The Exercise of Vital Powers

What we have seen the past two weeks is not a failure of the market. Its a failure of Government and faith in Government. Congress fails to pass a bailout, Dow drops 700pts. Congress passes a bailout, Dow drops 600pts. After the bailout, Dow drops another 2000pts.

Federal Reserve, US Treasury, and FDIC are buy companies, guaranteeing and making loans, and upping deposit insurance. Credit is still frozen, and financial companies are in panic.

Nothing the Government has done is helping.

First, the business model of Government Sponsored Entities (GSEs) in which profits accrue to the private sector but risks are underwritten by the public has proven unworkable. It would be a grave mistake to preserve the GSEs in anything resembling their current form. –George Soros

Don’t get me wrong. I’m still immensely pissed off at the Bush Administration for giving Barak Obama at trillion dollar credit line to go buy up whatever he wants on Wall Street. However, i wonder if the US Bailout package didn’t suddenly send the problem overseas. The Fed answers (to nearly) no-one, and the Treasury just needs agreement between Democrats and Republicans - both of which face elections in under 30 days.

The Euro Governments are much more split as the article below describes. Germany sat on France’s bailout proposal because the Merkel Government didn’t want the German taxpayers bailing out “Latin Europe”. Can’t say I blame her. The Telegraph does however: Germany takes hot seat as Europe falls into the abyss - Telegraph

As for the US itself, it has not yet exhausted its policy arsenal. It can escalate further up the nuclear ladder. The Fed can cut interest rates from 2pc to zero. If that fails, it can let rip with the mass purchase of US debt.

“The US government has a technology, called a printing press,” said Fed chief Ben Bernanke in November 2002. (His helicopter speech).

In extremis, the Treasury/Fed can swoop into any market to shore up asset prices. They can buy Florida property. They can even buy SUV guzzlers from the car lots in Detroit, and mangle them in scrap yards. As Bernanke put it, the Fed can “expand the menu of assets that it buys.”

There is a devilish catch to this ploy, of course. It assumes that foreign creditors will tolerate such action.

Japan entered its Lost Decade as the world’s top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.

…

The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again.

The Fed can now hope to pursue monetary stimulus “a l’outrance” without being slapped down by the currency, debt, and commodity markets. Take comfort where you can.

Marginal Revolution: Facts about banks

…the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to around 2,000 billion euro, (more than Fannie Mai) or over 80 % of the GDP of Germany. This is simply too much for the Bundesbank or even the German state to contemplate, given that the German budget is bound by the rules of the Stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. The total liabilities of Barclays of around 1,300 billion pounds (leverage ratio over 60!) surpasses Britain’s GDP. Fortis bank, which has been in the news recently, has a leverage ratio of “only” 33, but its liabilities are several times larger than the GDP of its home country (Belgium).

Bail that out suckas!

“The failings in our civil service are encouraged by a system that makes it very difficult to fire someone even for gross misconduct…” — John McCain

That sir, is because it take a majority of the house and 2/3rds of the Senate to remove the President.

… Same as the old boss.

In the two years that Democrats have run Congress, federal expenditures are up $429 billion — to $3.158 trillion.

So much for the divided government argument.

I, along with many others, have observed a disturbing trend over the past 8 years in the partisan nature of politics: Bush Derangement Syndrome. It started with Democrats who were quite upset at George W. Bush winning¹ the 2000 election. Their anger at losing a very close battle not only made it difficult for Bush to govern, but it made conservatives and Republicans rally to the President’s defense.

There are many things that George W. Bush has done wrong: Medicare Part D, the Agriculture and Energy bills, the response to Katrina, postwar planning in Iraq, and never vetoing a bill while the GOP held the majority. Due to the left’s constant frivolous attacks, conservatives felt they had to stand by their man. So Bush got a pass from the donors and activists who helped get him elected. Republicans weren’t going criticize their President, while the left was calling him “dumb” or a “retard”.

We don’t see the same level of insipidness in Georgia Politics^1.1. There are no massive sufferers of Sonny Derangement Syndrome. As a result, you see much harsher internal criticism of the Georgia Republican leadership from among those on the right.
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I believe him:

Politico’s Carrie Budoff Brown reports: At a press avail in Monroe, Mich., Barack Obama on Palin: “Back off these kinds of stories.”

“I have said before and I will repeat again: People’s families are off limits,” Obama said. “And people’s children are especially off-limits. This shouldn’t be part of our politics. It has no relevance to Gov. Palin’s performance as a governor or her potential performance as a vice president. So I would strongly urge people to back off these kinds of stories. You know my mother had me when she was 18 and how a family deals with issues and teenage children, that shouldn’t be a topic of our politics.”

On charges that his campaign has stoked the story via liberal blogs:

“I am offended by that statement. There is no evidence at all that any of this involved us,” he said. “Our people were not involved in any way in this, and they will not be. And if I thought there was somebody in my campaign who was involved in something like that, they would be fired.”

“Change” is not a guy who has been a Senator longer than I’ve been alive. Heck, McCain was still in Hanoi when Biden was elected to the US Senate.

From Cato-at-liberty

With fuel prices surging, commercial airlines have started charging passengers for once-gratis amenities (sodas, the first checked bag, pillows-n-blankets) and have increased fees for other amenities (alcoholic drinks, additional checked bags). A recent editorial ["Pillows and Planes," August 13] describes these fees as “picking passengers’ pockets” and “idea[s] to separate you from your money.”
Are you kidding me? Those amenities weigh down the plane. The fees therefore distribute higher fuel costs to passengers who consume more fuel. As important, they allow passengers to avoid getting their pockets picked by avoiding those amenities. (Don’t want to pay for checked baggage? Pack light.) The only people those fees hurt are the free-riders whose amenities were being subsidized by everyone else. The fees don’t allow pocket-picking; they put an end to it.
The next time I hear a temper-tantrum coming from the main cabin — or first class? — I’ll know it’s a Post editor who had to pay $14 for his vodka tonic and pillow.