I’m Shocked
I’m shocked to discover that someone is not being straight forward in this crisis. Paul Krugman has A sneaking suspicion that the “Bailout Boys”, Paulson and Bernacki, do not intend to allow the market to decide the price of the assets, as Warren Buffet assumes, but intend to begin a process of “price discovery”.
I have a gut feeling that the “price” will be “discovered” to be as high as they think they can get away with before Congress takes away the “credit card”.
I guess this is why they didn’t announce the plan described by Mr. Buffet, which would have been reasoned and in accord with many of the basic principles of the market. I must assume when it comes to their friends, Karl Marx trumps Adam Smith.
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…Krugman’s sneaking suspicion is a bit disturbing, because I’m having a hard time recalling when he’s been wrong about any aspect of this looming ‘meltdown’ dating back a year or more. One of the sidebar stories at the link seems to spell out pretty clearly why he’s suspicious (in essence, Paulson’s plan looks like throwing money at his cronies because – unlike in the S&L bailout – the government isn’t seeking an equity stake in the companies themselves to recoup costs if everything ever does settle down)…
Roubini and Krugman keep getting it right and the Villagers keep avoiding their analysis.
It’s the housing market and mortgages that are the problem. That’s where the solution has to be found. Until houses are priced realistically and mortgages reflect reality there is no solution possible.
Pouring money into the system puts the crash off, but doesn’t fix anything, so the crash still occurs.