3 ms·

There is a simple, good test for smartness in the current climate: Who identified and coherently described the housing bubble in 2005 or before? I think every

There is a simple, good test for smartness in the current climate: Who identified and coherently described the housing bubble in 2005 or before? I think everyone on your list fails the test.

davidw 18y ago
After a quick search in The Economist's archives: http://www.economist.com/finance/displaystory.cfm?story_id=E1_QPRVNJP http://www.economist.com/finance/displaystory.cfm?story_id=E... > The technology bubble in the late 1990s at least left behind a modern capital stock, which continues to yield productivity gains; a property boom, in contrast, does nothing to boost long-term growth. Instead, it diverts resources away from more productive sectors and by fuelling consumer spending it exacerbates America's economic imbalances. Eventually, there will be a price to pay. Also, I'm not sure that predictions of problems equate to knowing what to do to best wind down the current mess. You're right (elsewhere) that some things need to go under. However, I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it. Of course I guess we'll really never know for certain in any case, as it's impossible to know what would have happened otherwise. We could have no bailout and massive failures just as we could have a bailout and still have massive failures. Or no massive failures in either case.
- kingkongrevenge 18y ago
  > I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it. I've seen this movie before. If bailouts and stimulus packages worked Japan would have been the economic star of the 1990s and the Depression would have ended before FDR ran for the nomination.
  - davidw 18y ago
    Japan didn't do "bailouts", from what I've read. More along the lines of simply never facing up to the bad debts and letting some things fail. That certainly has to be part of it, and has been so far.
- cubix 18y ago
  The Austrians were predicting it in '02: http://mises.org/story/986 http://mises.org/story/986 Raines may be in a dream business, but the net result of Fannie Mae’s actions in the credit markets is a nightmare of resource misallocation and massive systemic risk.
MaysonL 18y ago
Warren Buffett in 2003. see http://news.ycombinator.com/item?id=304237 http://news.ycombinator.com/item?id=304237 Note that he's contributed $5 billion to the bailout of Goldman Sachs, in the form of convertible senior debt, at an interest rate of 10%.
- byrneseyeview 18y ago
  Buffett bought callable preferred stock and warrants. Differences: preferred stock only pays a dividend when Goldman makes a profit. In a bankruptcy, preferred is ahead of common, but behind creditors. At any time, Goldman can pay Buffett a 10% premium to the issue price, and get the preferred back. If Buffett exercises his warrants, he will still own the preferred.

There is a simple, good test for smartness in the current climate: Who identified and coherently described the housing bubble in 2005 or before? I think everyone on your list fails the test.

davidw 18y ago

After a quick search in The Economist's archives: http://www.economist.com/finance/displaystory.cfm?story_id=E1_QPRVNJP http://www.economist.com/finance/displaystory.cfm?story_id=E... > The technology bubble in the late 1990s at least left behind a modern capital stock, which continues to yield productivity gains; a property boom, in contrast, does nothing to boost long-term growth. Instead, it diverts resources away from more productive sectors and by fuelling consumer spending it exacerbates America's economic imbalances. Eventually, there will be a price to pay. Also, I'm not sure that predictions of problems equate to knowing what to do to best wind down the current mess. You're right (elsewhere) that some things need to go under. However, I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it. Of course I guess we'll really never know for certain in any case, as it's impossible to know what would have happened otherwise. We could have no bailout and massive failures just as we could have a bailout and still have massive failures. Or no massive failures in either case.

kingkongrevenge 18y ago
> I think the point of the 'bailout proponents' is that more will go under than otherwise needs be without it. I've seen this movie before. If bailouts and stimulus packages worked Japan would have been the economic star of the 1990s and the Depression would have ended before FDR ran for the nomination.
- davidw 18y ago
  Japan didn't do "bailouts", from what I've read. More along the lines of simply never facing up to the bad debts and letting some things fail. That certainly has to be part of it, and has been so far.
cubix 18y ago
The Austrians were predicting it in '02: http://mises.org/story/986 http://mises.org/story/986 Raines may be in a dream business, but the net result of Fannie Mae’s actions in the credit markets is a nightmare of resource misallocation and massive systemic risk.

MaysonL 18y ago

Warren Buffett in 2003. see http://news.ycombinator.com/item?id=304237 http://news.ycombinator.com/item?id=304237 Note that he's contributed $5 billion to the bailout of Goldman Sachs, in the form of convertible senior debt, at an interest rate of 10%.

byrneseyeview 18y ago
Buffett bought callable preferred stock and warrants. Differences: preferred stock only pays a dividend when Goldman makes a profit. In a bankruptcy, preferred is ahead of common, but behind creditors. At any time, Goldman can pay Buffett a 10% premium to the issue price, and get the preferred back. If Buffett exercises his warrants, he will still own the preferred.