The Paulson Plans

Inflation works

We want instant salvation: we want to be born anew from the injected liquidity. But it is difficult to make people have faith in anything, particularly in their fellow creatures if not in the supreme personality.

It was certainly fascinating to see presumably rational experts relying on the fluctuations of the so-called wisdom of a volatile stock market to influence their judgments. When the indexes plummeted after Henry Paulson’s original asset management bailout bill was voted down, Congress hastily took up the bill again and modified it for quick approval, providing pork barrel incentives such as relief from taxation on children’s wooden arrows. Why, then, did the efficient stock market indexes fall, after the modified bailout was approved by congress?

Perhaps the Stock Market read the International Monetary Fund’s September 2008 Working Paper, ‘Systemic Banking Crises: A New Database, prepared by Luc Laeven and Fabian Valencial. One might reasonably presume that bailout mastermind Henry Paulson, U.S. Treasury Secretary and member of the Board of Governors of the International Monetary Fund, had read it too. After studying 42 well documented banking crises in 37 countries, where excessive credit expansion was among the many causes of the crises, one of the conclusions drawn by the researchers was that the use of government asset management companies to take over and manage distressed assets has been largely ineffective:


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