last two weeks have been an education!
Here are my Top 10 Lessons.
What do you think of my list?
What would you add? What’s high on your Top 10 list?
1.) The stock market is neurotic.
Dropping a trillion dollars and getting the bulk of it back in two days is a textbook example of emotional instability. The stock market always overreacts. That’s why economists don’t pay much attention to it as a barometer of the real economy.
2.) We don’t know if the bailout will work.
Expert opinion is divided. Some say it will; some way it won’t. Either way it’s going to be an expensive social experiment.
3.) We really don’t know why the problem occurred.
Yes, the problem is linked to the sub-prime mortgage market. But what’s the root cause? Unscrupulous bankers who coerced unqualified borrowers to take these loans? Those who took the loans? The American Dream of home ownership? Wall Street banks that invested in mortgage-back securities? Foreign investors who plowed money into the U.S. financial economy? The free market system? Lack of regulatory oversight? There’s blame for everyone, as our expert Jerry Davis noted last week.
4.) Republicans can have their cake and eat it, too.
By rejecting the bailout plan, Republicans vote their values (free market principles) and self-interest — looking good in front of their taxpayer-constituents who hate the proposed rescue plan.
5.) Democrats can’t.
Voting for the plan is consistent with Democratic values of government regulation. But you side with an unpopular sitting president — and you alienate your angry taxpayer-constituents back home.
6.) You can slow-boil Americans, but you can’t drop them in boiling water.
Put a frog in a pot of water, slowing increase the temperature, and the frog, well, croaks. Drop a frog in a pot of boiling water and it jumps out. Steadily increasing gas prices didn’t spur collective action. But Wall Street’s boiling pot sure did.
7.) It’s fun to hate rich bankers.
Wall Street was only the latest target of the venting of America’s strong populist, anti-elitist sentiment.
8.) Socialism is for the rich.
Support universal health care? No way! But, a government bailout to cover Wall Street bankers’ bad decisions? No problem! As John Kenneth Galbraith said, “In America, the only acceptable form of socialism is socialism for the rich.”
9.) It takes a gargantuan financial crisis to push Sarah Palin off the front page.
But then there was that debate Thursday night —
10.) This election is the perfect storm.
Financial crisis, race, gender, age, war, an unpopular president, etc.
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