Thursday, October 02, 2008

Saving the Jerks

Nicholas Kristof says "Save the fat cats"- we need to save the US economy, even if it's unpopular on "Main street", or "Sesame Street" or "Elm Street", or whatever the new cliche is. (Actually, how will the bailout impact Elm Street? Will Freddy Kreuger be able to make ends meet?) Anyway, Kristof basically says what my father-in-law said to me: "It's not pretty, but we need to stop the bleeding as soon as possible." Besides, it's all for the common good- a concept that hasn't received nearly enough good press in the last few decades.

Kristof uses the very appropriate example of Japan, whose "lost decade" was caused by a housing bubble.

"Japan’s failure to respond urgently and decisively to its banking mess caused the country to endure a “lost decade” of economic stagnation. If America wants to avoid Japan’s decline, the House should follow the Senate’s lead and approve the bailout — immediately.

Just as in the U.S. today, most Japanese did not initially appreciate how devastating a banking crisis could be to the real economy. Banks and real estate tycoons in Japan were corrupt, profligate and unsympathetic figures, and no one wanted to help them. On corporate expense accounts, they sipped coffee with gold leaf and patronized “no-panties shabu-shabu” restaurants, which had mirrored floors and miniskirted waitresses.

In short, the businessmen involved were jerks. And, whether in Japan or the U.S., it’s challenging for politicians to frame a bailout with the slogan: Save the jerks!"

So, what can we do? It sounds like we all need to pitch in to save the jerks on Wall Street. I'm okay with this, although I think the bill still needs a lot of work. And I want to know two things:

1. Why are we bailing out the financiers at the top of the mess instead of the 6 million homeowners at the bottom of the mess who are expected to default on their mortgages?

2. Do people really understand that the bailout is likely going to make things much less catastrophic than they could be, but that the economy is still going to be really lousy for some time to come?

I worry that most people don't really have a handle on money or how it works anymore. I've read that credit card debt is now shooting up as people try to pay off the mortgages that are still too much for them. I know people my age who have six-figure credit card debt and I wonder how that's even possible. What this means is that credit card debt is going to implode before very long, along with whatever happens to housing, banking, gas, and the dollar. I just don't know that people have yet realized that living beyond their means is as dysfunctional and pathological as drinking a bottle of scotch every day. If you can't afford an SUV and a big house in the suburbs, you don't "need" them. The major problem here isn't "fat cats" or "politics as usual"- it's that in some fundamental way too many people have become unmoored from reality. Reality is something that happens to other people. A bailout isn't going to fix that mentality.

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