Economics 101

Sometimes I like to do a little ego stroking, then I remember that only rocket science is rocket science. Other stuff is actually quite simple. Like the economy.

Here's George Will, quoting an economist:

"The failure of Lehman Brothers and the near-failure of Merrill Lynch raised the interest rate at which profit-seeking lenders were willing to lend to highly leveraged investment banks. The market thereby forced Goldman Sachs and Morgan Stanley to change their business models drastically and to convert to commercial banks. If that isn't effective regulation, what is? Protecting firms from failure (Bear Stearns, AIG, Fannie Mae, Freddie Mac, Goldman Sachs, Citigroup) and mitigating their losses with bailouts renders this most appropriate form of regulation much less effective."

Here's me, back in November:

I said this before, and I still believe it: the system did not fail. The system worked perfectly. People tried to game it for political and financial reasons, and the system chopped their hands off. That's the way systems should work. When you cheat them, they make you pay. Today's crying about a failed system is a smoke screen. The only thing that failed were the cons and tricks that the players used to try and make a buck. They goofed.

Left to itself, there is no doubt that the market would rebound. Yes, some jobs would be lost, and some money would go up in smoke, but probably no more than the taxpayer money that is being poured into the stratosphere every day trying to stave off the inevitable.

Granted I am no economist, but even I understand what happens in a marketplace. Borrowed too much? Expanded too quickly? Built lousy cars? Let unions drive your payscale through the roof? Went billions into debt? Paid your CEO hundreds of millions? Guess what? The market is going to screw you.

I like mine better. I should also point out that "probably no more than the taxpayer money" should now read "definately no more than the taxpayer money." It's been five months since I wrote that post. That was before the $800,000,000,000,000 spending bill signed in February, and the $410,000,000,000,000 spending bill signed yesterday. One trillion two hundred ten billion in two months? Thank God these incredibly smart experts know what they're doing.

Fat chance. The economy is not difficult, no matter how these gurus want to dress it up. Maxim: a little girl with a lemonade stand who sees rain on the horizon will be able to tell you as much about economics as any finance executive.