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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Sam Citron who wrote (89567)	2/16/2001 2:48:05 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Sam, Quid pro quo. Greenspan and Rubin created a credit bubble to save the economy and/or trading partners and the financial system. Would I have bailed out LTCM and Mexico and printed money to save the Asian economies? Probably! But it would not have been a free lunch. Using LTCM as an example, bailing out the financial system to prevent a panic that could drag down the whole house of cards was essential. Allowing the folks who put us at this risk (the bankers and brokers who lent to LTCM so that firm could buy more chips at the table, not the gamblers themselves) to not only avoid bankruptcy, but to increase profits from the situation, was inexcusable. Greenspan/Rubin did their best to prove that big players had no risk when they behaved recklessly. That has encouraged them to increase the risks more and more so that there will come a time when creating credit out of whole cloth will either not solve the problem or will create such an inflationary bulge that it will be game, set and match. In the case of Mexico, I think that they are trying to set their economic house in order. I believe that was a domestic decision and had nothing to do with any G/R cabal restrictions or recommendations. Good for Mexico, but, again, we should have required them to do what they are doing now before fronting the get well money. With Asia, keeping the American consumer in a state of foaming at the mouth will eventually come back to hurt us and the Asians much more than first forcing them to take a hit for overbuilding capacity. So, my comment is that inflating credit for the world at every crisis will eventually have some ramifications that are much worse than allowing the markets to do a little work. In is strong medicine and care with dosage is vital and extracting some behavioral payment for the medicine is common sense. So far, we have been Dr. Feelgood to the world and there has to be a morning after. And when the house of cards collapses, the one-trick pony of credit inflation won't work the same way it didn't work in the 30s and the money pushers will have made things much worse than they should have been. Of course, I am talking as someone who doesn't believe that paper money creation is the answer to real economic problems. Those who believe in the free ride at no risk economics of Rubin/Greenspan will disagree. Best, MB