Double Whammy Morning

FACED WITH the failure of the auto bailout in the United States Senate and the collapse of a $50 billion Ponzi scheme markets plumm... well, they seem to have shrugged. At noon, 12/12/2008, the Dow was down 95.02 points and the Nasdaq was up 5 points.

So that just shows you. It’s not the end of the world. Yet.

Most likely, as long as the financial system holds up—and LIBOR rates are down sharply in the last two days—we can deal with the auto meltdown just fine. That’s what the bankruptcy system is for. You declare Chapter 11, you wipe out the stockholders. You make the bondholders the new owners of the company. You wipe out the labor contracts. And you keep going with special bankruptcy loans.

But why then did we have to bail out the banks? The answer is simple. We can’t let the banks fail because they’d bring down the whole credit system with them. We did a nationwide experiment on that in the 1930s. Banks failed left and right, and depositors lost their life savings. It brought the United States to a standstill and a ten-year Great Depression.

Don’t think you’d like a repeat of that? Then bail out the banks.

That’s not to say that there aren’t lessons to be learned. Lesson One is: Don’t get leveraged up like that. Don’t get leveraged up on home mortgages, or credit default swaps, or government sponsored enterprises like Fannie Mae and Freddie Mac. But that’s a subject for beneficial legislation, if Congress is up for the job.

The interesting part, for me, with the bailout failure in the Senate is that Majority Leader Sen. Harry Reid (D-NV) now proposes to go home for the holidays. Oh really? Can’t be all that urgent, can it.

The murmur you hear is that the Dems did the whole bailout thing as payoff for the United Auto Workers support in the election. And the bailout package failed because eevil Republican senators wouldn’t sign onto a bailout bill unless the UAW bit the bullet on wages and accepted “parity” in 2009.

So the Dems took a dance on the floor with the partner what brung them. But, it looks like the agreement was one dance only. Now the partner could be on their own.

Unless President Bush rushes into the breach.

But Mr. President. It looks like the market has already discounted an auto industry failure. And it looks like it thinks that it’s not the end of the world. So why worry?

Yes. There are all those “high net-worth individuals” who got taken to the cleaners by an accused Ponzi scheme. Oh well.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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Faith & Purpose

“When we began first to preach these things, the people appeared as awakened from the sleep of ages—they seemed to see for the first time that they were responsible beings...”
Finke, Stark, The Churching of America, 1776-1990

Mutual Aid

In 1911... at least nine million of the 12 million covered by national insurance were already members of voluntary sick pay schemes. A similar proportion were also eligible for medical care.
Green, Reinventing Civil Society

Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State

Living Under Law

Law being too tenuous to rely upon in [Ulster and the Scottish borderlands], people developed patterns of settling differences by personal fighting and family feuds.
Thomas Sowell, Conquests and Cultures

German Philosophy

The primary thing to keep in mind about German and Russian thought since 1800 is that it takes for granted that the Cartesian, Lockean or Humean scientific and philosophical conception of man and nature... has been shown by indisputable evidence to be inadequate.
F.S.C. Northrop, The Meeting of East and West

Knowledge

Inquiry does not start unless there is a problem... It is the problem and its characteristics revealed by analysis which guides one first to the relevant facts and then, once the relevant facts are known, to the relevant hypotheses.
F.S.C. Northrop, The Logic of the Sciences and the Humanities

Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.” —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison

Democratic Capitalism

I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism

Action

The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action

Churches

[In the] higher Christian churches� they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm

Conversion

“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh

Living Law

The recognition and integration of extralegal property rights [in the Homestead Act] was a key element in the United States becoming the most important market economy and producer of capital in the world.
Hernando de Soto, The Mystery of Capital

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