Here's what he notes:
I think most readers of this site will understand the meme that somehow the recent Wall Street meltdown represented “unfettered capitalism under George Bush” is absurd. The US financial industry is the most highly regulated sector of the economy, and George Bush was in no way a free market capitalist. Bill Clinton, for example, had a better laissez faire record than Bush, in my scoring.
But those pushing for a Euro-Japanese style corporate state (e.g. Barrack Obama) might beware. It probably comes as no surprise the US economy has outperformed the EU and Japan over the last decade, but would you believe we have also out-performed them over the last year? The chart below is from Paul Kedrosky, and shows GDP indexed to 4Q07 (the graph is not the way I would have drawn it — the third small hash mark is actually the fourth, not the third, quarter).
Coyote's note on Bill Clinton is ironic, as Bubba is out there today telling everybody that if he'd been around (drat that term limitations thing), he'd never have allowed a global economic meltdown in the first place.
Coyote also makes another point about the unintended consequences to small businesses about the current bank bail-out plan:
Running a small business over the last few months, I have found that the credit we need to expand is not unavailable, but is harder to get. Banks and individual investors are asking for tougher terms, more collateral, and are being pickier about what they will fund. All totally normal and unsurprising (though stressful if you are in the middle of it).
The one thing small borrowers like myself have in our favor: Eventually, lenders have to lend and investors have to invest. They simply cannot just put all their money in the vault or the mattress. The money they hold, in deposits and CD’s and whatever else, has a cost, as do their operations staff. These costs have to be covered. The only way they have of doing so (short of switching businesses) is to put their free cash to work. They have to lend it and invest it. It’s a useful thing to remember in this world dominated by the cult of victimization and helplessness — that even as a borrower, you have power. Banks need you as much as you need them.
So, what does the government do now? Well, very soon, the Obama administration is going to be marketing to banks and investors an additional trillion dollars of government bonds backed by the full faith and credit of the US taxpayer as an alternative investment to funding my business. Uh, yeah, that’s sure going to help. On Thursday, I had some power with investors. Given time, they were going to have to consider my business as a place to put their money to work. Now, however, everyone can run out and park their money in a trillion dollars of new government securities that have features attached I can never match (e.g. the ability to print money or grab it at gunpoint to repay the loans).
I cover this primarily to try and focus people on a point that seems to have been lost in all the partisan wrangling over the need to do something RIGHT NOW or to have all Republicans united for FISCAL RESPONSIBILITY (this year, anyway), and that point is this:
The US and global economy are complicated, complex nonlinear systems, and nobody--not Mark Zandi, not Paul Krugman, not Lawrence Summers, and not Tim Geithner--is really sure precisely what's ahead as they start tinkering with the controls.
By analogy, I heard an aviation expert on the radio this morning talking about the recent airplane crash in upstate New York. He said the problem with turning off the auto-pilot during an ice storm and retaking manual control is that the auto-pilot neither knows nor cares what the problem is. It just compensates for greater drag or different aerodynamics and tries to fly the plane as efficiently as possible. When you turn it off, it stops. It doesn't give you an explanation, it just stops, and you inherit--immediately--the consequences of all the things it has been compensating for, usually with no warning. The result is almost always hair-raising and--far too often--tragic.
This is not to suggest that government has no role to play in markets, or stimulus, or regulation, or any of those arenas. As Dana points out with respect to what senior investment officials knew or suspected about Bernie Madoff--but never bothered to tell regulators--there have to be consequences for inappropriate behavior, and people have to have a reasonable belief that someone is enforcing those consequences. Unfortunately, this isn't a feature restricted to free markets and private enterprise: such behaviors run rampant in any large-scale organization (such as the Federal government).
(Title with all due apologies to Marty Feldman.)