[PEN-L:258] Re: Re: Re: Re: In Response to Jim Devine's Question

[Rob Schaap <rws@xxxxxxxxxxxxxxxxxxxxxxxxx>]

G'day Boddhi,

>	I'm not sure how you mean to apply this quote to the present.
>Would you focus us a little?

I guess I was stretching it a bit - sort of feeling Heilbroner's point
somehoe still maintained, but not quite being able to explicate it myself.
But ...

Big business is reading in its own organs that it's made a mess of things.
It perceives financial crises, and probably sees a public relations crisis
in them as well (of course, much of the rest of the world experiences it as
personal and social disaster, but that's neither here nor there).

The 'halfway measures' of external intervention aren't 'working' and
business is demonstrably not investing its apparently enormous paper assets
in the historically cheap plant now lying idle around the world.  The Right
hates the IMF because it distorts and alleviates the market's discipline.
It also happens to help plant the perception that the market ain't
disciplining what ails it at all.

There's a hint in the Kahn/Truell piece Lou just posted:

' ... the Fed's quick action to save the hedge fund from collapse has raised
other questions. Some Wall Street bankers say privately that they felt
strong-armed by the Government into putting up the $3.5 billion for the
bailout. Bakstansky, the spokesman for the New York Fed, denies this,
saying some banks chose not to participate in the bailout and that the Fed
had no way of forcing them to partake.'

Is there a new dimension of regulatory risk in all this?  Just what kind of
precedent would a CEO want to set vis the Fed?  And if you were inclined to
put your money back into production, you'd wait for the medium-term picture
to clear up a bit, eh?  (Y'know ... is the Fed's role about to change, are
international currency controls on the way back, is anyone gonna try
nationalisation again, is a new round of IMF bail-outs on the cards, would
such attempts throw themselves at the finance sector again, will
business-bashing creep into half-term election campaigns, is Greenspan
fair-dinkum about dropping rates).  And then there's 'is the greenback
creaking, could a hike then follow the drop, what's gonna happen to my bank
if Japanese banks start turning turtle, what's happened to American brand
images in foreign markets, etc'.

You could well hold fire long enough effectively to ensure a depression,
couldn't you?  It might be the individually rational thing to do in an
uncertain political economy, mightn't it?

Cheers,
Rob.