Wise words. He informs us that there will be no Great Depression 2.0, which far too many people are worrying about, of course. He also points out that some of what we have been doing to try to adjust to the crisis will only serve to make things worse:
The temporary banning of short sales is an example of a perennial approach to difficulties in financial markets and elsewhere; namely, “shoot the messenger.” Short sales did not cause the crisis, but reflect beliefs about how long the slide will continue. Trying to prevent these beliefs from being expressed suppresses useful information, and also creates serious problems for many hedge funds that use short sales to hedge other risks. Their ban can also cause greater panic in other markets.
Well put. Becker also calls for the sale of Fannie and Freddie to private sector actors as soon as possible. Let’s see how long it takes for that sale to occur.
Dan McLaughlin
Moe Lane
Neil Stevens
Steve Maley
Fannie and Freddie
Scope (Diary) Wednesday, October 8th at 7:44AM EST (link)McCain had said that he believes that Fannie and Freddie should also be privatized. Your correct, it will not happen anytime soon. The Liberal powers that are in control now will never allow anything but complete government control.
There is another diarist here that is talking about the whole mess with a total slant to the Wall Streeter that he is.
I can quibble with Becker.
skorrent Wednesday, October 8th at 8:51AM EST (link)“Short sales did not cause the crisis, but reflect beliefs about how long the slide will continue.”
Usually this would be so, but in an uneasy period, naked shorts by heavy hitters can become a self-fulfilling prophesy.
Remember the “Soros” figure from the SNL skit? “The dollar will crash next Tuesday, or maybe Wednesday. It depends on how I feel when I wake up.”
Depression - it's up to us
enrique Wednesday, October 8th at 9:14AM EST (link)Much of what Mr. Becker lays out is correct in that conditions right now are not anywhere as bad as they were in 1931. However, it should be kept in mind that our government is following the same path as before in the late 1920s with bans on short selling, increasing liquidity, nationalization of certain industries.
The depression was bad because the government chose to ‘intervene’ and prevent it. I have no idea how bad this correction will be but I know that the more we try to prevent it, the worse, and deeper it gets.
For a good read on business cycles and the Depression read Rothbard’s analysisin the 60s which is anti-Keynesian and very relevant to today’s problems.
“There are a thousand hacking at the branches of evil to one striking at the root.” Henry David Thoreau