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December 18, 2008

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DWAnderson

A key sentence in the above post is: "One way to think about all this is that investors have essentially delegated to the central government that which many of us would have liked investors to undertake."

Although that is "one way" to think about all this it is not a very accurate way. It assumes that investor preferences are accurately refecting in the choices of their democratically elected government. For all the legion reasons cited in public choice literature this is an unjustified assumption.

More likely is that government investment decisions are those that result from an eye toward political expediency rather than some collective reasoned judgment.

funrick

"In short, investors have "chosen" to invest in safe assets and so, in turn, the government is, even more than usual, in the position of making choices where we might prefer more signals from the private market. For that reason, it is a bit misguided to complain about all the central decisionmaking [...]"

Why is private allocation of capital in "safe assets" not a sufficient signal?

AlanDownunder

"we might prefer more signals from the private market"

Haven't we had enough such signals? Perhaps down the track if the market is no longer distorted by legislation, corrupted by political funding, gamed by crooks, informed by mythic nationalism, pervaded by group-think, overheated by wealth inequality and blindly revered by ideologues, not least those with regulatory duties.

The market's incentives to self-corruption came to vastly outweigh the ring-keepers' disincentives. Until the reverse is the case, market 'signals' will be no more dependable than those of a command economy.

Kimballcorson

Of course. Global capitalism wants the government behind it, especially the independent agents of the CIA and NSA and the big loanable bucks of world lending institutions controlled or dominated by the USA. That is how global capitalism most wants to operate. Be big, go abroad and have your doings be in the national interest at least, if not important aspects of national security. We are being wrapped without even consciously knowing it. Even the universities are coming under that corporate control. Money talks and big money talks most loudly, within or out of government.

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