February 2021

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This is my blog... an austrian... a bolivian blog in economics.


Regards, Mauricio.

While I agree w/the thrust of your main point, I think it would be beneficial to be more precise. Certainly the residue is NOT that nothing bad happens to anybody that is bailed out. Clearly the shareholders, even those that were allowed to keep something of their equity, were hammered from the values they previously enjoyed. The interesting question is what is the tipping point--at what level of "bad happening" is enough and the govt says no more? I suspect it is also well beyond the "too big to fail" mantra. For example, why are the bondholders of Fannie and Freddie bailed out while the shareholders were virtually wiped out? Why are all money market funds now being guaranteed?

While I disagree w/"too big to fail", it does have a certain logic to it. But when the govt bailout in effect bails out the Chinese govt who has heavily invested in agency securities, we wonder why shouldn't the Chinese take a haircut on their bonds? They certainly can afford to...

This whole thing screams for an Austrian analysis of the problem, and a public choice analysis of the "solution"....

Otherwise I agree with your main point--we've certainly leaped across the line where govt management of the economy is not only tolerated but thought to be the only responsible solution. And even if we somehow get out of this mess, their will be a bad legacy which comes with us...

"The ultimate effect of shielding men from folly, is to fill the world with fools." - Herbert Spenser. I've been thinking about this line a lot lately.

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