The smartest guy in the room?

Actually, what’s much more likely is that he’ll stay on for quite some time in the next administration, whoever wins.

“One thing that really puzzles me about the great bailout plan is the almost universal acceptance that Paulson should be the one to run it, at least until the next Administration. More generally, I’m surprised by the kid-glove treatment he’s been getting in public discussion, even from people highly critical of the plan.”

Shades of ‘the CEO Administration’, and ‘He’ll be surrounded by good people’.

i think whoever comes into power would be better of letting Nouriel Roubini take charge of the financial industry.

Actually in the left blogosphere he’s been coming in for plenty of well-deserved abuse and calls for his resignation. But indeed, the deference shown to him by mainstream Democrats, including Obama, has been sickening. (Who listens to the left? Sigh.)

What I can’t understand is, how does one consume credit on credit?

you hire some high-falutin PhD’s to invent financial bistromathics calculations to hide the fact that you can’t actuallydo what you’re doing. presto! faster-than-light travel!

Well, Paulson is certainly shrewd, and heavily invested somewhere. It’s hard to imagine how he’s a disinterested party in this (or any) bailout.

~~~

It is not a stretch to suppose that, at the margin, the chance to unwind his stake in Goldman Sachs tax-free may have had an influence on his decision to take the Treasury job. After all, if he were to completely divest himself without any tax relief, he would be staring at a tax bill of well over $100 million, Willens says.

Paulson need only obtain a “certificate of divestiture” from the Office of Government Ethics to sell off his 3.23 million Goldman shares, worth about $484 million, tax-free.

http://www.forbes.com/2006/06/01/paulson-tax-loophole-cx_jh_0602paultax.html

There is no need to be smart to rise to the executive position he has. George Bush and Dick Cheney are evidence of that. All it takes is the ability to bully other people into letting you have your way, an ability he is currently demonstrating on the spineless Republocrats in Congress. They’ll show him – instead of $700 billion, they’ll just give him $699,999,999,999!

abb1, @12

Of course that should be sufficient to discredit Paulson. These people can’t run a war with a 3rd world country that has no navy, airforce, or army; can’t steward the economy without bankrupting millions and savaging the most prestigious institutions on the planet; or manage the aftermath of predictable storms on the Gulf. They shouldn’t have 1% of the vote, let alone 45%.

Robert Reich has it right — this is about Trust. Trust and Transparency are foundational to everything in the Social Contract, not just to working markets, and the Republicans work purposively to sow distrust of Government (and governance), and corporatists work purposively to design financial instruments and systems that are so opaque that professional economists acknowledge we can’t determine what portfolios are worth.

The self-proclaimed “Masters of the Universe” have “Architected their own Reality,” and no one knows what it is.

This election seems framed to be about “Change” and perhaps it should be about “Trust.” The time of Trusting Republicans with the National Security of any part of our world should be over.

John, @13

And anyone who isn’t actively lying to Congress would be better than Paulson. I don’t care how smart someone is, if they’re lying to me, they’re not on my side.

Paulson’s better than Gramm.

Damning with faint praise?

Hey, whatever happened to Greenspan? Should’t we at least get Greenspan in front of Congress to testify under oath about what happened, and why it happened, and what he would do about it if he had the chance to do something?

A lot of people used to trust Greenspan. He ought to get some public spotlight now, explain just what he was doing when he set us up for this.

Of course that should be sufficient to discredit Paulson. These people can’t run a war with a 3rd world country that has no navy, airforce, or army; can’t steward the economy without bankrupting millions and savaging the most prestigious institutions on the planet; or manage the aftermath of predictable storms on the Gulf.

Mission Accomplished. People still assume that somehow altruism is supposed to be involved. Silly people.

Hmm, is this question serious? Looks like more Chomsky, Silber and a host of others needs to be read more: We have one party with two wings.

So when you say:

More generally, I’m surprised by the kid-glove treatment he’s been getting in public discussion, even from people highly critical of the plan.

I do not know what people are “highly critical of the plan” in any meaningful, strategic, non-tactical way?


Sector Total To Dems To Repubs
Agribusiness $7,587,571 $2,945,870 $4,624,051
Communications/Electronics $34,228,994 $25,358,758 $8,793,921
Construction $16,754,615 $7,158,588 $9,572,327
Defense $2,071,922 $1,111,020 $951,802
Energy & Natural Resources $8,955,401 $3,348,737 $5,601,614
Finance, Insurance & Real Estate $114,465,564 $59,847,674 $54,548,348
Health $30,141,119 $18,411,015 $11,679,446
Lawyers & Lobbyists $75,555,649 $56,936,901 $18,583,593
Transportation $6,530,813 $2,261,194 $4,261,821
Misc Business $60,335,832 $35,476,723 $24,754,609
Labor $756,158 $727,063 $28,195
Ideological/Single-Issue $18,220,844 $13,535,021 $4,684,122
Other $117,873,314 $70,654,807 $46,893,782

Sector contributions during this presidential campaign: http://www.opensecrets.org/pres08/sectorall.php?cycle=2008
( What am I missing? ) http://www.opensecrets.org/pres08/sectorall.php?cycle=2008

Hey, more “defense” dollars to the Democrats than to the Republicans? How ’bout ’em apples?

Noen, @18,

I think we understand that 1% benefit from these serial crises. My point (@15) is they have closer to 45% of the electorate. If 40% of that 45% woke up, those remaining wouldn’t dare propose serial crises to benefit themselves — they’d be revealed as the “friends of terrorists” (what they call Obama) they are.

The only place to begin is transparency and a more “honest” media, so I’d like to see media restructuring as part of the bailout deal.

Can we have Krugman in charge?

“They’d say, Gee, maybe you need to at least order transparency on these high-risk transactions and hedges. You know what? The ECB people were sneered at and insulted.

Paulson and Bernanke knew years ago what trouble they were in and did nothing, a la Coolidge.”

See this is where your theory has problems. Thus far at least, the problems haven’t been caused by hedge funds, it has been much more traditional things. And the AIG transactions really weren’t high risk in the conventional sense either.

The basic problem is that buyers, sellers and mortgage lenders all acted as if there was some sort of physical law of increasing house prices.

“But that said, the possibility of a meltdown ‘like this’ really hasn’t been seriously talked about as far as I can tell. AIG? They’ve had trouble around the edges their whole corporate existence but I don’t think the “idea that it could fail outright was seriously contemplated by very many people (I only hedge because I’m sure one person somewhere said it was possible). The idea that the money market funds could have serious problems wasn’t anything I’d heard about. I’m all for fair attacks on Paulson. I don’t think he’s done a great job, and I certainly don’t like his bailout blank check. But unless I’m misunderstanding the whole thing, the criticism that he didn’t foresee this isn’t a really good one.”

On the contrary, it is an excellent one. First, any number of people have been putting their money behind exactly this idea since last August when the first writedowns hit. Simply look at the short interest and put option action on the investment banks, some of the more insane thrifts, and, yes, AIG. Not only were people predicting it, they were betting huge amounts of money that they were correct. And they would have made even more on their correct investment decision if the government didn’t decide that bailing out the ignorant long-side was what governments were supposed to do.

Second, people who understand that massive leverage on subprime mortgages is a bad idea could simply point to the institutions that had the most such leverage. Books have been published on this by economic analysts and securities analysts.

Third, anyone who spends much time looking at housing policy could see that many of the mortgages being bundled to Wall Street and to investors were simply fabrications: fabulously expensive reverse mortgages sold to 70-year old pensioners. $150K loans on 700 sq ft 1930s era steelworker housing in declining cities. Liar loans in an economy that did not expand employment. Never mind the predatory ARMs. This has been on policymakers radar screens since the late 1990s. For goodness’ sake, Federal Reserve bankers have been publishing books on this stuff since the early 2000s. All of these people could see how securitization disconnected loans from risk. That silly people elected to buy those loans based on some historical modelling of foreclosure rates was simple ignorance. In case you might think this is an obscure policy arena, Gretchen Morgensen has been saying the same thing at the NY Times since last summer.

Fourth, scholars have been writing about the financialization of our economy and the historically high, and unsustainable, ratio of leverage to GDP growth since the late 1990s. Similar analyses have been developed by several blogs and sites that offer financial commentary. In the latter circles, the only question has been whether the inevitable endgame will result in inflation or deflation.

So, to summarize: it was predicted, in numerous venues, over various forms of media, over the course of many years, by people with a variety of intellectual and political orientations and differing degrees of financial interest.

I understand that this is a complex issue. Nonetheless, I am utterly mystified by self-confident assertions that it was “not predicted”. I don’t understand where the need to think it wasn’t predicted comes from. I have heard this said many times despite mountains of evidence to the contrary. If you can shed light on this I would be most interested.

Are you saying that whoever he would be replaced with wouldn’t be making it up as he goes along?

the possibility of a meltdown ‘like this’ really hasn’t been seriously talked about as far as I can tell

Is ‘seriously’ the important word in this sentence?

Or you make it not magical. I think this is the reasoning behind some of the Main Street arguments.

“Sebastian, if you don’t think serious trouble was widely mooted for some time, you haven’t been paying attention.”

Serious trouble, yes. Serious trouble like this, not really. That is the whole problem with hindsight: you already know what actually caused the trouble so you think that all of the warnings about it were obviously good while you discount all the warning about all the other things.

For example (and it even comes in to this thread where hindsight bias should be protecting some of you from talking about it): hedge funds. This is one of the areas where the alarms were actually being sounded the loudest over the past 3-4 years. All sorts of hand-wringing was made about how the lightly regulated hedge funds were going to destroy us. But in reality, hedge funds have had almost nothing whatsoever to do with the financial disaster area we see. The actual disasters took place in two of the most highly regulated areas–mortgages and insurance.

Example #2: weak dollar. There have been all sorts of pronouncements about all the nasty things a weak dollar is going to do to the US economy vis-a-vis the world economy. For all I know they may be true. But what is definitely true is that the weak dollar played little to no role in this disaster.

I’m well aware that there were all sorts of ‘serious trouble’ which was mooted. And some of it even had to do with how we were going to deal with the housing bubble.

But I defy you to find me say three seriously regarded economists (from anywhere on the left-right axis) or three central bankers or three high level government policy experts or even one each from those areas that were saying (2 years ago, 1 year ago or even as recently as 6 months ago) that a likely fallout from the real estate bubble deflating/ending/collapsing was that AIG might go under or that money market funds might collapse.

Now was some unlistened to analyst saying such things? Perhaps. Though I doubt he was saying all of those things. And in hindsight he looks brilliant. But that is hindsight.

We really need to be humble about the limits of human knowledge and control.

– did the deceased sweat before dying?
– yes, doctor, he did.
– good, good, very good.

But I defy you to find me say three seriously regarded economists (from anywhere on the left-right axis) or three central bankers or three high level government policy experts or even one each from those areas that were saying (2 years ago, 1 year ago or even as recently as 6 months ago) that a likely fallout from the real estate bubble deflating/ending/collapsing was that AIG might go under or that money market funds might collapse.

Coincidentally, AIG posted it’s largest loss in 89 years back in March, just over 6 months ago. It was due to… a decline in mortgage backed investments. That’s not even a controversial dire warning from some academic economist, just the business page.

And from a year ago, I can easily find news items mentioning, for example, alarming jumps in the delinquency rate of AIG’s mortgage portfolio.

From two years ago, the top result is an article in “American Banker” which says,

Mortgage insurers are concerned that regulators are not moving with enough speed to put the brakes on nontraditional home loans, particularly option adjustable-rate loans taken out with “piggyback” home equity ones as down payments.

“Recent trends show alarming signs of ongoing undue risk-taking that puts both lenders and consumers at risk,” Suzanne Hutchinson, the trade group’s executive vice president, warned regulators in a July 10 letter. The insurers are “deeply concerned about the potential contagion effect of poorly underwritten or unsuitable mortgages,” she wrote.

That’s not hindsight. This crisis has been very clearly in the making for years, anyone who was paying attention could connect the dots.

I would also say that to the extent that there is a lack of dire or specific warnings from central bankers and the like is because no one, inside or out, really had a clear idea of the extent of the whole tangled mess. Not until it actually started unraveling.

That’s why the sorts of things you heard from responsible people like Al-Cubicle’s central bankers are not proclamations of doom, just mild-mannered calls for greater transparency. Calls which were… ignored.

I think Sebastian is just making the standard right-wing argument I think we have all heard by now in many other contexts. I was driving my car at night, on the wrong side of the road, with no headlights, while high on crack cocaine. I crashed into a car driven by Mr Smith, who was driving his family back from an evening out at the cinema, killing all of them. My defence? I had no idea this would happen. Who could possibly have known that the Smiths would have gone to the cinema that evening?

Yes we’re all going to die because of global warming.

[asteroid hits]

See I said we were all going to die.

It is comical that Sebastian is passing judgement on the quality of analyses that he did not know existed until a few minutes ago. Unfortunately, he is indicative of how we got in this mess. The willfully ignorant have been running the show. That is why, in my opinion, people insist this couldn’t have been predicted. To acknowledge that it could have been requires one to confront the dogmatic and/or uninformed nature of one’s own thinking. The smart and pragmatic ones, say Greenspan, instead implausibly insist that they too predicted it, they were just constrained by events.

Michael, @49

Greenspan goofed badly … and I’ll repeat the following (sorry) because I want to destroy the meme that “no one could see this coming, and the liberals are to blame anyway.”

http://www.newsweek.com/id/159346/output/print

~~~

Under the Home Ownership and Equity Protection Act enacted by Congress in 1994, the Fed was given the authority to oversee mortgage loans. But Greenspan kept putting off writing any rules. As late as April 2005, when things were seriously beginning to go wrong, he was saying that subprime lending would work out for the common good—without government interference. “Lenders are now able to quite efficiently judge the risk posed by individual applicants,” he declared at the time. So much for his feel. New regs didn’t get put into place until this past July—long after the crash had come, under Greenspan’s successor, Ben Bernanke. The new Fed chief’s “Regulation Z” finally created some common-sense rules, such as forbidding loans without sufficient documentation to show if a person has the ability to repay.

Greenspan has tried to defend himself repeatedly, though as bank after bank has failed he’s retreated to the shadows. But in a 2007 interview with CBS he admitted: “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late.” This, from a man who once told me, in an interview, that he most enjoyed scanning economic reports for hours in his bathtub.

~~~

And we can attribute to Bush the pressure for zero-down FHA loans.

http://realtytimes.com/rtpages/20040120_zerodown.htm

Actually, Sebastian’s point can be rephrased as – serious people, being highly paid and living the lifestyles common to the top 5 percent income bracket, were living in a huge bubble.

There is evidence for this all around. Take, for instance, the rightwing fierceness about insisting that incomes weren’t becoming more unequal over the last couple of decades, and much more so over the last eight years. The Freaks at Freakonomics, in one of those moments of UChicago hubris that could be used as a symbol of the Bush era, insisted that the glorious benefits of free trade, which made it possible for the poor to buy cheaper plastic goods from China, was a form of closing the inequality gap with the wealthy. Those lucky duckies and their plastic knicknacks! I wonder if banks take those things in lieu of mortgage payments? Well, one of the effects of denying that inequality is increasing is getting blindsided when an enormous effect from inequality rips across the economic landscape. If people were making less money, if we deduct inflation, in 2006 than in 2000, they had evidently at the same time taken on enormously more debt. And the debt they were taking on was not causing financial institutions to go, holy shit, but rather, to offer ever more teaser rates, under the benign eye of the Bush administration. Serious people are, in the media sphere, people who make good money to deny that 2 plus 2 equals 4. Less money for the average person plus skyrocketing house prices equals either a massive meltdown of those prices, with all its consequent effects on the system of debts contracted by the average household to keep up a lifestyle in excess of its income, or… or maybe the rapture.

We live in the age of the magic condition, which is how the “serious” are never able to question their own vanity. Thus, war supporters liked to say, in 2007, I supported putting in more troops from the very beginning, without saying, I supported the invasion regardless of the fact that my magic condition wasn’t met, and wasn’t about to be met. Similarly, the magic condition of the liberals is now, well, we have to do the bailout if we put in place regulations and institute much higher progressive taxes, knowing that, of course, these aren’t even on the table and are unlikely to emerge from the people doing the bailout. It is all very sad.

“Sebastian, if you actually read the business pages, and not just the right-wing press, you would be better informed. I know that the hedge fund thing is supposed to be some devastating right-wing talking point, but for at least 6 months now participants knew that there was a serious chance that the whole banking system was going to collapse. This isn’t an ideological question about left versus right—actual participants in the markets knew that the worst case was pretty bad.”

Ummm, I don’t read any right-wing press. I have no idea what the right-wing talking points are, but I do know that a huge portion of the focus of the left-wing talking points were focused on things that had nothing to do with the crisis–weak dollar, oil prices, hedge funds. The worst case scenario is always pretty bad–see asteroid.

I’m not at all saying that NOTHING could be done. I’m saying that this concept that were lots of obvious things that should have been done is ridiculous. Even now you couldn’t get some of the most obvious things through–a mandate for large (20-30%) downpayments, for example.

Ummm, I don’t read any right-wing press. I have no idea what the right-wing talking points are, but I do know that a huge portion of the focus of the left-wing talking points were focused on

Walt was suggesting reading the business pages.

People made jokes about weak dollar and said that it’s (obviously) a symptom of weak economy, but I don’t remember any left-wing talking points declaring the weak dollar a problem by itself. And as far as high oil prices go – left-wing talking points were very positive about that.

We really need to be humble about the limits of human knowledge and control.

We should not presume to know the ways of the Lord. People predicted a disaster, and we have a disaster, but correlation is not causation. For another example, look at “global warming”. Nobody really knows what will happen, much less why. In both cases, were we to put ourselves in God’s place and attempt to predict and control the future, we would be very likely to do more harm than good.

62: Can we trust Lucy this time?

Or do we just let God sort it out?

He’s God for a reason, Michael.

Both Dave Barry and Carl Hiaasen have talked about how difficult it is to exaggerate contemporary stupidity. They’ve specifically had Florida in mind, but with the 2000 election Florida took over the whole nation.

the people at the blogs The Big Picture and Calculated Risk and Sudden Debt have been talking about this for years. Clive Hamilton and Ross Gittins (a journalist, for god’s sake!) have been talking about it in Australia for years (I think I read Gittins’ first critique of the mortgage market 3-5 years ago). I remember talking to a trader in 2004 who told me he was waiting for the mortgage market to collapse so he could buy lots of his mates’ houses for nowt.

Just shows how much libertarians like Sebastian read outside of Reason magazine, I suppose…

65> ”Can we trust Lucy this time?”

You did last time? Tsk, tsk. I may have to take you off the table, too.

Just remember a robust economy requires an equally robust bailout. But on the bright side, the bathtub up to the overflow now; won’t be long.

Greenspan and Rove were smart. That’s one of the reasons they won. But they’re just bad.

Rove had one year of college, but he had a lot of PhDs working for him, and he whipped up on a lot of Democratic PhDs. Their belief in credentialization kills the Democrats.

Greenspan wasn’t fully credentialed either. He’s an ABD at best, IIRC,

giving people like Sebastian a pass is exactly how we got into this mess in the first place. It is how patently ludicrous claims survive in the public sphere. I say let him, and anyone else who wants to insist on the vapid, craven, or dogmatic, have it.

SoV: For me smart is a neutral word, like”tall”. And in general, losers can’t call winners “stupid”. We’re the losers, they’re the winners.

A friend of mine in Pol Sci from a statistical point of view was in awe of the Republican campaign machine. Rove wasn’t solely responsible for it, but he played an enormous role.

As for Greenspan, Brad DeLong has an enormous respect for him. He once said that the seven times he disagreed with Greenspan, Greenspan was right four or five times and wrong one or two times, with one draw.

“If you really want people to be more humble in the face of their human limitations and failings, not allowing them to award themselves million dollar bonuses year in, year out might be a good place to start…”

Absolutely. I’m a huge bailout skeptic. Maybe you didn’t read early enough in the thread, but my default vaule is that any and all losses that won’t lead to collapses hitting 3rd parties ought to be bourne as much as possible by the equity and bondholders.

That has nothing to do with how predictable this particular mess was and it really has nothing to do with whether or not this mess was preventable by any realistic countermeasures that could have been implemented prospectively.

A lot of this has to do with marking assets to market–something I would have said was a great thing 30 days ago. Under the old system, assets would have been carried until they could be sold for a profit again. Sometimes that would never happen. Failing firms could still attract capital over a long failure because of that. I, and lots of other people with more power than me, thought that it was better to have those firms fail, rather than let them suck up good capital on their way to failing.

But as it turns out, the rule also caused failures in firms that didn’t really have a reason to fail. If AIG could have just held its assets for a year or so through the crisis without marking them to the fire sale market prices, that would have been better.

Unintended consequences often suck.

Overheard on the left wing media, Speaker Pelosi has just declared the foot is being put down, no more rubber stamp Congress like Bush has been used to. They will look in to this to protect US.

Sarcasm, I presume?

giving people like Sebastian a pass is exactly how we got into this mess in the first place. It is how patently ludicrous claims survive in the public sphere.

No.

Patently ludicrous claims survive because the media repeat them and take them seriously.

If you seriously debate them, then that’s part of it. The media will at best report the debate and announce that opinions differ.

If you debate them on CT nothing will happen except that you will have that much less time available for serious concerns, and everybody who reads your comment will have that much less time available.

On the other hand it might be a sort of useful stress relief, in moderation.

Uh, John? I’m a physical sciency type of dude. I’m all about the evidence. Facts. If these people have facts that support them, why not repeat the facts that they base their opinion on? Not assessments.

As an aside, on one particular blog certain posters were sneering that the ‘lefties’ were right about the lack of WMD in Iraq, but they were only right by accident, and more in hindsight when they made their objections more forceful than they really were at the time. When I pointed out that no, that just wasn’t so, I was subjected to the usual stock in trade, derision, and was asked how I could be so sure when others much smarter(ha!) and much more in the loop than I got it wrong.

To which I replied: physical evidence. The aluminum tubes that were supposedly being used to produce nuclear weapons turned out to be categorically unsuitable for this use. The ‘yellowcake documents’ that were supposed to be so damning as to intent were cheap and obvious forgeries. The same thing with the ‘germ factory’.

Iow, by not listening to the opinions of others, often stove-piped and always repeated in an echo chamber, and by considering only the physical evidence, I was entirely justified in my skepticism. And entirely right.

No, opinions, well, you know what they say about them. I don’t hold with ’em much myself. Physical evidence, tangible actions, that sort of thing? That’s about the only thing that matters. You ought to try it sometime.

83> “Sarcasm, I presume?”

Not at all. Faint optimism. If it happens, then I’ll faint.
Sarcasm would be considered to be shallow or something, right?

#88

My sentiments exactly. I was genuinely surprised that our government didn’t either plant evidence, or else find a few rusting barrels of toxic waste and claim those to be the much-dreaded WMD’s.

SoV: all you’ve offered is your own assertion that Rove and Greenspan aren’t very smart. I’ve referred to two people I respect more than I respect you who are familiar with the fields they work in who say that those two guys are smart, and what they say confirms my own opinion and that of many others. Since you’ve brought nothing to the table, that’s enough for me. You seem to think that your opinion that they’re not smart should be the default assumption to be rebutted, but it isn’t. It’s your baby.

You say: “No, opinions, well, you know what they say about them. I don’t hold with ‘em much myself. ”

This is baffling. On Rove and Greenspan you’ve offered nothing but your opinion.

It doesn’t make a lot of difference whether we conclude that those two guys are smart. They’ve been playing at a very high level, and they’ve won, and they’ve transformed America. I think of them as malignant, but see no reason at all not de say that they’re smart. If they had done what they did with 98 IQs and high school educations, that would be downright weird, but it wouldn’t change anything.

I’m not really trying to convince you; go in peace.

SoV, some of the people who say Rove is smart say so for the same reason a lot of boxers said that Marvin Hagler was tough. These people once thought they themselves were smart, but they went up against Rove and found out that they were dumb. Rove’s political goals are horrible, and his methods are semi-criminal, but he’s smart.

I got interested in this subject (mortgage / CDO crisis) mostly because my brother, who is an MBA and worked doing finance in Silicon Valley, has been telling me about the impending crisis for a couple of years now – it’s a hobbyhorse of his.

This is what I understand:

“Virtual” wealth (no value added from labor or other resources) has been created at a great rate by the housing bubble. When this virtual wealth goes away, anybody who was relying on its existence (homeowner with HELOC’s, WaMu bank, CDO sellers, people using CDO’s as collateral) is in a world of pain.

It is very easy to spot a housing bubble based on some simple fundamentals, such as median house price to median income. Hence the disaster warnings from my brother for the last two years.

The part I don’t really understand:
The boom was driven by huge expansion of credit. Such a boom has to end with either – inflating the problem away with consumer inflation (debasement of the currency), which would diminish debts and as a side effect make house prices rational again eventually – or a massive contraction of credit, deflation, and a severe recession/depression. Since our Gov’t cannot allow a severe contraction of credit, it is now effectively choosing, by doing bailouts, the debasement of the currency, which takes us to a future of stagflation.

It is regrettable that in the new regime of currency debasement the Chinese may no longer desire to buy dollar-denominated US Treasury bonds, which I understand is a very bad thing indeed.

Comment – Sebastian is a corporate lawyer, and has spammed the living crap out of another thread, when it concerned things in his professional purview (sp?); the Ledbetter thread. It’s likely that he’s doing the same here; the tactics are similar. Ignore him.

SOV, yes, until we define what it means to be smart then we’re only talking 0pinion about who’s smart. John Emerson is using it in a colloquial way, calling somebody smart if they’re successful at something.

As to whether Rove was smart or had a simple pattern that worked and also he got lucky, we’ll have to wait for historians. Like, if he was involved in passing forged information about Bush’s military records to Dan Rather and then later exposed the forgery, I’d have to say he was pretty smart. But if he didn’t plan it then I guess he was just lucky.

This is really silly. Rove is smart by any standard. He’s uncredentialed, he may be uncultured, he may be no fun, but he’s smart. He’s in a ruthlessly competitive business where people don’t have successful careers by luck, and where outwitting the other side is what wins the game, and where knowing a tremendous amount of detailed information was required. He might even do poorly in a grad school seminar on voting behavior, but when the PhDs who aced the class went out into the world with their doctorates, if he didn’t hire them he’d whip their asses. I came to this conclusion after talking to a guy whose dissertation was was in part on voting behavior.

There’s an alternate, purely academic definition of “smart”, but that’s an inferior definition because it describes bright, clueless, highly verbal people as smart.

As I said, SoV, for me “smart” is morally neutral.

Evil does not necessarily prosper, but Rove sure did. There was an additional ingredient.

You are a moron, only in part because you do not understand why Rove was successful.

ScentOfViolets:
Words like “crafty” are employed to get the distinction you and John Emerson are foundering around about.
Despicable smart people. To the outraged the despicable aspect outweighs any intelligence demonstrated.
But there’s a lot of admiration out there for those who can play the system to achieve their ends, regardless of what those ends carry, morally.
Rove is crafty enough to get Machiavellian trophies.
It’s an old debate. The devil, in Christian mythology, is the craftiest of all beings. Sort of has to be, if you think about it.

>Let’s stipulate that he’s a smart guy.
I dispute that claim. I forced myself to listen to the 2 hours and 19 minutes of congressional questioning of him, Bernake, and Cox on C-SPAN. He may be smarter than Boehner and McCain, but Mr. Paulson came across as less swift than everyone who questioned him.

Thanks for the analysis, JThomas.

The Chinese are still buying US dollars in the form of Treasury bonds at this point, I believe? They are “paying” for them with their exports, subsidizing our lifestyle in the process.

James Fallows from The Atlantic seems to have thought about these issues …

http://www.theatlantic.com/doc/200801/fallows-chinese-dollars