Insanity

Sunday, September 21st, 2008
  • Sec. Paulson says U.S. taxpayers will likely be buying bad loans from foreign banks, too.
  • Sebastian Mallaby throws cold water on the bailout, and explains why 2008 is different than 1989.
  • Amity Schlaes make the important point that the stock market crash of 1929 and the Great Depression were two very different occurrences. The latter was created by and prolonged by massive government intervention. It’s a history lesson I suspect will be lost on most of our politicians.
  • Lehman Brothers’ New York office will split $2.5 billion in bonuses. Something ain’t right, here.
  • I’m tired of hearing the hysterical, “OMG! Can you imagine if we had privatized Social Security?” line. Yes, I suppose if you had invested your entire Social Security account only in the stock market, started at the tail end of the Clinton boom, and then retired early this week, just before the rally, you’d be in some trouble. But there’s no 30-year period in the history of the stock market where your investment wouldn’t have returned a higher yield than what you’re getting from the federal government. And for those of us under forty, the Dow Jones could drop below 1,000, and we’ll still be doing better than what we’re likely to get out of Social Security by the time we retire. Which is nothing.
  • Best line thus far, from Jim Henley: “Wouldn’t it save administrative costs if I just started giving my money to random rich people?”
  • Second best line thus far, from John Scalzi: “Are we socialists yet? No, no. Relax. We couldn’t possibly be socialists. Socialists only nationalize successful businesses.”
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  • 19 Responses to “Insanity”

    1. #1 |  ktc2 | 

      This week has been really, really depressing. For the first time I truly wept for my country.

      Is there a name for “reverse” socialism where the poor support the rich at gunpoint? Slave state?

    2. #2 |  winston | 

      drink some victory gin, it will all go away

    3. #3 |  Cynical In CA | 

      Not “slave state.” Just “state.”

      Thus has it always been, and so shall it always be forever and ever amen.

      Sebastian Mallaby starts from a false premise: the government has the incentive and desire to act on behalf of the taxpayer. His entire argument dissolves into irrelevance from there. Notice where it is published too, that should be a huge red flag.

      Taxpayer = armed robbery victim

      Name one armed robber who considers the victim. I’ll wait.

    4. #4 |  Tim C | 

      “But there’s no 30-year period in the history of the stock market where your investment wouldn’t have returned a higher yield than what you’re getting from the federal government.”

      I wonder how much longer the stock market as a long-term good investment can be taken for granted…is it just me or do the last 2 weeks feel like a baaad turning point?

    5. #5 |  Tim C | 

      Ah, yes, and the rest of the Mallory column (i.e, not the part Radley cited)…ugh. God. Ack. “Well, I think that version of government controls sucks, here’s my better idea about it.”

      Siiiiigh. It’s only a matter of time before Galt comes into this comment thread, so here goes: “Get the hell out of my way!” [note, The "John Galt Plan," in its entirety]

    6. #6 |  Cynical In CA | 

      Galt’s Gulch, more workable scenario. It’s already happening. A friend of mine in manufacturing is fed up and wants out.

    7. #7 |  Michael Chaney | 

      Re: $2.5B to Lehman Bros. execs – Somebody’s soon going to find out what the term “preference” means in a legal sense.

    8. #8 |  j.d. | 

      america has seemingly jumped the shark. we have republicans and democrats both crying out for more government in a time where less is needed. absolutely insane, sure, but going on and on about it does no good. those that understand, understand, so it’s preaching to the choir at this point I think. What’s probably more necessary is talk about how to get through whatever meltdown is on the horizon.

      btw, americans should be less concerned about ze terroists; the ghost of an idea that we were threatened by them and warranted full military deployment has catalyzed all of these problems. it’s going to be interesting to see what those troops do once thier government cannot pay them anymore.

    9. #9 |  ktc2 | 

      Okay. I’m over it.

      Got my fiddle and lots of ammo.

    10. #10 |  greenish | 

      Is there a name for “reverse” socialism where the poor support the rich at gunpoint?

      Yeah, it’s called “socialism”.

    11. #11 |  Sithmonkey | 

      It’s a history lesson I suspect will be lost on most of our politicians.

      Our government has displayed itself qute adept at proving that old adage about ignoring history and repeating it…only it’s us that’s doomed.

    12. #12 |  Honeyko | 

      “But there’s no 30-year period in the history of the stock market where your investment wouldn’t have returned a higher yield than what you’re getting from the federal government.”

      — This is a very common fallacy exploded by the fact that most people own specific stocks (of companies which can go bankrupt, becoming utterly worthless, or at least severely depress and never recover former prominence) rather than index-funds.

      I.e., does anybody here think Google will still be a $600+/sh company five or ten years from now? One or more of the Big Three auto companies may not even exist.

      The broad market may improve over the course of time, but at any given moment it’s a composite of some companies which will permanently falter and new releases yet to rise to their prime.

      Lastly, inflation will savage the value of any long-term investment offering such meager percentages as an index-fund.

    13. #13 |  Kieffer | 

      @Honeyko,

      That’s still better than the pyramid scheme and accounting scam that is Social Security. At least with private investment there’s a pretty solid chance that someone who isn’t a complete moron can get out as much or more than they put in.

    14. #14 |  Sam | 

      So can we agree now that Republicans are not free-marketeers, and that they can no longer be supported by Libertarians?

    15. #15 |  kishnevi | 

      Balko, I thought you were smart enough to realize that the Republican orginated description of Social Security as an “investment’ is pure bovine excrement.

      It’s a (mandatory) insurance program. The problem is simply that premiums and promised benefits are severely out of line, and the problem will continue to grow until (and unless) the premiums and/or benefits are changed to match realistic actuarial projections.

      as for the stock market: All I know is that I invested in the stock market via a mutual fund during the Clinton years, and ended up cashing up at a slight loss in 2002. The loss occurred because of the Bush tax cuts: the cuts kept me from recouping the full amount of capital gains taxes I had previously had to pay on what turned out to be paper gains that were lost by the time I cashed out (although I managed to cash out just at the point that allowed the mutual fund to send me a check almost exactly equal to the check I sent them six years earlier). I own stock now through my 401(k) and the only reason I can claim a gain there is because my employer matches my contributions, so the money that’s in my account is greater than the amount that I put in. But if it were only my contributions in there, I’d be posting a loss in almost every year since 2001.

      Most of my money is in bank CDs, adhering to the 100k limit and hoping that if push comes to shove I’ll actually get my money back from the FDIC.

    16. #16 |  freedomfan | 

      Honeyko, regarding Radley’s statement about stocks outperforming the government:

      This is a very common fallacy exploded by the fact that most people own specific stocks (of companies which can go bankrupt, becoming utterly worthless, or at least severely depress and never recover former prominence) rather than index-funds.

      So, your point is that companies go out of business?

      People planning for retirement, and not just speculating, won’t have their investments all in one company. It doesn’t take any special genius to buy an index fund.

      Lastly, inflation will savage the value of any long-term investment offering such meager percentages as an index-fund.

      So, inflation decreases the value of dollar-valued assets over time? I’m not sure I see the point it that observation. Doesn’t the same truth apply to investments besides stocks, including any income one is counting on from the government?

      I think that Radley’s point stands: Even unsophisticated retirement investing in the stock market does better than social security will, especially for younger income earners. Keep in mind that SS currently takes 12.4% of one’s income, though it’s hard to imagine that won’t increase during the next decade, though it’s unlikely returns will increase.

    17. #17 |  Cynical In CA | 

      “Our government has displayed itself qute adept at proving that old adage about ignoring history and repeating it…only it’s us that’s doomed.”

      Government, with its infinite resources and infinite power and the best and brightest and most vicious minds in its service, somehow keeps making the same mistakes over and over, fulfilling Santayana’s prophecy.

      Um hmmm.

      Cui bono? If the answer makes no sense, check your premises.

    18. #18 |  Cynical In CA | 

      “… Social Security as an “investment’ is pure bovine excrement. It’s a (mandatory) insurance program …”

      No, it’s a Ponzi scheme.

      And while we’re at it, Ponzi got either a bad rap or more credit than he deserves. States have been running “Ponzi” schemes since their inception.

    19. #19 |  xyz123 | 

      and, in ponzi’s defense, he didn’t just pass a law to force the suckers to increase their contributions whenever the ol’ cash flow got iffy. social security started out taking 2% of the first 3 grand. now we’re up to…what? 15% of the first 100k?

      a mere hundredfold increase in just 70 years.

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