Innermost Thoughts

After re-reading a lengthy email I sent to a close friend today, I thought I'd post a portion of it here, for what it's worth:

I don't believe in this scheme from a long-term standpoint, though. I hope I'm wrong but if inflated asset values are the problem, then how does encouraging lenders to lend against those assets again solve the issue? Nothing says they will, though, and the economy may already be in an unstoppable de-leveraging phase that the bailout can't change.  I actually think that such a de-leveraging would be best for the economy, but from a practical standpoint I'd hope that, if passed, this plan would first bring a few months of liquidity, optimism and a bounce in the markets so you can get your deal done and, selfishly, so I can re-arrange a few things myself.

Same time, I cannot get it out of my head that we are running precisely the Depression-era playbook. You might want to check out "The Forgotten Man" by Amity Shlaes... I believe her contention is that Hoover was as responsible for the Depression as FDR, not because he was too laissez-faire but because he was a big government taxer, spender and regulator, which most people don't realize.

I actually haven't read the book until now because I knew I agreed 100% with her central assertion (if I understand if correctly, which I'll find out soon enough), but I cracked it for the first time yesterday to beef back up on details about the era because I suspect I could be writing about them a lot in coming weeks/months.

In a perfect world, I truly believe it would be best if this bailout died somehow.  The economy would be atrocious for a number of months but it would allow markets to clear and wouldn't inject Barney Frank deeply into our financial system.

I say "in a perfect world," though, because we are careening straight toward quite the imperfect one with Obama as our next President. In that respect W looks very much like Hoover (that has been my assertion about him since about '02 or '03...did you know I did not vote for him in ‘04? I say that today with great pride) because Obama looks very much like FDR, especially since he'll have Nancy Pelosi and Harry Reid to send him legislation. FDR actually ran against Hoover as the fiscal conservative in '32! Only years later did one of FDR's key advisors admit that the New Deal simply expanded on programs Hoover had created. Bush has given Obama a similar opportunity.

I mean, Maxine Waters suggested nationalizing the oil industry with a straight face only a few months ago! Just think what sort of nuttiness we'll see next year with a President Obama.

With that in mind, perhaps there's a defense for this bailout: one last Hail Mary in the hopes it'll put things on track so Obama won't have an excuse to launch the New Deal, Part II.

Hope I'm just going overboard, but hope ain't a plan...
(end)

Now, I'm an optimist by nature and saying the word 'Depression' doesn't represent a thought I even like to hold, but it's hard to ignore what's going on around us: free market ideology is dying and the folks in Washington who created this mess are about to insert themselves further into our economy.

Just keep your eyes open and honestly assess what you see developing.  Maybe everything will be just fine but sometimes history happens-- and not always in a good way.