Tuesday Outlook: Galt's Rescue Plan

Caroline Baum, the gifted, credible and straight-talking columnist at Bloomberg wrote an excellent article [in its entirety here] that outlines a Galt-like solution to our current credit crunch/housing mess.

A snapshot and conclusion follows:

Galt's Solution
The following day, Fed Chairman Ben Bernanke encouraged mortgage servicers to write down a portion of the principal on home loans, which would give owners some equity and discourage foreclosure. He advocated a bigger role for the Federal Housing Administration, a Depression-era agency that insures mortgages. Congress envisions an even larger role for the federal government.

Any day, I expect some government official to unveil the John Galt plan to save the economy.

Galt, the hero of Ayn Rand's magnum opus Atlas Shrugged, stops the world by going on strike. He and the "men of the mind" literally withdraw from the world after watching their wealth confiscated by the looters (the government).

Toward the end of Rand's 1,000-plus page novel (or polemic), the economy is in shambles. Desperate, the looters kidnap Galt and prod him to "tell us what to do."

Galt refuses, or rather tells them "to get out of the way."

Road Is Cleared
You probably can sense where I'm going. Today's economic and financial crisis would resolve itself more quickly and efficiently if the government got out of the way. Yes, there would be pain. Some banks would fail. Others would clamp down on credit to atone for the years of lax lending standards. Homeowners-in-name-only would become renters. Housing prices would fall until speculators found value.

That's not going to happen. The bigger the mess, the more urgent the calls for a government solution, the more willing government is to oblige.

We want laissez-faire capitalism in good times and a government backstop against losses in bad times. It's a tough way to run an economy.

I couldn’t agree more.

Meanwhile, back to current market realities. Should we start with Elliot Spitzer? No, let’s leave the guy alone, but I just have one question: How is it the wives are always forced to stand by their man before the media humiliated? Doesn’t it just diminish both of them even further?

Volume was heavy while breadth sucked!





































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Comments

[Panskeptic:]

Why is it that people who advocate John Galt-like laissez-faire capitalism in major emergencies always seem to have plenty of money themselves? Other peoples' pain is apparently easier to deal with.

BTW, Ayn Rand's favorite disciple was a young bookish stripling named...Alan Greenspan, who helped get us into this mess in the first place. So I wouldn't pay too much attention to the mythical Mr. Galt or his mad creator.

2008 Mar 11 10:35 PM