ARM, CRE, and sovereign debt crisis in the EU in 2011-12.

The Fed has no more bullets besides outright monetization and price controls. When that starts happening, you can rest assured no one will laughing at the libertarians then.

[Graphite]

shrike, there's a simple concept you need to get through your thick skull: the banks are insolvent. They do not have enough in assets to cover the liabilities on their books. Therefore, someone is going to eat the shit sandwich created by all the crappy loans they made. The options are:

1.) Stock- and bondholders, the latter of whom have been almost entirely spared any pain throughout the whole financial mess
2.) The banks' other creditors and counterparties, including depositors themselves, or
3.) Anyone who holds U.S. dollars (if the FDIC goes the route of printing up the money to cover all the smoking holes where depositors' money is supposed to be).

Your pretend little 4th option where no one takes any pain is a silly fantasy which will be revealed as such when the marked-to-make-believe portfolios in all the major banks eventually lead to a cash flow problem, and the resulting liquidity crisis again reveals the fundamental insolvency under the surface.

More to the point, we have a totally insolvent monetary and banking system, with horrible leverage ratios and nothing but government debt paper underlying the whole thing, precisely because we moved away from nineteenth century style financial arrangements, especially by guaranteeing liquidity to the banking system any time it did something stupid like lend a bunch of money to Latin America, or LTCM, or overstretched subprime mortgage borrowers.

We've had two central banks fail in this country. The third has been managed with an even greater degree of arrogant incompetence, so there's every reason to expect it to meet with the same fate.

[Hazel Meade]

Go check the financial stocks, most have recovered to 2005-2006 levels.

So the stockholders of most of the major banks have not taken a hit, unelss they sold at the bottom of the market.

Except for Fannie and Freddie, and Lehman shareholders.

Of course, most of the banks have paid back their TARP loans, but, like General Motors, a lot of them are getting other government money - the Federal Reserve buying up troubled assets to take them off their books.

(Someday I hope the fed sells that shit and makes a killing.)

Even if the injection of cash staved off a contaigion, it's unclear that that the contaigion couldn't have been contained *without* bailing out the failed institutions. And to the extent the contagion was just psychological, it shouldn't have.

[Graphite]

Of course, most of the banks have paid back their TARP loans, but, like General Motors, a lot of them are getting other government money - the Federal Reserve buying up troubled assets to take them off their books.

They're also issuing debt backed by the FDIC and receiving payments from counterparties (like AIG) which would have gone under if not for the bailouts.

However the main subsidy to the TBTF firms now is the basically explicit government promise that they will be backstopped in any future emergency. This is encouraging investors to lend to these firms and purchase their stock offerings with total disregard for the risks that exist on their balance sheets. The value of this implicit government put on all the TBTF banks is the real cost of TARP and there's no way in hell they've actually paid it back.

At some point the government's efforts to prop up all the bad debt in the system will imperil its own ability to fund itself without precipitating a currency crisis, the banks will be cut loose, and shrike's "solution" will be shown to have been a costly, ill-conceived game of kick the can.

[Hazel Meade]

is encouraging investors to lend to these firms and purchase their stock offerings with total disregard for the risks that exist on their balance sheets.

Indeed. I bought a bit of CitiGroup stock before it's recent run-up.

My reasoning? Citi ain't going anywhere. As a TBTF firm, you an put a floor under the stock price, so there's only upside.

[Graphite]

My reasoning? Citi ain't going anywhere. As a TBTF firm, you an put a floor under the stock price, so there's only upside.

The problem is that the losses are real and so eventually someone will be forced to take them ... eventually the Ponzi unwinds when there are no more Uncle Suckers to provide a bailout. When the chips are down, will the government commit funding suicide or destroy the dollar by propping up these companies at all costs? I doubt it. The ability to issue debt in a currency it can print is a source of immense power to a sovereign government; they will protect it even if it means letting the share price of C go from $4 to $0.

[Invisible Finger]

TARP bailed out the bank depositors - not the shareholders.

TARP did neither.

It bailed out bondholders of the banks.

The stockholder's equity was indeed reduced. When you realize that the bulk of the stockholders are public employee pension funds, who then ran to their legislatures to demand contributions, the people shown the door were taxpayers who had no skin in the game otherwise.

The FDIC has a limitless line with the Treasury - the supposed depositor bank runs would be met by issuing debt (aka inflation via Fed printing press). There is no magic to the FDIC safety-valve - it stops slow leaks by insurance premiums and covers bursting pipes with inflation.

[Ghost of Schr?dinger's cat]

Matt Tiabbi may be a thirty-second degree douche-nozzle, but he hates Thomas Friedman.

[Tim Cavanaugh]

Indeed, and that hatred produced a lede that still makes me green with envy:

I think it was about five months ago that Press editor Alex Zaitchik whispered to me in the office hallway that Thomas Friedman had a new book coming out. All he knew about it was the title, but that was enough; he approached me with the chilled demeanor of a British spy who has just discovered that Hitler was secretly buying up the world's manganese supply. Who knew what it meant but one had to assume the worst.

[Ghost of Schr?dinger's cat]

yes, his reviews of Friedman's books are legendary.

[The Art-P.O.G.]

That is an amazing lede.

[Kolohe]

"I think it's great that you and your friends memorized Road to Serfdom in between Star Trek episodes?no really, I'm happy for you"

Fsm help me, but I thought this was a pretty good line.

[capitol l]

What I actually thought when I read that was; "Does this guy troll at Reason".

[Groovus Maximus]

I would have been more convinced if he mentioned Dune, beer and pizza threads. But yes, it applies. Epi's countless quotes of ST:TOS was the first thing that went through mine.

[capitol l]

Beer is the mind killer.

[The Art-P.O.G.]

Nice, capitol l. Nice.

[robc]

He stole that from me.

[capitol l]

Okay beer is the mind killer, better?

That is a great quote and should be repeated as much as possible.

[wylie]

"I think it's great that you and your friends memorized Road to Serfdom in between Star Trek episodes...

Go fuck yourself. I was reading Dune between episodes of StarTrek, asshole.

[wylie]

Read the thread? Never. I mean, there's only a 120% chance that others already made the same joke....

In all seriousness, do i have to turn in my decoder ring if thought "Road" was written by Rand? (Wikipedia just corrected me.)

[ed]

Yes. But you should read Road anyway, if only for the rape scene.

[alan]

nice!

[John C. Randolph]

Ames should go back to writing about drugs and hookers, and leave economics up to people who know what they're talking about.

-jcr

[&]

Anyway, Ignore-A-Troll Tuesday is here again! Resist the Siren's call and feel better about yourself. Ignore a troll today!

[juanita]

Like the police say to drug dealers:
You can run but you can't hide

[robc]

With incif, every day is ignore-a-troll Tuesday!!!!!

[Almanian]

Shit - missed all the fun last night cause I went to bed early.

I actually thought the "burn" was pretty funny. "Between Star Trek episodes.." Heh heh!

[Kiwi Dave]

Ironically, "Just get the fuck out of my face and leave the adults alone" is about as perfect a one-line summary of libertarianism as you could find.

[http://linksyssolutions.com/]

Correct, Kiwi Dave.