Saturday, March 7, 2009

This sounds like a rhetorical question but isn't

In philosophy there is a certain special Latin term used to describe accepted premises, i.e., those things which are taken for granted in the discussion. For example, if I were pondering what God thinks about gays, I would be asserting any number of things as true for the sake of the discussion -- among them, that God exists, and that there is any sort of reality. I mean if God doesn't exist, or, indeed, gays don't exist, there's little point to trying to sort out their relationship.

I can't remember that nifty Latin term, but I would use it for the sake of this post.

So, let's assume that use of government money to stimulate the economy is a good idea. So, when we look at the issue of bank bailouts we don't just go into some sort of Republican neo-con catatonic state of rage, screaming "Socialism! Socialism!"(a)

But here's my problem. The goal of sinking public money into banks is to get them back into the habit of lending money. Thus far, billions and billions of pounds/euros/dollars have been handed over to the banks but the banks have not really started lending again. Wouldn't it be a better use of the money to simply skip the banks and have the government set up a lending programme itself? In other words, instead of giving money to Lloyds with the purpose of having Lloyds lend money to me, wouldn't it be better to let Lloyds live or die on its own and lend the money to me directly?

What am I missing here? If the goal is to get money to me, why give it to someone else first? Surely there must be some explanation (good or otherwise). Anyone know?
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(a) One of the dumbest things about America is the way we have value-weighted the word "socialism" to make it as bad as kicking babies.

2 comments:

Sionned said...

But then what would all the poor sods who work for Lloyds do for a job?

Jim Downey said...

Getting from here to there is the problem.

Loaning money to individuals isn't really what they're trying to fix - though that is a necessary component to eventual economic health - it's trying to get the banks to cover the stupid mistakes that they made in loaning money to one another, or in using risky financial instruments such as CDOs (I've written about this stuff on my blog, here's a recent entry: http://communionblog.wordpress.com/2009/03/02/its-that-time-again/ ). Basically, they have to clean up these toxic debt obligations that the banking geniuses made before anyone will risk the kind of money necessary for large capital formation & projects.

Yeah, it stinks. Personally, I'd say a good game of "pitchforks & torches" should be played first, and then the mess cleaned up, but that's just me.

Oh, and "socialism" - yeah. But you should try being an atheist here these days.

Jim D.