The Idiocy of Wall Street: Applauding Its Own Demise

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vertigo factor in the last two weeks of the stock market has been
high: down 400 points, down 400 points, up 400 points, down 400
points, up… Which is it, one wants to know, because to have
the answer as to the state of the future would relieve anxiety in
the short run, even though the things we do to relieve short-run
anxiety often cause long-term calamity.

Things like
nationalizing the finance industry of the United States, which is,
effectively speaking, the consequence of Federal Reserve and Treasury
actions of the last two days.

The humor factor
in the rally of last week has been far higher than the vertigo factor,
however, as Wall Street bizarrely applauds the nationalization of
the finance industry. I like to be less anxious, but not at the
expense of socialism – or more likely fascism, the latter of
which (when you listen carefully to the drumbeat for war with target
of the month, Pakistan) is the clear direction of US policy.

Maybe former
Treasury Secretary Paul O’Neil was right about those guys in front
of the green trading screens on Wall Street being trained monkeys,
because the actions and announcements emanating from the federal
government have been anything but good for the wealth-creation mechanisms
of capitalism, or for the future of liberty for that matter.

We were told
less than six weeks ago by the Congressional Budget Office that
the taxpayers may have to spend up to $25 billion dollars bailing
out Fannie Mae and Freddie Mac. Secretary Paulson and Federal Reserve
Chairman Bernanke assured us that beyond that, all was well. Why
is anyone still listening to Paulson and Bernanke?

The announced
bailout plans six weeks later have costs that Paulson and Bernanke
now admit will run at least into the hundreds of billions of dollars.
But why is anyone still listening to Paulson and Bernanke?

Given the economics
discussed below, and the government’s lack of credibility to date,
the real costs will now clearly run into the high trillions. The
question is, who will get stuck with the losses and how will that
loss-distribution process be handled? For Wall Street to applaud
the prospect of the upcoming events is lunacy. Why is anyone
listening to Paulson and Bernanke?

the rest of the article

25, 2008

A. Rich [send him mail] is an
instructor of economics, finance, and political science at Montgomery
County Community College in Blue Bell, PA. He also teaches economics,
government, and history at Delaware County Community College in
Exton, PA.

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