Tuesday, December 29, 2009

Poorly Canned Product

This Post from Tyler Cowen leads me to question the effectiveness of Government intervention in the economy. Tyler’s line of Thought is a quite excellent analysis of Fed policy and what it attempt to accomplish within its periphery. It is at this point where an alternate question assailed me: Why must economic policy always alter in mid-stride? TARP and all its complications were initially implemented to save the Banks from Insolvency. Right! Good! The thing is–the Banks have not been in trouble since about October. There was a lot of Talk at that time about long-term mortgage failures which relatively Few believed, the Crisis having passed. Tyler speaks of the desire to recapitalize the Banks, but also states that he does not want to push that Point too seriously. Why not? The first Question which must be asked is why recapitalize the Banks anyway? Banks, by the terms of their construction, do not need recapitalization at all if the majority of their financial paper is sound. They can always borrow from outside sources if they need more funds; in the final analysis, the Fed is always ready to provide the Cash. What We are talking about here is the recapitalization of Bank Profits; We are in one of the greatest Government-created Cash Cows ever designed, and there is huge pressure from the Banks on the Fed to maintain their ‘No Interest’ policy. Will it help lower Unemployment?–No! Will it actually get Banks to increase their lending with lower Contract restrictions?–No!. Do We really want this form of Government intervention?

Read through this Post from Brad Delong, which attempts to define the difference between the actual Taylor Rule, and the central banks’ interpretation Rule. The humor of it all is the fact that I believe that both Rules feed into a Bell-shaped Outcome Response, where success comes only in those Outcomes falling between 2-5% Interest rates. I have often contemplated whether there could be negative outcomes, and decided that the tails of the Bell curve of Outcomes always had to be negative. This does not bode well for Fed intervention. The tails, by the way, are created by a right-hand production of too much Lending, and the left-hand tail comes from too high a value to repayment–insisting on huge repayment demands. I await my fellow bloggers claims that I am full of it.

I will finish with this article, which discusses the fight over fees between Stations and Cable networks. I do not see what the great fight is about, as I do not see Cable networks provisioning any new programming on their networks. I have a Brother-in-law who currently watches nothing but movies from Netflicks, as nothing new can be found on Cable. Placed in the spectrum of the above argument, Stations want a high Interest rate on their Product, while Cable networks want to continue their ‘No Interest’ policy while actually restricting Product. Current Consumers are being trained to watch canned Product over and over, and Big Brother will eventually enter the arena, as Fox networks have already started to program predicted response. I wonder if Fox can understand that propaganda will only work with standardized response, and such response will not be adopted without lengthy repetition; more varied programming sharply curtails the ability to instill propaganda. lgl

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