Sunday, February 15, 2009

Random thoughts...

1. In the February 11th entry, 'Rhetorical questions...', this blogger wondered re the multiple calls to make the shareholders of institutions that get government aid in this downturn "take a haircut." Per Paul Krugman we apparently have the following choice: rescue the banks either by "(a) giving a HUGE handout to current stockholders or (b) effectively taking ownership on the part of we, the people."

One problem with this and much other discussion on this topic is the unstated but implied notions that these are completely two separate groups, and that the shareholders who own bank shares are responsible for the current state of affairs and don't deserve 'bailing out.' Unfortunately, all (millions if not tens of millions, via ownership of mutual funds, 'direct' and via pension funds) of these shareholders are tax-payers and most are not the "fat cats' that excite popular outrage... Politicians can posture re saving taxpayers at the expense of shareholders with relative impunity, because most people think of themselves as 'taxpayers' rather than as 'shareholders,' even though they are both.

OK, so consider taxpayer Suzy Q. Public. Every day she hears from the politicians the false dichotomy - the government needs to pour billions into these institutions to make them whole, and to protect SQP the shareholders need to "take a haircut" (because otherwise they would be given a huge handout). Well, post haircut the value of SQP's wealth and retirement funds are reduced, and even if the banks eventually pay back the entirety of the loans they received plus interest, SQP is unlikely to see one penny of this money. On the other hand, without the haircut the value of SQP's retirement increases as the financial institutions recover... (Note: we are assuming for both scenarios that the government bailout succeeds in turning the economy around) Why does it have to be an either/or (shareholders win vs. taxpayers win) rather than sum-sum?


2. Israel mulls releasing uprising leader to Abbas - So Israel would prefer to negotiate with a man they sentenced to 5 life terms for murder than with any Hamas leaders in Gaza? Other than Fatah and the Palestinian Authority being more compliant than Hamas, what else could account for this?


3. 'Axelrod: Effects of stimulus will be seen soon'- Having passed the "stimulus" package the discussion moves on to how effective it will be, something this blogger regards as a somewhat sterile argument. How will anyone know if the stimulus "works?" Proponents will claim success no matter who happens. Things turn around in the next 12-24 months... thank goodness for the perspicacity of those who proposed and passed the stimulus! The economy continues to be in recession and unemployment continues to rise... thank goodness for the perspicacity of those who proposed and passed the stimulus, because without it things would have been worse! A "no-lose" set of circumstances (note: the Obama team was smart enough to say they would save or create 4 million jobs... one can always claim jobs were 'saved', no matter what happens!) The opposite for opponents.



4. NYPD learns lessons from Mumbai terrorist attack that killed 174 -The NYPD is conducting drills based on lessons learned from the recent terrorist attacks on Mumbai. Good move. The article goes on to say that the new training was ordered "... because in the Mumbai incident, casualties mounted as local police were outgunned and unable to engage the terrorists..." Hah, no lessons to learn here. Of course the Mumbai police were outgunned! Most ordinary Mumbai police are "armed" (if you can call it that!) only with lathis, 6 to 8 foot iron-tipped canes (generally bamboo). And their main use of these is in lathi charges on unarmed civilians.

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