Friday, January 16, 2009

All hail the Nancy Capitalists

(Citizen Jensen nails it. The era of Nancy Capitalism will not be short-lived. Socialized guts will lead to diminished glory. That is not to suggest that prudential regulation isn't important, it most certainly is. Without prudential regulation Marx(not Groucho) looks prescient. But fear of loss is quickly becoming fear of risk ... that does not bode well for future growth. As stated in the introduction to this blog:

They will destroy the village (dollar and markets) in order to save it. After the deflation is overwhelmed, the West will never be the same.-AM

January 16th, 2009 8:36 am
Across the Curve blog
From the outset, I have always been a supporter of government intervention as a means to prevent this unique crisis from taking the system down. I have always believed that the consequences of inaction were greater than the cost of government involvement. I question that assumption now.

The bailouts began with the deal in which JPMorgan took control of Bear Stearns with government assistance and continues to this day with the government intervention in the Bank of America union with Merrill Lynch.
The Federal government will now be an integral part of the financial system for a very long time and will influence decision making and risk taking in that sector during the time in which taxpayers are a partner in those businesses.

I now think that we would have been better off with some truly cathartic event which would have curbed the animal spirits of traders but which would have established a basis for a market prescribed recovery. Succinctly stated, the government is not in the business of taking risk and I would argue is in the business of risk avoidance.

In retrospect, the commonwealth would have been better served had nature taken its course and allowed for capitalism to travel its natural course. I fear that this new course has placed on us a path to a very slow recovery and one in which innovation and risk taking will be viewed through the narrow and ill begotten prism of some bureaucrat.

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