DOOM: Fiat justitia ruat caelum

MORON UPDATE: Vic is going home from the hospital today. I'm prayin' for ya, brother. Get well soon!

Teh Krugman: SPEND! SPEND LIKE THE WIND! Krugman's main fallacy, like that of most Keynesian acolytes, is that he interprets all labor as productive labor; all action as productive action. To him, paying one man to dig a hole and another to fill it in is actually a wealth-generating enterprise. The pernicious lie at the root of this fallacy is the concept of "free money" -- that money can be printed at will, or borrowed willy-nilly from the future, with no ill effects. They don't understand that the government has no money of its own; every cent that it spends must be taxed or borrowed from productive individuals.

Teh Krugman’s achilles heel.

The problem isn't as simple as low aggregate demand. The core problem is that the economy needs a microeconomic reset, where supply (production) and demand (consumer) are brought back together through an undistorted and smoothly functioning price system. That means the government has to back off, not become more active. Moreover, dumping more money into the system as Krugman recommends, is really throwing good money after bad, and will make the economy inevitably worse off. In short, across the board increases in spending are likely to reinforce the very factors that cause the economy to collapse in the first place.

Apparently, the only way to save the economy is to totally destroy the concept of “moral hazard”. Privatize profits; socialize losses. Rewarding spendthrifts and punishing the prudent is a highway to hell, regardless of any short-term benefit. If you subsidize behavior, you get more of it -- so if you reward people for wasting money, they’ll waste even more money. Debt-default has to hurt -- a lot -- before people will stop doing it.

Still, there is the reality that losses must be realized by someone. Whether it is the mortgagees for overborrowing or the banks for overlending, the losses must be taken and accounted for, or we'll never see a rational valuation of real-estate assets.

Chancellor Merkel is facing a smorgasbord of unpalatable choices vis a vis the Eurozone. Democracies are funny that way -- they often work contrary to the way the “experts” would like them to. And Europe has a bad habit, historically, of dispensing with democratic rule when it proves inconvenient.

The predictable failure of “magical thinking”. We live in an age of "magical thinking". It is the dominant characteristic of our political class and much of our population.

Fannie Mae: "How dare you trick us into buying those crappy mortgages that we begged you to make! That's a lawsuit, mister!"

DOOM! Everybody's catching the fee-vah!

Bad news on retail holiday hiring. a lot of businesses aren’t expecting the usual holiday boost.

Jeremy Warner at The Telegraph wonders if the world is doomed to another Depression. Given the abysmal quality of the political class on both sides of the Atlantic, I'm not hopeful.

Here's another really ugly problem: too many older Americans are carrying way too much debt into their senior years. And that's on top of not having enough money saved for their long term needs even apart from the debt they're carrying. This means, of course, that retirement must be delayed indefinitely. And this in turn prohibits job mobility (promotions etc.) for younger workers because older workers are not leaving the workforce in the numbers they used to.

Via the IBD, "A Dangerous War Against US Banks".

Democrat Rep. Barney Frank of the House banking panel wants to stick banks with all the bills from the crisis he and other affordable-housing zealots helped cause. "I don't mean to demonize," Franks said, "but Goldman Sachs and Wells Fargo and Bank of America and Citicorp and Morgan Stanley and the large hedge funds can pay for this."

posted by Monty at 09:00 AM

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