Posts Tagged ‘financial crisis’

Instead of a $25 bn bailout …

November 21, 2008

… of the auto industry, how about a $25 billion Treasury-managed automotive venture fund?

The new ventures would claw back some of the jobs that Detroit is shedding. And it would position the US as the center of 21st century automotive technology and innovation.

And, hey, if GM/Ford are indeed the best recipients of capital for innovation (especially green innovation), as some of the bailout supporters claim,  they would still win the funds. But they are probably not, of course.

Seth Godin agrees, I think.

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Homer Simpson’s line should now read…

October 11, 2008

… “in theory Capitalism works. In theory.” 

What will the economic crisis do to:

1) The age at which we “settle down,” marriage or otherwise? (Jana’s question)

2) The allocation of talent between industries and professions?

3) The rate of innovation, financially or otherwise?

4) Worldwide economic integration?

My initial guesses would be 1) reduce it slightly 2) better align it to the optimal 3) stagnation over the next year, rapid acceleration of the next five 4) further integration as worldwide capital gushes to shore up financial institutions everywhere.

It is not immediately obvious to me that a dislocation and rebuilding of our economic infrastructure is necessarily a bad thing. Although it certainly won’t be pretty in the short term.

Assorted thoughts on the financial crisis

September 26, 2008
  1. I don’t understand the crisis. You don’t understand the crisis. 90% of the people writing about the crisis don’t understand the crisis (most guilty: Matthew Yglesias). You need a PhD and lifetime of work in finance / economics to understand the crisis and if this isn’t you then you don’t have the answers.
  2. My work mates were discussing whether this signals the beginning of the end for US hegemony.  Startlingly, the consensus was “yes” and no one challenged it. Laura volunteered “can we turn it back or is it too late?” Opinions were mixed. To me the other important question is “as a global society, do we want to turn it back?”
  3. Disruption always creates some chaos. Often it is followed by innovation. Call me optimistic, but I see this spurring a wave of innovation in the financial sector.  Katie sent me a quote: “Every financial system tests every regulatory system to destruction.” The idea that the financial system grows to put pressure on the bounds of the regularity system, requiring a new regulatory system seems very healthy to me. One step back, two steps forward. I hope.
  4. The executive compensation discussion is a red herring
  5. Related to 1) — given that our elected officials (who really have no more of a financial /economic background than you or I) are voting on this, I hope they have some smart advisers. Who is actually crafting these plans? Sure as hell isn’t the Senators themselves.
  6. $700 billion is a cartoonish and meaningless amount of money. Per taxpayer it is a few thousand dollars. We are not going to be sent a bill from the US government though. It will be debt financed like the Iraq War and pretty much everything else. If there was feedback between government apppropriations and tax bills, there might be more appetite for fiscal restraint. As it stands, this has more in common with personal credit card debt or a home equity line.  It feels like free money. If our tax bill went up in accordance to government expenditure (or if the future tax incidence was indicated on our tax form), this would all be more real.
  7. If enterprises are not, occasionally, failing are we being too risk-averse as a society and curtailing our potential economic growth? Occasional failure is probably healthy. Widespread failure certainly isn’t.
  8. Better safe than sorry: I am going to start building an Ark. Anyone selling 15,000 cubits of gopher wood?