“Let them fail”
Disturbing Trends may have unfortunately been spot on in predicting that the bail out was essentially “more of the same” as now we have Paulson leveraging bets with billions trying to put things right.
An Op-Ed in NYT today, said:
‘THERE are other things the Treasury might do when a major financial firm assumed to be “too big to fail” comes knocking, asking for free money. Here’s one: Let it fail.’
Very interesting series of articles regarding the financial crisis in New York Times. You would expect some media oversight, but when it comes to the calculation of obscure derivates – the financial “whizz kids” babbled incomprehensible gobblygook – we accepted it as too hard to understand therefore must be sound; now, we are going to want to understand what they are actually going to do with our money. Sound financial fundamentals are required.
This problem will only be solved by facing up to the very simple fact that an asset is only an asset when it is represented by factual productivity or in reality.
It is what is wrong with the internet as an economic model. If everyone was successful – if everything worked – nothing would be proitable. So we add risk of failure and reward what works. Now a large percentage are living off the misfortune of another large percentage.
The only lever we have discovered is “growth”. This is great until you get to be too large. Then you can either fall gradually or suddenly. Sudden death is what nature uses to reduce risk.
Financial markets sustaining that which seeks to grow capital from risk alone is increasingly only there to sustain parasites.
The notion of merit as in social benefit has to be a part of economics. This faith in figures and need as a driving force of economics is without merit if it does not pick winners.
When we get too old, we die. When a bank gets too old, it become vulnerable to false ideas. Revisionist behavior does not correct this, but the masking of problems is sure to create global vulnerability.
If you do not understand the meaning of “failure” then the triage could be misjudged. Saving one merchant bank over another becomes the decision of one man?
