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To: yard_man who wrote (3970)	4/8/2004 5:12:32 PM
From: gregor_us	Respond to of 116555

That's Right. Without Penalties, its No Longer Capitalism. If there are no penalties for mis-allocation of capital, it becomes a form of socialism. Not Marxist socialism--which carries with it a whole lot of baggage and Intellectual Intent. But, rather, a Japanese-style, collectivist socialism, in which everyone is allowed to save face, to make mistakes without "shame." The problem of course is that in addition to all the Naz investors who got crushed from the top, the deflationary boom of the 90's threatened to spiral into deflationary bust. Thus, the threat of Hurting many more than those who "mis-allocated" capital. And so, we have the standard moral hazard of un-necessary investor protection. And then, we have certain benevolent traditions of a social democracy--Re-Flation policy is at bottom an effort to protect the majority from economic pain. And so it goes.

To: yard_man who wrote (3970)	4/8/2004 6:03:42 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 116555

IMO, the fiscal stimulus that we have seen has been misdirected. One of the imbalances occurring right now is we have BOTH an excess of capital AND an excess of debt. How can this be? The reason is the skewed distribution of wealth (the highest GINI coefficient since '29). Some people have an excess of capital; others an excess of debt. The best growth occurs when: 1) wealth is fairly evenly distributed (fairly obvious why) and 2) incentives exist to distort that distribution (to motivate people to work hard). Fiscal policy needs to balance these two elements. The current fiscal policy is exacerbating this distribution problem. My proposal was: 1) tighten credit requirements. 2) repeal misdirected fiscal policy (repeal tax cuts), 3) slowly tighten monetary policy to slow the growth of debt. 4) Redirect fiscal policy to stimulate demand and/or cushion Americans from high unemployment.