Most "experts" are clueless

Torpedoing the world economy took thousands of “experts” working in concert to stuff their bank accounts before the inevitable consequences of their gambling (with other people’s money) habit and “talent” for selling crap at premium prices to trusting victims materialized.

It’s now taking a Federal Reserve, Treasury and White House of “experts” to re-arrange deck chairs as the Titanic sinks to the ocean floor.

Paul Krugman believes officials overseeing the financial system rescue have failed to craft an adequate rescue plan because they’re still living on Fantasy Island:

Why do officials keep offering plans that nobody else finds credible? Because somehow, top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as “toxic waste,” are really worth much more than anyone is actually willing to pay for them — and that if these assets were properly priced, all our troubles would go away.

Thus, in a recent interview Tim Geithner, the Treasury secretary, tried to make a distinction between the “basic inherent economic value” of troubled assets and the “artificially depressed value” that those assets command right now. In recent transactions, even AAA-rated mortgage-backed securities have sold for less than 40 cents on the dollar, but Mr. Geithner seems to think they’re worth much, much more.

And the government’s job, he declared, is to “provide the financing to help get those markets working,” pushing the price of toxic waste up to where it ought to be.

What’s more, officials seem to believe that getting toxic waste properly priced would cure the ills of all our major financial institutions. Earlier this week, Ben Bernanke, the Federal Reserve chairman, was asked about the problem of “zombies” — financial institutions that are effectively bankrupt but are being kept alive by government aid. “I don’t know of any large zombie institutions in the U.S. financial system,” he declared, and went on to specifically deny that A.I.G. — A.I.G.! — is a zombie.

Recovery will remain impossible until officials face facts and accept reality. Amazingly, the American people have moved on to anger and depression while the “experts” possessing all the fancy charts and models, deep knowledge of the Great Depression, and supposed ability to make thoughtful, rational decisions are stuck at denial and immobilization.

Posted by James on Friday, March 06, 2009