The One-Minute Meltdown

It comes to this, doesn't it. There's a trillion--two trillion--however-many-trillions--of dollars that have gone missing out there. No;not "gone missing;" in truth, they never were there, but now we know they aren't there and somebody has to take it. Seems to me there are two choices:

• The taxpayers, by doling out money to buy toxic assets at inflated prices; or

• The investors, by bearing the downside risk inherent in their investments.

The way I've framed it, I suppose it sounds like I favor the latter. Well, yes, I am tempted, which I guess puts me squarely in the Krugman/Cantor wing of the commentariat. So, guilty as charged, or at least "not innocent."

I suppose the main reason for my continued hesitancy is the fact is that I still don't know (and I suspect nobody else does, either) just who are the "they" who hold all those sour investments. There seem to be so many of them, so widely distributed. The near total-collapse of accounting integrity has to beaar a lot of blame here. And of course, there is always the risk that some of those investors might turn out to be me: the long road may run direcct to my pension fund. There is also the little matter of system meltdown--a rerun or an aggravation of the kind of lockdown we fell into after Lehman Brothers went under last fall.

Are the right kind of judgment on these issues from our betters in the Seat of Power? At the risk of betraying a centrist, anti-populist vein, I'd say at that on the whole, I think so. Our Betters almost certainly have better information than we (I) do, and there is at least a chance that they dare doing right. I suppose my biggest concern on this point is a mega-populist imuplse: the intution that the bums in Washington are altogether too cozy with the people they are supposed to control--that Larry Summers (he of the $135,000 speaking fee) simply cannot countenance any solution that would impose pain on his buds around the fireplace and under the moosehead of the gentleman's club where the decisions that mess up all of our lives usually get made.

Update: It's the flavor du jour; cf. link, link.