Nationlize the Banks, not so fast

Blinder argues against nationalizing the banks but I think the issue here is, as far as I know, most are not talking about completely absolute, every bank in the U.S. is nationalized...

just the TARP recipients or at least the large ones.

Great name, consider joining us.

Yes, I know but I also know that VCs also have great experience evaluating business plans that might succeed as well as putting startups together.

I would say give them serious incentives as well as oversight. My conditions were all hires must be U.S. citizens, all work must be done in the U.S., then business plans must be viable, people credible. I would say to quit the "soup can label" credential demands these guys usually have (i.e. must have a at least a MS from Stanford, etc.) but work to basically fund a host of startups, new innovations, new small businesses.

the key is to have the business models and plans, the ability to executive be viable and frankly our government seemingly isn't so great at that.

We do have things like NASA, DARPA that are huge successes but we need either privatization spin off of some of the patent pools plus an environment, which is purely U.S. citizens to generate more.

Throw out an idea or two, sounds like you know the VC beast!

That's what is happening in a host of sectors, from Medicine to research to tech to even teachers. While one can deal with the great privatization of the military, that is important but it's not going to stop the destruction of the United States and working America.

I'm sorry but there is a huge difference between numbers, mathematics, science and trying to ascertain or predict human behavior.

I'm sure it comes into play but the issue here is trying to put human behavior as the "be all/end all" to economic systems is undermining the fact economic systems are fundamentally mathematical in nature.

Animal spirits move the economy to the point someone got a Nobel prize for this?

Ya know, sure mass psychology, "herd behavior" and other factors assuredly come into play, especially in bubbles and troughs...

but in all seriousness if it is believed this is the primary market force...

Let's consult Jane Dixon for future predictions next.

Yeah, add Reich to the list and there are any number of investment analysts you could add too. But the thing I liked most is that Stiglitz takes the good bank approach of determining the good assets as the basis for the ongoing bank. This considers the welfare of the taxpayer first but also saves a functioning banking system. It is the good bank that receives the government/taxpayer assistance.

The toxic assets are left for the shareholders, bondholders and the old bank management to deal with in the open market. It seems a subtle difference to start from a position of protecting the good assets, as opposed to finagling over how to value and what to do with all those bad assets. The difference in outcome is that taxpayer money is only going to institutions which have a high probability of surviving and are structured to participate in economic recovery.

That's the kind of policy change I can embrace.

you have to remember that China is two things: 1) a nation full of people, and 2) a state controlled by the Communist party.

As bad as the economic crisis has hit us, its quite worse in China. The government is afraid, with reason, that they've lost the trust of the people, and that the rage at having been exploited and then screwed out of a check is going to shift from the employer, specifically, to the government's management of the crisis.

That leaves the leadership few options. You can kill people like Tianamen, but that only works in small doses without undermining the functioning of the economy.

The second option is to deflect the anger being directed at the government into a nationalism that blames the countries problems on other countries. And that replaces legitimation by economic growth, with a legitimation by national greatness. There is a streak of nationalism that sees China as having been robbed of large areas of East Asia that are now in Russia, Mongolia, Korea, and Southeast Asia.

I think that there is real reticence among the current CCP leadership about stoking nationalism and becoming openly militaristic. But the current leadership's term in office will be coming to an end in the next few years.

If large scale social unrest occurs, and to be clear we are just now coming to the end of the Chinese New Year holiday, where people traditionally go home to the country from their city jobs. Those city jobs have disappeared, and over the next few months these migrant workers money is going to start drying up. By the fall of this year, it's going to be clear how this first act plays out. If the social unrest continues on the present path, towards larger demonstrations, directed against the government, then something has to happen.

And if the government can't keep control, the PLA (Army) will, and that would most likely mean a quasi-military regime like in the late 1970s. For the past two decades, the PLA has been crafting an ideology of nationalism in contrast to the ideology of development at work in the present leadership.

So we'll see.

What is clear though, is that the Chinese military is using the spending to boost recruitment, and to modernize weapons. As I understand it, the Navy is currently trying to acquire an aircraft carrier, and blue water capability. This means that they could project power, for example put troops in Africa, supply them, and have air support for the mission.

This is a very, very short overview.

He has a plan for a global system, twin peaks on market regulation as well.

When I first heard of Volcker I was like "oh God, that Reagan guy from the 80's who sent interest rates to the stratosphere" but he's turning out to really know what he's talking about.

http://dealbook.blogs.nytimes.com/2009/03/06/volcker-split-commercial-an...