I have called here for the U.S. government to start nationalizing some of the financial institutions instead of either giving them money, backstopping their bad debts or buying their toxic waste. Why spend and/or backstop well over a hundred billion on Bank of America and hundreds of billions on Citigroup when the two combined now have a market cap of under $60 billion. Just buy them and end the pain. We can sell off the pieces or reprivatize them later.
Unfortunately, any talk of privatization tends to elicit a rather visceral negative response in many people. It seems so anti-American of a thing to do. It is socialism. And governments are notoriously bad at running businesses. Well folks, last time I checked, it looked like the current management at these businesses is not doing too well at running them, so why should we simply keep supporting them?
It makes no sense to me that my tax dollars are being spent to benefit the shareholders and bondholders of financial institutions that are technically insolvent. If you are a shareholder of one of these institutions at this point in time, you are not an "investor" at all, you are a speculator, a gambler, and you know the risks. You are simply betting that the U.S. has no taste for privatization - and you may be right - but I hope that if enough people get on the bandwagon and write their representatives then Congress and the Administration just might begin to understand this is our money and it should be spent to our benefit. Do not privatize the gains and socialize the losses. That, my friends, is anti-American.
In any event, some excellent financial minds, such as Taleb, Roubini and Krugman, are backing the idea, so it cannot be all that bad. And while our situation may not be entirely identical, privatization did work well in Sweden in the 1990s to stem its financial crisis, so it can work. Certainly better than simply flushing our badly needed dollars down the drain by giving them away.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4Tl65kFU96s&refer=home
Disclosures: I own some shares in GE, which is getting some government aid.
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5 comments:
I think opposition to nationalization based on the premise that it would be "socialism" is a great instance of ideology, rather than empiricism or reason, driving policy and therefore stifling free thought. What we've been doing hasn't worked and doing something perhaps socialistic in order to save our capitalist system is not all that unheard of.
Thanks Cody, I wish I could write as well as you. You are right that capitalism occassionally needs a good dose of socialism to survive, and vice versa. Maintaining one dogma over all others, without variance, is problematic. People and politicians need to learn to be flexible. Changing times require changing approaches.
Thanks Cody, I wish I could write as well as you. You are right that capitalism occassionally needs a good dose of socialism to survive, and vice versa. Maintaining one dogma over all others, without variance, is problematic. People and politicians need to learn to be flexible. Changing times require changing approaches.
P.S. I don't know why my comment posted twice but Cody, if you are doubting it, my post was meant as a complement. At your age I could not have half the financial curosity - or intelligence - you are exhibiting. Keep it up and your future will be fine despite what happens. If you understand what is happening, you can make money whatever happens. Seriously, my best investment year was last year as I finally understood what was happening. Study what is happening and try to understand it and you will do very well.
Thanks! It's only recently that I've become interested and what a great time for that to happen haha. I'm still trying to learn more before I make any investments, so we'll see how it goes.
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