Tag Archive: Jon Stewart

The “let them fall” concept of macroeconomics

Last night, on the Daily Show with Jon Stewart, Peter Schiff was interviewed.  Schiff is an “economic commentator” (as compared to an economist?) and the head of a brokerage firm.  Stewart showed a number of clips of Schiff on CNBC prior to the current economic crisis warning of the dangers of the housing bubble, sub-prime mortgages, and over-leveraged companies and individuals.  These comments were made well in advance of the actual recognition of the situation and there is audio of people actually laughing while he is talking (I got the impression they were other guests of panel shows, not the moderators or CNBC folks themselves, but I cannot be sure).

At any rate, the gist of Schiff’s argument is that

  1. The government should have let companies fail.  No company is too big to fail.
  2. The market will dictate how things will fall out in the end, even if it means massive recession for now.  The market is strong.
  3. This is all because of how messed up things were, so let’s let the bad die out
  4. The government is just making things worse by intervening, and we might have hyperinflation.

In some ways, I find this very dangerous.  In others, thought-provoking.


Toxic Assets – finally doing something about it

Geithner Unveils Revised Bank Plan – BusinessWeek

Paul Krugman, the economist, wrote a while ago about how one of the factors in any stimulus plan was that government spending alone would not be enough.  The government had to get “toxic assets” (bad mortgages, etc) off of bank balance sheets so that those credit institutions could start lending again.  This is a pretty critical aspect.  Even if it’s just psychological, our lenders are not lending, and our economy is based on 1) consumption and 2) borrowing (because, in general, we never have as much money as we’d like to spend).  The machine just starts to break down at that point.

Jon Stewart, in assessing all the tax problems Obama’s appointments have had, commented that Geithner got through because he’s the only one that can save our economy.  Good first step, IMO.

Oh, btw – key point is that there is going to be a test to see whether banks can really lend or not.  I like requirements for giving out up to $1 trillion.