Let them fail

The same experts, in Congress and out, who did not foresee and who promulgated the current banking/credit crisis are the same ones assuring us their plan for salvation is just the thing.

Is it rational to believe that these creatures have finally figured out what is best for us? Or is better to say: Stop! Just let things fall out where they may. Let the people who caused this pay the price for their own mistakes.

Analysis so far suggests that the entire mess was brought on by Congressional prompting, in the form of laws which would penalize banks for not making risky loans, and by unscrupulous financiers who figured how to game the system. Also to blame are the people who bought absurdly constructed loans, the kind which they knew they would not be able to eventually afford. It is ridiculous to claim that these people were duped by forces more powerful than themselves. Nobody coerced anybody into buying a house.

And who twisted arms of bank executives to pay their failing CEOs millions? What rewards were given to financial engineers who packaged and sold the most creative sub-prime mortgage-backed securities?

There are many guilty parties here, not the least of which are our own elected representatives who reflexively believe that throwing money—as quickly as possible—at any problem is always the solution.

Thus, the belly-aching speech about partisanship by the appalling Nancy Pelosi after the failed vote was particularly galling. Here are two statistics of interest about yesterday’s “bailout” vote:

40% of House Democrats voted no.

33% of House Republicans voted yes

Which is to say, a fairly uniform rejection by both sides of the aisle.

Thank God for that. I in no way want to give any of my money to either over-confident corporate executives or to the people who will lose their homes. I am utterly unconvinced that I should feel any sense of responsibility for any of this mess.

In this current “bailout”, I feel the same way as when asked to contribute money to people who built their houses on a coastal area well known to be in a location of frequent hurricanes. How is their stupidity my problem?

Whatever the solution is, it is not more government.

Incidentally, it’s been little reported so far, but the Fed has already started printing more money to “infuse cash into the system.” One figure I read is $600 million. Next stop: inflation. Some bailout!


  1. Ari

    I agree completely on the overarching sentiment (and think that houses in hurricane country and houses in brushfire territory are stupid stupid stupid.) But I’m concerned about this current situation for one reason: capital availability. I’m already seeing companies reduce investment because they can’t secure long-term loans, and equity is just too costly right now. If companies can’t leverage, they can’t invest.

    And the relatively unfettered investment environment in the US is one of the biggest reasons for American economic success.

    Does this mean that I’m all for the bailout? No. I think I side with Zingales and Miron on this one.

    On the other hand, I think the Economist makes a good point by saying that:

    “Consequently, three-month Treasury bills were yielding just 0.43% last week (something like 2% would be more normal). According to Barclays Capital, the cost of long-term financial debt was some 450 basis points (4.5 percentage points) above that of government debt, compared with a normal spread of less than 50 basis points. Shorter term, the gap between three month Libor (the rate at which banks borrow) and that paid by the government is getting wider and wider (see chart).

    At that level, it is simply uneconomic for banks to lend money to customers. So they won’t. Banks are getting by on borrowing overnight, but the markets for one and three-month loans have dried up. That explains why central banks have been forced to offer billions of dollars at those maturities.

    This cannot last long without causing immense damage. Companies will be unable to raise new money and, more importantly, refinance old loans. Corporate bankruptcies will soar. Consumers will also find it difficult, or expensive, to borrow. The result will be a sharp downturn in demand that will push the economy into a deep recession.”

    So what’s the solution? Beats me. I just know that it’s not going to be an easy next couple of years for people looking to secure credit.

  2. Michael Smith

    I agree, let them fail.

    Here is an excellent article that summarizes the nature of this government-caused mess:


    The author makes the point that there is plenty of capital available to well-run financial institutions. Recently, Goldman Sachs and JP Morgan raised $10 billion dollars each, and the offers of capital from private investors actually exceeded what the two firms needed.

    He also explains how recent Fed actions are making the problem worse.

    And see here for a short, but wonderfully informative article on how the Federal Reserve created the housing bubble: http://mises.org/story/3130

    Be sure and click on the button labeled “Real Estate Roller Coaster” at the end of the article.

    What we are seeing is the failure of the regulated, unfree market.

  3. Joy

    President Briggs:

    A bail out will still and should happen. This matter is bigger than fat cats and the foolish.
    There’s what is ideal and what is practical. You know this. It’s what you’re always saying.

  4. Bruce Foutch

    Here is a link to “The Bailout Reader” from the Austrian School of Economics:


    May be time to have another look at the Austrian Economic viewpoint. It certainly supports the idea that a government bailout is a bad idea, but for reasons you may not have considered.

  5. I would question the statement about unfettered investment based on this article:

    The $55 Trillion Question

    This is the kind of investment that really ought to be fettered, or at least reported, particularly when companies involved in credit-default swaps don’t report their potential obligations. The FASB is going to start making them report, but any time a market like this becomes this large and largely out of the public eye, it’s a problem.

    It has already functioned as a problem by removing or allaying perceived risk. My gut feeling is that as much as the CRA forcing subprime mortgages was an issue and Fannie & Freddie securitizing subprime mortgages was an issue, the use of CDS contracts to make things look fine was fuel on the fire. If no one bought the securitized bad loans that Fannie & Freddie offered, this problem would have never gotten as large as it did. When you add a false sense of security to greed, bad things get worse.

    The fact that a Treasury spokesperson is quoted as attributing the $700 billion figure to “wanting to ask for a big number” unconnected to data points, according to Forbes, speaks to the back-of-the-envelope nature of this plan. Without suspending mark-to-market accounting rules, the fire sale of assets to the Treasury may make bank liquidity even worse for companies not being bailed out.

    The $700 billion may help, but I’m not sure if there is even a data set from which to torture a p-value that suggests it will be a cure. It is still an enormous amount of money. The Federal Reserve is not making $600 million available, it’s making over $650 billion available already between short-term loans of 84 days (the kind banks won’t make to each other) and currency exchanges for people to buy dollars. All totalled, that would be $1.3 trillion dollars, about 10% of our annual economy.

    It’s still a drop in the CDS bucket.

    This is all very inflationary but being an inflation hawk made things appreciably worse in the late 1920s and early 1930s.

  6. Luis Dias

    (I’m having problems in the browser, sorry if it repeats)

    Mr Briggs. A more cautious position should be held. I agree with your pathos against all the corruption that is so evident. But this problem ask more serious answers than just “let them burn”, for the problem is in the core of the institution that works like the heart of the body economy. You cannot let the events enter heart attack mode. It could kill the patient, and plunge the entire economy into another depression…

    Also to blame are the people who bought absurdly constructed loans, the kind which they knew they would not be able to eventually afford.

    I know what you’re talking about, but I disagree with you, it wasn’t their responsability. They had no clue of what was coming, nor they had to. If they were smart enough, they would have gone away of this thing, but no one is forced to be a master of statistics and know what the hell they are talking about. Mainly, if the bank stamps “yes” and you see that you can afford the monthly pay, then you sign.

    The responsability of the risk of lending stuff to people that are only able to pay without any margin of error, is of the lenders themselves who got immensely easy on the money, and fraude was the word of everyday.

    This is no excuse of Joe Sixpack, but quite franckly, if these decisions are left to unspecialized people that know nothing about the FED, rates, etc., what can you expect?

    Next stop: inflation. Some bailout!

    It can be worse than inflation, we can be hit by a deflation monster. Or, alternatively, by an hyper-inflation super-black hole.

    And btw, 600 million is nothing.

  7. Noblesse Oblige

    Be careful what you wish for. You may not like it.

    Like it or not, the broader economy (read middle class) has to be shielded against further financial disaster. There is plenty of blame to go around, but we need to stay focused.

    The no-vote was a demonstration of lack of confidence in government. There is clearly a strong underlying urge for something “different” or “better.” The problem is that the only offering so far is “bigger.”

  8. Servius

    How is “40% of House Democrats voted no. 33% of House Republicans voted yes ” uniform rejection.

    Wouldn’t it be better to say the rejection was fairly bi-partisan?

  9. Briggs


    Yes, you’re right. I misspoke.


    Your last argument, in advocating “doing something” catches my attention. “600 million is nothing.” Now, if that is true, then it should follow that we do not need to do anything, because the amount is so small. Surely peoples’ confidences will return and restore homeostasis, especially when the amount is so small.

    But if 600 million is something, then it’s too much, especially in the sense that they’ll come looking for the money from me.


    The best arguments I have seen so far, in advocating “doing something”, is that certain experts say that we must. This line of reasoning fails to persuade me.

    I say that people are overstating the horrors that await us if we fail to “do something” (in the sense of spending public money or in increasing government regulation). My basis for this belief is history: most of the time people have predicted economic dissolution, the outcome was not nearly as bad as predicted, or even good.

    The predictions made for “doing something”, I say, are too confident. Again, I argue from history. The chances of unintended consequences are great, yet brushed aside as they almost always are.

    So, yes, I was serious. Let them fail.

  10. I’ll have about 3000 words about this up at pajamas Media on Thursday; the gist is this:

    – you’re absolutely right that the initial problem was governmentally imposed requirements to make risky mortgages.
    – the various structured securities that have made the issue come to a crisis now were all built as ways to reduce the risk, and were all implicitly based on the Fannie/Freddie “wink, wink, nudge, nudge” argument that they were essentially as save as government debt even though there weren’t entitled to that by statute.
    – when Fannie/Freddie became insolvent, that was a trigger
    – which was exacerbated by some unwise accounting rules changes
    – and the current situation is a cascading failure following.

    However, unless you’ve always wanted to be Tom Joad, you don’t want to “just let them burn.” The additional liquidity isn’t “unfreezing” the credit markets, and if they don’t unfreeze, pretty quickly many companies won’t be able to pay payroll. Pretty quickly after that, we would have a very severe recession. Like bread lines and soup kitchens severe.

    Also, the “bailout” is actually the government buying up some illiquid securities, thereby cleaning up the market and restoring liquidity, which will quickly clarify values, which will quickly unfreeze the credit market. Thing the government is buying distressed securities at an artificially depressed price, over time they should pay back the investment, or even make a profit.

    In the mean time, the SEC is revising the unwise accounting rules changes, which will also help.
    As it is, the basic

  11. Noblesse Oblige

    Thank you Charlie.

  12. Noblesse Oblige

    And what’s at stake is more than financial difficulties. We are drifting toward a modern version of anarchy in which a disfunctional government — and the institutions themselves — are not trusted. The polls show it; the outpouring that led to the defeat of the program shows it. Still the system limps along carried mostly by the economy. Now the eocnomy is under threat, and this makes us ripe for some kind of instability. The signs are there. Therefore it seems very important for government to show it can still work and for this program to work.

    Letting it burn is not a good option, because the range of outcomes, mostly to the negative side, is too large. I would have preferred to have had a more rational process, with hearings and testimony from all sides. But this is not possible this election season.

  13. EJ

    Dear Sir,

    Perhaps you could reconsider your ‘,,, financial engineer’ comment.

    I hope all can realize that the financial, social, domestic and maintianance engineers are not really engineers. These are soft sciences. Subject to human whim. To say one is an engineer when not qualified to do so is illegal. In fact, who are these financial gurus who said they were also engineers?

    It should also be noted that no Engineering Society has bought into any financial bail out nor any IPCC recommendations.

    An engineer, trained in the natural sciences, and who takes such responsibility seriously, cannot consider econimics a hard science.

    I could not recognize an economical engineer or a domestic engineer as a peer.

    Unless, unless they could calc a 3D cross product with the correct units.

    Humans, are we natural? If not, then should we die and be gone?

    If we are, then why are we here?

    WOW, I gotta quit D & B! When I quit drinkin and bloggin, I am buying drinks all around.

  14. Briggs


    You’re right, I’m wrong. Let me instead say, the people who charged those engineers to be creative.


    Somehow my WordPress cut off some of your comments. I’ll see if I can fix this. Sorry about that.

    You might be right about payrolls, etc. But I am doubtful. While it might happen in some cases, I can’t see it happening in a widespread fashion. But, as I say, I am willing to say I might be mistaken about this.

    I also do not love the argument that “We will all make money by the government selling the mortgages/securities they will buy in the bailout.” I do not love the precedent nor do I believe the government will make a profit, or if they do, that they will use the money in the wisest fashion. That is, I foresee that the money would be used to make the government larger and not smaller.

    Noblesse Oblige,

    Though (continuing the line of thought) I agree that, in part, this crisis is one of psychology.

  15. Luis Dias

    Mr Briggs, when I was referring to 600 million being nothing, I’m making a reference of scale. Tens and Hundreds of billion are being lent by the central banks everywhere in the world, europe, japan, you name it. If the FED had lent 600 million, that’s a drop in the bucket. So Darren’s comment about 650 billion is more in line on what’s the real problem here.

    And it’s a lent, with high rates, it’s not a “giveaway”.

  16. Ray

    The situation is somewhat amusing. It was brought about by the same people that gave us affirmative action in education and employment. Everybody deserves a good education and a good paying job. Now they have tried affirmative action in housing. After all, everybody deserves affordable housing. Next they intend to try affirmative action in medical care. Everyone desereves cheap, plentiful medical care.

    Given the previous affirmative action successes, I can hardly wait for socialized medicine.

  17. Joy

    Luis Dias and others are right. Sorry if the following is sententious. On 17th Sept Rogoff wrote in the FT that $1000bn to $2000bn was a realistic figure. His writing is inconsistant. On 7th and 8th he was saying ‘let them fail’(in two other papers.)
    Most people would share your sentiment Mr Briggs, with respect to avarice of many. in my opinion it’s cowardice that has allowed the bubble to grow. Not enough people speak of the cowerdis shown by people in responsible positions that chose to ignore what must have been obvious. This is why being truthful is, I am afraid, not rewarded in today’s society. This is why lies and greed were able to prevail; the same mentality that blew the green bubble which will, I predict, burst over this issue and prove the proverbial silver lining.
    Society and particularly the US right now need to take responsibility for each other. It was looking after number one that led to the eyes down and don’t look mentality. “I’m just trying to make a living like everyone else”. I need society so I can make a buck but that’s where my involvement ends.
    Capitalism is the only viable and practical social framework and is driven by natural greed, selfishness and then mistrust. It’s not a perfect system. It’s just the best one we have.
    Voting ‘no’ is akin to cutting your nose off to spite your face.
    I understand it and respect those who would vote ‘no’ but it’s a moral luxury that the US should not afford itself. Morals are too expensive in a selfish society. Honesty and selflessness is considered a sign of weakness. It’s upside down but that’s the society that has been created.
    It’s not just the experts in the US that recommend this bail out. It’s the leaders, economists, central bankers and businessmen from around the world. I hope they vote ‘yes’ today. To limmit the hardship of many moreand for much longer.
    When you take the golden parachutes from the CEO’s, I’ll hold your coat!

  18. Joy, I agree that part of the consternation reflects a basic loss of trust.

    It is at this point that someone needs to display morals, however expensive. I’m reading Amity Shlaes’ book The Forgotten Man right how and it’s strange how things are seeming to repeat themselves. The politicians create a problem, then rail against the market for following the path the government laid out for them, then seize control in part because no one can stand up and point out that the markets were not free from influence. Rewarding selfishness by voting public funds to cover private losses sends what signal to a selfish society? We’re going to get serious about addressing systemic selfishness in our society, right after we address the problems of people who wanted something for nothing on both ends of the income distribution? I don’t see contributing to the silliness as a step toward its resolution. Once again, the “Forgotten Man” is the one in the middle, paying for the grand ideas of the first man to address the needs of the third man.

    You’re right that Capitalism is unique because it depends on the inherent nature of Man, good and bad. The problem is that there are plenty of people that don’t believe man has a dual nature and will point to Capitalism as inducing bad behavior that Man would otherwise not partake. If you remove the penalty, you break the feedback loop. Self-interest is not informed when people don’t suffer the consequences of rampant self-interest. Failure to keep the feedback loops in place is the greatest threat to capitalism, because it will invariably break and generate a political demand to change it to another system. When the people who don’t like capitalism are trying to remove the feedback loops and “save” it, well, those are friends we can do without.

    Maybe this is a one-off and this will be the last of the bailouts. But as long as our elected officials from the President on down can whip up enough frenzy to Do Something Now, it will likely not be the last intervention. At some point we have to sit there and think, and not just do something. I have no idea if this is that point or not, but my gut tells me that putting a giant taxpayer-financed thumb on the scales is not a good move.

  19. Bruce Foutch

    And, the bloated bailout bill becomes more so:


    “By Ayesha Rascoe

    WASHINGTON (Reuters) – Legislation extending tax credits for the solar, wind, and biodiesel industries gained new life on Wednesday as U.S. Senate leaders said they plan to attach the tax bill to a $700 billion economic rescue package…”

  20. Noblesse Oblige

    Joy 8:35 AM “…the same mentality that blew the green bubble which will, I predict, burst over this issue and prove the proverbial silver lining.”

    I value your perceptions and would welcome an expansion of this one. Do you mean that government will reduce its subsidies of noneconomic technology that diverts needed capital from other uses? Or that a President Obama (or McCain) will back away from cap-and-trade, which he says “pays for itself.” Rather it looks like it’s going the other way as there is frenzied flailing around to get out in front on these kinds of initiatives.

    The real conundrum is why the polis appears ready to vote for more and larger government when it is fed up with what we already have.

  21. A Stoner

    I agree, let them fail. I also agree with your last statement, this will only fuel inflation. I like reading your posts!!!!

  22. Joy

    I agree with pretty well all that you say although I think the argument is idealistic. It is unlikely to be the perpetrators that will pay, but the employees of companies that suddenly find themselves out of work and unable to meet financial responsibilities. This could run into the millions of people. This does not mean that people cannot still be held accountable for their actions. Regulation is clearly necessary to limit the chances of this happening again although it surely will.

    Noblesse Oblige:
    There are multiple reasons why I believe the green bubble is straining: Will it pop or deflate?
    Primarily it is too expensive. Money always wins. A future crisis can never be as scary when you’ve already got one on your hands. It was always a luxury problem. Attitudes will change and lessons about prediction have been learnt the hard way.
    Investors will be more prudent than ever. The concept of prediction and computer models will, if there’s any justice, be scrutinised and seen in a whole new light thanks to this crisis. There will be much discussion as there has been already, about truth, which offers a golden opportunity for those trying to speak realistically about the environment. It will be easier to show a now cynical public who will at last be listening. They are about to learn the value not the cost of fossil fuels.
    The money to keep the “studies” eco ventures and number crunchers going will have to be justified. My guess is that many scientists will simply move their area of interest silently. The usual suspects will become isolated. The urgency to act must now be shown to be more important than other immediate and visible concerns. The proponents of the green movement will have to shout louder. As if they didn’t already, they’ll start to look silly or even vulgar to people who have not previously thought to doubt.
    Predicting temperature to .1 degrees C in 100 years will look like exactly what it is.
    Al Gore and the like will lose interest when they start losing money; assuming there is no wrong doing to be found in the carbon offset business in general. Who will want to invest simply to raise awareness? Which is all that Al admits the offsets do. What a luxury if money is tight…”who cares!”.

  23. Joy writes:

    Regulation is clearly necessary to limit the chances of this happening again although it surely will.

    My guess would be something like the opposite of that. This is unlikely to happen again with or without regulation. Financial managers are self-interested; they’re not stupid. All regulation on this matter will do is the same that so much other regulation has done in the past: allow politicians to claim credit for something that was actually fixed by a market correction, and avoid taking responsibility for a mistake that was in no small measure theirs in the first place.

    Take any major economic legislation in history, really, and it’s the same story. Child labor laws were only passed after the trend was already away from employment of minors. The minimum wage was passed after the percentage of people earning below the proposal was already negligable.

    This case is no different. Regulation would have been useful about 6 years ago. Instead, the market was allowed to learn its own lessons the hard way. Only now that the lessons are clear is anyone talking about regulation. Which is to say that we’re only talking about regulation now when we don’t need it.

    I’m with Briggs – let them fail. Not every financial firm was involved (BB&T and Berkshire-Hathaway spring to mind). Those firms will build a better financial sector out of the ashes. I would much prefer they do it than the government.

  24. Noblesse Oblige

    Thanks Joy. Very interesting perspective. We will see.

  25. Emperor Briggs,

    I must agree. Numerous pundits have declared that the $700 billion bailout will NOT shore up home values and hence will NOT forestall market corrections. All it will do is hand taxpayer dollars to Wall Street investment bankers who have made billions gaming the system with 30:1 leveraged derivatives.

    The new run-up national debt will not aid me. It will just aid the (subjective Bayesian) multi-millionaires who gambled and lost.

    Oregon has been vaccinated already. Our economy was crippled 15 years ago when the federal government, which owns half the state, decided megafires were preferable to renewable resource management. As a result, we have already experienced the highest rates of unemployment, home foreclosure, business bankruptcy in the nation for a decade and a half. We have made the adjustment, now the rest of the country can try to catch up.

    I might add that real wealth creation comes from, farming, forestry, mining, and manufacturing, not from stock trading. If the country is interested in creating wealth and growing the economy, people are going to have to figure out where wealth actually comes from.

    One benefit that may possibly accrue is that the drive to cap-and-trade the real economy in the name of phony carbon credits will die. Or possibly not. The financial shark feeding frenzy has not been abated, as far as I can tell. The $700 billion bailout will just chum more sharks into the melee.

    Bottom line: I own my home, I grow my own food, I am self-sufficient, and I know how to create wealth. I feel pretty confident that whatever the future holds, I will be okay. Plus, I don’t live in a NYC penthouse, so have no window with altitude to jump out of.

  26. Mike D,

    Most of the farming, forestry, mining, and manufacturing that occurs does so (today) only because of financial markets. If those things could be divorced from financial markets, then we wouldn’t be facing a credit disaster with ramifications beyond a few large companies.

    Furthermore, by creating a system whereby capital can be rapidly allocated to emerging technologies and by rewarding people for efficiency, markets definitely promote wealth creation. It’s not central, but it is vital. There are certainly some people parasitically playing the markets and generating wealth, but they are not adding value (I’m looking at you, George Soros). Tank the financial sector completely and it becomes exceptionally hard to add value in a primary economy, or even a secondary one. How do you barter for a new car?

    I may envy your garden in coming years.


    I do not believe there is any regulation that will sufficiently contain the “confident-cocky-careless-dead” arc that seems to be such a part of human nature, at least none that the Congress can impose and then maintain. Certainly none you would care to live under. Regulation won’t shut down the derivatives market any more than Prohibition eliminated the sales of alcohol. The derivatives market will simply move overseas. Senator Obama and I agree on few things, but he did hit a nail when he pointed out that any solution to this would be international in scope. Even then, with enough money nearly anything is possible, and the folks playing with derivatives have enough money, until they get blown out.

    Considering that the terms hubris and nemesis descend to us from the Greeks and capably describe the development of this situation, I submit that this has been a recurring problem, and will likely occur again in some other form no matter how well the regulatory fence is constructed. The situation this time was subprime lending and leveraging built on that. In 1997 it was Long-Term Capital Management. There are plenty of other examples outside recent financial history.

    It seems to be a bug, not a feature, of human nature.

  27. Darren, I don’t think you get it. The American wood products industry is nearly dead. In the last 15 years over 90 million acres and over a trillion dollars worth of timber have been incinerated. There is barely any harvest on federal forests, by policy. There are no loggers or mills lining up to get loans.

    And farmers get farm loans through the Dept of Ag, not through banks, investment or otherwise.

    Hence there is no connection between the financial markets and basic wealth creation. None. It does not affect those productive sectors if NYC investment banks fail. I’m not sure what you mean by “emerging technologies” but without food, fiber, minerals, and fuels, new technologies will not support a healthy economy. Without raw material production, there is nothing to “add value” to.

    We had our tech bubble, and it burst. Now we have had our financial sector bubble, and it burst, too. Until and unless people understand where wealth comes from, there won’t be a healthy economy in this country, with or without bailouts of non-productive sectors.

  28. Bruce Foutch

    An interesting essay by Murray Rothbard on why we should “regard government statistics with dismay.”


    “But, furthermore, statistics are, in a crucial sense, critical to all interventionist and
    socialist activities of government.”

    How many government statistics were used/misused to justify the political meddling that brought us to this current financial state of affairs?

    Mr. Briggs: Thank you for helping to remove some of the “non” from this nonsense and for continuing to provide us all with your statistics reality checks.

  29. Bruce Foutch

    Hope this is not a repeat post. I already tried once, but may have refreshed too quickly.

    Thank you Mr. Briggs for helping to remove some of the “non” from the nonsense and for your continual efforts to provide us a statistics touchstone.

    Here is an essay by Murray Rothbard, who regards “government statistics with dismay.” He believes that, “statistics are, in a crucial sense, critical to all interventionist and socialist activities of government.”


    I wonder how many government statistics were used/misused to justify the political trampling of our constitution that brought us to this current financial state of affairs?

  30. Briggs


    Well, we see what the Senate has done. Passed a bailout loaded with pork. I read in one place where a few million, for example, is being tossed to a company that manufactures toy wooden arrows.

    Yes, the wise men and women of the government have showed once again where their true interests lie.

    Meanwhile, we hear from the same people that on the one hand the loans the government will buy are “toxic” and untouchable; but then they claim that these same “toxic” loans will eventually reap a profit because they are currently undervalued. By “same people” I mean that the same physical persons, in many instances, are saying things like this.

    Others are claiming that the newest bailout is just the thing that will solve the problem. They say this with certainty, or they add slight modifications, like those by my own Senator Chuck Schumer who promises a boat-load of new regulations which will really fix things for good. The old regulations and laws which helped usher this crisis in are nowhere spoken of—that is, not spoken of in Congress, a body which does not admit its mistakes except perhaps to utter variants of “If we had more control, life would be better”.

    I can’t see how the government cannot but grow in size an inflexibility.


    Oops. Typo. “B” and not “M”.

  31. Dr Briggs,

    A technical point, the Senate cannot introduce spending legislation (it’s in the Constitution), so they found the pork bill that already passed the Senate by 93-2 and added the bailout language as an amendment. The pork was already there, the House had already passed all of that including the toy wooden arrow provisions (who says there is no forest product industry anymore?). In order to get the Senate side of this done they had to graft it onto something they had already passed — they hung THIS on a pre-existing Christmas tree, they didn’t festoon the bailout.

    Bizarre, but even knowing why and how they did what they did it does not increase my confidence in the institution.


    Farms have to sell their products to someone. Farms that don’t do this entirely at farmer’s markets do so by selling their product to agribusiness companies. I am not imagining the existence of Cargill and ADM. The Iowa corn fields I used to rogue and detassel all used hybrid corn from various companies, often Pioneer. Most people don’t have the cash to buy all the wheat from a friend of mine’s family farm in Kansas, thousands of acres of wheat produces an exceptional amount of grain. That wheat ends up being purchased by Kellogg or Flowers Bakery or someone else, because most people don’t eat wheat, they eat products made from wheat. Most people wouldn’t know what to do if you gave them a couple of sackfulls of harvested wheat, they would be staring at enough food for the rest of the year without a real concept of how to turn it into food.

    The food distribution system as it exists today interposes companies between people and farmers, sometimes two and three deep. Those companies depend on financing to maintain their continuing business operations. Back in the 1930s, half the nation was involved in agriculture. Now, we’re down to 4%. If the companies that make the food we consume go under because of a credit problem, then there will be a major problem getting food from production sites to consumption sites, and whether farmers get their loans from banks or co-ops or the Department of Agriculture a relatively minor issue. If nobody else can buy their product, then that will ripple back to the farmers, who will all go broke, too.

    As far as the forestry industry goes, there are literally billions of dollars of forestry operations around the United States. Weyerhauser alone has 5.5 million acres of forest that is privately owned, not government-owned. There is a massive paper mill 3 hours down I-20 from me in West Monroe, LA, it’s just one of many. I agree with you completely that the Federal Government could do a much better job of managing our country’s forest assets, they’re definitely good for more than walking in and forestry management has advanced greatly as a science. The fact remains that there is a lot of forestry going on in areas other than the Pacific Northwest.

    But once again, without billions of dollars of capital that has to come from somewhere, Louisiana-Pacific, Weyerhauser, Smurfit-Stone, Temple-Inland, Boisie-Cascade, Georgia-Pacific and the lot would stop. They would stop faster if their customers couldn’t get credit to buy their products. At that point the companies only have their cash reserves to rest on, and how long can they pay their employees and suppliers to continue operations?

    I do admire your individualism and self-reliance. I obviously don’t know you but I would imagine that those qualities have been developed at personal cost. Like I said (without sarcasm) I may well end up envying your garden in the years to come, I’m one of the proles that depends on the food distribution chain to bring me apples from Washington and oranges from Florida and wheat products grown in Kansas and processed in Michigan. Maybe it’s because I understand how tenuous my food supply is and the number of links that it takes to get me and my family fed that I have a little more sensitivity to the number of places that financial issues can interpose themselves between me and my food.

Leave a Reply

Your email address will not be published. Required fields are marked *