Krugman: The Market Mystique

[Larkspur]

The Market Mystique
On Monday, Lawrence Summers, the head of the National Economic Council, responded to criticisms of the Obama administration’s plan to subsidize private purchases of toxic assets. “I don’t know of any economist,” he declared, “who doesn’t believe that better functioning capital markets in which assets can be traded are a good idea.”

Leave aside for a moment the question of whether a market in which buyers have to be bribed to participate can really be described as “better functioning.” Even so, Mr. Summers needs to get out more. Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis.

But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.

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...what’s striking is the vision expressed both in the content of the financial plan and in statements by administration officials. In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.

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But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

In short -- it's the financial system that's broke, not the will to make it work!

Wasting time on trying to fix our financial Titanic when its doomed is a waste of taxpayer money and encouraging robber baronism.

[Beavker]

1. Though I will support Obama and his for trying to do something, I agree.

I work in the industry as such, and I just think it's a scam. It's a gampling racket where people with power on the floors of the exchanges influence if our economy is good or bad. Why can't we just go to Microsoft and say, we want to invest in your company. They give you a receipt for your investment and they pay based on a dividend or interest rate based on profit, and as a percentage of your investment. You directly invest. The 2ndary trading of these investments is easy to minipulate by the chosen few. I want my MSFT to pay off when the company is selling software, not because the sector itself is doing poorly, or Goldman Sachs just decided to Sell out of their stock for MSFT for their rich, accredited investors. It's to complex. You don't sell something you don't have (short selling), you simply either buy something you want or do not. It's rediculus in it's essence.