History Doesnt't Repeat, but it Rhymes

Here's a pattern: it's not a big deal, but it explains something about the departing administration.

Start with Social Security privatization reform. Seems to me one reason it failed is that nobody could come up with a plausible story linking the disease (Social Security is insovent!) with the remedy (send it to Wall Street!). I've entertained myself with a thought experiment asking: what if somebody had come up with a full-scale Chilean plan--everybody gets an off-the-rack opt-out IRA, together with a "safety net put" against starvation. Should it have passed? I won't say for sure although I admit I am intrigued (the devil is still in the details). Would it? Perhaps not; there was, even then, just too much distrust against the motives of the Bush administration. Well-deserved, of course, but it would have proven a formidable barrier for a proposable much more plausible than the one we got. That one was beyond right or wrong--it was incoherent.

Flash forward to Bear Stearns. In retrospect, I don't think anybody quite understands what our masters thought they were accomplishing in "saving" Bear Stearns by delivering a big wet kiss to JP Morgan Chase. And I suspect our masters themselves pretty soon figured out it was a hard one to justify. So when Lehman came along they were already wrong-footed: we screwed it up last time, we don't dare try again.

And then, of course, came the total debacle of the "first bailout," which nobody can now explain except in the sense of "seemed like a good idea at the time."

I suppose a common thread here is some sort of ideological commitment to free markets at any cost. But repeat after me, children: a market is not a gift from the clouds. A market is a cultural artifact that must be cosseted and nourished. We'll pull through somehow, though not as successfully or as soon as we might have with better planning. Someday, as the fella says, we'll look back on all this and laugh. Just like we do on the Great Depression.