I was reading Roubini last night. His take is it’s almost inevitable that the banks as a whole are going to fail here, leading to the nationalization of the banks. From what I have been reading some countries have little to no problems making the adjustment to nationalism while others fail miserably. Can one of you bright people explain what is likely to happen if this does happen here? I know that he may be wrong but if he is right, what is the upside and what’s the downside? Thanks.
I believe you move “nationalization,” unless you mean the banks are going to be adding a lot of flags and other patriotic paraphernalia to their decor.
good catch. Change noted and made. 
I was searching for the article but couldn’t find it. Do you have a link?
Well, if I might kindly save several hundred posts of typing from the dittoheads who will inevitably respond:
Government fails at everything (except the military, in which case its the most awesome thing on the planet, even if it invades the wrong country). Government is too big. Jefferson will roll over in his grave. It is our God given “right” not to have government control the banks. It will stiffle our economy. The free market is beautiful and will always prevail (even when it fails). Regulations will hold us back. The is socialism and socialism is bad. Why do you hate America?
Did I miss anything?
Sorry, Barry, I don’t believe in God-given anything, I’m not familiar with the term “stiffle,” and I don’t think the free market can solve all problems (at least until we’re transported into a magic universe where all problems are solvable). 
Aww, another crack at my dyslexia. I thought you were above all that. ; ^ P…
Actually, I thought you were saying something about erections. BTW, I don’t see the free market as a cure for impotence, either.
Maybe not impotence, but if sex were truly free…
“Free” as in “given away” or as in “unregulated”?
Getting serious for a moment, I see human beings as inherently fallible, and consequently I believe that many problems are inevitable regardless of what kind of political/economic system we have. The fallibility, however, follows certain patterns: Specifically, if acting human beings are permitted to experience the feedback from their actions, they tend to correct their errors, but if the consequences of their actions are experienced not by themselves but by other people, those errors tend to intensify over time. Consequently, the errors and the consequent problems are magnified in a system based on coercion and centralized control, and minimized in a system based on voluntary action and decentralized, private control. For me at least, it’s not “faith” that leads me to favor systems of the latter type, but simply logic together with my understanding of how human beings arrive at knowledge.
…but simply logic.
What did the great depression teach us?
I recently read this: “If we have learned anything from history its that people don’t learn anything from history.”
I agree that you want people to have the incentive to learn from their mistakes. The problem is, the stakes are too high and the greed mongers have yet to prove that they won’t fuck up badly. Its one thing to let your baby touch a hot stove to learn to respect applieances, but it is entirely something different to let him point a gun at his sister and pull the trigger to learn, “Hey, if I fuck up, someone else has to pay.”
FWIW, I recently heard a phrase “Cry baby capitolism,” which is, “No, please, don’t regulate us. But if we screw up, PLEASE, bail us out!”
San Francisco’s Wells Fargo wrote a $371 million check to the US Treasury this morning as a dividend resulting from the TARP “nationalization” of our banks. That’s $14,861.11 per share, based on the $25 billion it got from the feds as part of the program.
Not a bad investment thus far. If only we could track down the other $325 billion…thus proving that the bank rescue plan itself is not a bad one, just the idiots who controlled it.
“What did the great depression teach us?”
Maybe that we should have listened to Mises and the other economists who saw it coming?
Summing up Rothbard’s analysis from America’s Great Depression, the Great Depression was necessitated by the “easy money” policies pursued by the central banking system (i. e., the Fed, which is in reality an arm of the government) in the late twenties, which led to the same pattern of malinvestment errors I just described to Matt in another thread (http://forum.slowtwitch.com/Slowtwitch_Forums_C1/Lavender_Room_F4/The_economy%2C_Money_or_Work__P2186558/). After the bust arrived, the policies followed by Hoover and FDR further exacerbated the problem and extended the depression by slowing the process of market correction of those errors.
“it is entirely something different to let him point a gun at his sister and pull the trigger to learn, ‘Hey, if I fuck up, someone else has to pay.’”
You understand, I hope, that if such actions are allowed to proliferate without opposition by the government, the resulting system is by definition not a free market? Notice that your scenario aptly describes the way that government officials relate to private citizens in a coercive, statist system, which is the antithesis of a free market. Notice also that it violates the principle I outlined above, namely, that in a proper social system people experience the consequences of their own actions.
Didn’t we get a taste with the sub-prime housing debacle? Fanny and Freddie were encouraged…hell, that might be too gentle of a word…to make loans to unqualified people based on political motivation rather than any real, viable underwriting.
Here is the downside “The borrower is slave to the lender” - One of the great Proverbs.
Gosh, that’s amazing! It’s only been a little over three months, and we’ve already recovered 0.114% of our investment! At that rate, it will only take us a little over 219 years to get all our money back. Well, except for the interest, of course. But whew, that makes me feel so much better! The risk was definitely worth it.
The downside is that the Government is not a very good banker or businessman. Take a look at the Deficit and National Debt as examples. They need to regulate enough to prevent unscrupulous actions but give enough freedom for innovation to excel. Government is a bureaucracy.
One of the causes of the current situation (and there have been many of these in the past) is that the free market concept is based on, among other things, the free flow of information. When people lie or conceal information then investors can not make rational decisions. This leads to boom and bust cycles. This is what happened now, it happened with the dot.com boom, it happened with Enron, it happened in 1929. Until we can rely on humans to be truthful in their business dealings we will need to regulate, to some extent, their actions in the public domain.
Which makes sense. If we don’t trust our govt. to do the right thing then why would we trust them with our money? However, if we didn’t have a choice, if all money was controlled by the fed, I am not sure how much different things would be today from a month or two ago.
“At that rate, it will only take us a little over 219 years to get all our money back.”
The hyperbole is getting a little thick in here. Actually that payment is a quarterly dividend, so we would recover the initial WFC investment in just under 17 years if that makes you feel any better. I don’t know about you, but I would love to have a 6% return on money that I borrowed at close to zero. The costs to the economy associated with the collateral damage if a Wells were to fail would have far exceeded $25B. That is where the real ROI is…assuming this actually works of course.
Haim
“If we don’t trust our govt. to do the right thing then why would we trust them with our money?”
who said anything about trust? Not me. I trust our govt.
I don’t think they are very fiscally responsible and they are terrible at manageing a business and worse with an economy. But i trust in them and believe that most of them really want to do the right thing.