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Jane Smiley

Jane Smiley

Posted: October 1, 2008 02:33 PM

What Part of "We Don't Trust You" Do You Not Understand?


Yup, we're in a mess now, and no one quite understands what the mess is or what will happen, but everyone knows who got us here. I guess my favorite article on the bailout is by Ben Stein, at the NY Times, who I don't think is voting for the bailout. Here's his practical suggestion: "By the way, if we are actually thinking about tossing the Constitution out the window, why not simply annul these credit-default swap contracts? With that done, the incomprehensibly large liability of the banks would cease, and we wouldn't need this staggering bailout. Shouldn't we consider making the speculators pay some of the price?" The rest of the article is good, too.

On balance, I guess I believe those who say that the ruling class we have now are the ones who got us into this mess, and what they are asking for is more rope with which to hang themselves, and us. If there's going to be a bailout, bailout from the bottom and let the benefits trickle upward. But the ruling class sits in its ruling class bubble and can't imagine how things would work for them if we did that.

Ever heard of "creative destruction"? That's a phrase free market economists are always applying to the effects of the free market when it goes wild and hops from bubble to bubble. Bridges, farms, houses, freeways, people's bank accounts, investments, auto companies, the Chilean economy, the nation of Iraq, public schools, ecological balance, hey, if they offer no short-term profits, then let the market destroy them and build something better. But we absolutely can't apply that term to credit-default swap contracts, no no no, they are too big to fail!

Too big for creative destruction? That's always the last resort of scoundrels. The ruling class drives the bus to the edge of the cliff. The folks in the first class section of the bus climb out the windows. The bus is hanging by the two back wheels. The drivers turn to the rest of the passengers and start screaming, "Save the bus! Save the bus!" and the passengers are expected to get out and push the bus back onto the road, at which point the first class passengers will get back on, and the drivers will drive the bus away, and those who pushed it back on the cliff will be left standing there. Essentially, this is what you should be thinking when you hear the words "too big to fail".

But the ruling class has to learn its lesson, and those who voted for them, or didn't make the alternative case well enough to dissuade those voters have to learn the same lesson. What you did was wrong -- morally wrong and practically wrong, corrupt and stupid, evil and dopey ALL AT THE SAME TIME. Because if they don't learn their lesson once and for all, then we will have to pay all over again when they screw up the next time. That's just the way it is, Tom Friedman, John McCain, Henry Paulson, George W. Bush, Ronald Reagan. When you are wrong over and over, we don't think you will ever be right.