The Mad Magazine motto worked itself out pretty nicely over the last couple of days, with record gains on the NYSE from the jumping-out-of-windows mark to the coming-in-off-the-ledge levels of moderate loss. It simply WAS to be that way, and hence forward for the next couple of years--no, no ... not soon enough, ye gods forfend, to infect the upcoming election day with any kind of McCain/Palin/Republican resurgency and turn the tide for them--as the Economy stabilizes. As it will, if only because echoing in the back of everybody's mind is the refrain, "the Democrats are coming ... the Democrats are coming." They'll fix IT, just like F.D.R. and Bill Clinton did. It's a 99% placebo effect, I'm convinced. Because nobody really knows for sure how to get a grip on this Protean/Procrustean monster.
Except Alfred E. Newman, and his school (see #92). Print lots of money; lend it to almost anybody. Treas. Sec. Paulson's now even shipping it overseas. And, as I predicted, it's working. (But please don't BUY anything, Henry. Way too far from free-market principles for me. Usury, OK. Outright purchase, no-no. Let the banks use the loan-money to buy back bad assets from themselves, if need be. They need the practice.) Of course this exaggerates 20th C. liberal economics, which was the the other side of my liberal education in the field. Sherill Cleland (see last post) in his Econ 101 class at K-College was the purveyor (indeed actor, in a minute) of the Pump-up-the-economy-when-necessary-with-federal-funds Theory. He had the aid of still-one-of-my-favorite books, Heilbruner's The Worldly Philosophers, still-in-classroom-use in later editions, I'm sure, across the known world. The text, as I recall, took us through the preliminaries and up to classical Adam Smith and Parson Malthus (Darwin's and Aldous Huxley's favorite), then ultimately to Marx and J.M. Keynes and the economic activists. In fact, there seemed to be a kind of Darwinian agenda to the book, as if really all that went on before was leading inevitably to Keynesian Economics (I don't know about later editions, where Friedman and his conservative ilk might come into play). And I was sold, just as I been on the tee-total free-marketers in H.S. Civics.
These were the Kennedy-Johnson years, after all, where the Keynsian J.K. Galbraith held sway at almost cabinet level, and where Dr. Cleland his-very-self was called upon by the that administration to help pump some good-will American money into several Latin American countries on the edge of what we're facing now. (He took a leave of absence as a kind of financial ambassador for several years shortly after I luckily had my class with him, and didn't return until after I graduated.) But that's basically the theory: modulate and moderate and even preempt the ups and downs of the economy with a "liberal" flow of funds from the government treasury.
What the heck: I swing back and forth in a bi-fiduciary kind of way, man. Let the ghosts of Adam Smith and Fred Hayek hover over a REGULATED (some of what's been going on smacks of simple fraud) Free Market most of the time. But when it's in extremis, as it is now, boogie down with a dose of Marx and Galbraith, and let the Monopoly money flow. Alfred E. Newman would approve.
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