I do not as such have a problem with the government involving itself in banking. It has since the 1930 been an entirely legitimate thing for government, for example, to secure the deposits of people held in registered banks.

I don’t even have a problem with taxpayers covering short-term holes.

What I do have a problem with, as you rightly say, is being held hostage by a system on which so many depend. It has to be bailed out – like it or not.

I really am not sure what it the best – there are downsides with all the alternatives. To my mind, reigning in the housing market would be the best start though I have no idea how to sell that the public.

I do wonder about my idea of the long-run though, as it seems a bit too long!

You know, I think the housing market is kind of being allowed to fail because it is too big to save (thank the lord!) and I also think policy makers at least acknowledge that the blame has to shared by all who took part, but the reluctance to quickly nationalise or liquidate the bankrupt banks and sort out a solution where the risk-takers suffer the downside (not just shareholders, who are suffering in spades, but also the bond holders who are being kept whole). If we do engineer a way out of this mess, I do hope the regulators start looking at the degree of interlinkage in bond-holdings, insurance, etc, across the system, to stop governments being held hostage by the ‘if one falls, we all fall’ scenario that we are currently facing. Alas, being held hostage by the system like this means that taxpayers are simply having to plug the holes as and when they appear because not doing so will produce a series of failures throwing the entire financial system in complete ruin. I need to do more research and perhaps write a short article or blog that maps out my thoughts, but I am starting to see the system as a kind of global keiretsu with no one at the helm (though perhaps we can put AIG at the head of the table!).

Anyone investing their hard-earned on the advice of a talking hack, whether on TV or in blogland deserves all they get frankly.

And anyone calling out American capitalism for being corrupt whilst holidaying in Dubai…

Well.

You work that one out.

Really? To me the lesson seems to be that government will bail out the feckless, very possibly at the expense of the cautious because the housing market is too big to allow to fail.

I really, really want to believe this stuff about how in future there will be less finger pointing – but blame shifting seems to have been rewarded. Apparantly some feel it the the fault of their lender that they recklessly took 100%+ mortgages.

Now this is not to say that everyone who has (and will) see the benefit of government intervention is ‘unworthy,’ far from it. But what it is to say is that I disagree with you about why we will see more caution. You believe that it is about a greater apprecition about the psychology of bubbles.

I think it is about a realisation on the part of everyone that this is a one-time only get out.

Hope I’m wrong.

Yeah but they’re part of that system that then feeds into rising stock prices and investor sentiment. What else are they supposed to do other than inform investors??

I guess it depends what we choose to learn from it. To improve the system over the long-run, I think it is important not just to shift the blame and move on, but to analyse where ‘we’ went wrong so we can pass on the lessons to future generations without sounding like burned out has-beens who got screwed and have a hang-up about the system – by providing them with a better way to analyse the system in which they live. It sounds optimistic, but I imagine marginal improvements with respect to understanding bubbles, human psychology etc can all lead to an improvement in how we as individuals act when we find ourselves in the middle of these storms of blind exuberance.

Simply put – I believe there is less to be gained by asking who is to blame, and more to be gained by asking what I can do better. I believe this outlook will lead to a better outcome for society and the individual.

Here’s a thought on that – what about the ‘property porn’ media? They all just seem to have spent 10 years blithely pouring out ‘media’ about how wonderful massive house price increases are and how there is nothing to see coming in the way of a crash and how when it comes to mortgages money is no object.

It maybe a red-herring, but some of the property shows have skated mighty close to something that could justifiably be seen as cod-financial advice.

Re my comment of ‘what do they feed these guys’, here is a chap at CNBC called Charlie Gasparino a few months back. I think he’d consumed a little something that caused his brain cells to misfire a tad. Here’s a portion of the interview:

Gasparino: No. You know what you got. That’s right.. you have… you have… You have one choice: shoot to the capitalist system. ‘Cause that’s what you’ve got.

Ratigan: Do what?

Gasparino: No. That’s what you got. That’s what you got.

Lee: Okay.

Ratigan: Shoot the capitalist system?

Gasparino: Shoot to the capitalist system. That’s what you got.

Lee: Okay. Thanks Charles.

I blogged the full thing and took down the dialogue for posterity:

http://www.rizdin.com/2008/10/cnbcs-gasparino-loses-ball-big-time.html

Proper mental.

Did anyone read the Playboy blog that started a mini-storm about how Santelli’s rant may have been a pre-rehearsed set-up by CNBC? Turns out it wasn’t but their was a mini storm in the financial blog world for a few days. Also, while Santelli is not talking from a position which will get much support from the public (i.e the trading room), I do agree with much of what he said, that essentially those who didn’t bear the risks and thus enjoy any of the upside are now being asked to subsidise the losses.

Golam – I still find the style crazy. J.Stewart is great although when we started watching, it took some time for us to get over even his level of energy, the exaggerated movements, shouting, and bait-applausing antics. What do they feed all these guys?

PS – A shame More4 don’t show the Colbert Report – that looks pretty funny as well.