We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for “regulatory capital relief rather than risk mitigation”. In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.

Now, was that the Grey Lady? WaPo?

Uh, no, an article about European leaders backing down on “blame America”
Oops – not American Greed
for their banks’ failings.

If you would notice, our present system, we have to put more and more money (energy) into the system and get less and less. This is not a good trend line. People in true economic affairs( businessmen ) are escaping the friction and transaction costs by going overseas.

We had to have representative government because of the distances, and costs and inefficiency’s in communication.

Now, effectively those are zero. With the Internet, the curtain has been lifted. I’m not so upset at the shenanigans ( a great Irish word on human frailty ) as I am by the clear observation that it is not that our Representatives don’t know what they are doing, but by the haunting thought that they, nor anybody else, could know, such is the size and complexity of government and affairs.

We have seen this, so far, in the last year of efforts by Mr. Bernake and Paulson. I’m not blaming them, just pointing out that if anyone was to be an ‘expert’ with Roman like Emperor powers it would be them. So far, in their subset of the economy, they’re not doing well. Now they are swinging for the fences.

Maybe, it is but a learning curve in the unique circumstances, much like the US Military in Iraq.

As a thought experiment, let’s give Bernanke/Paulson credit like Grant got, that sooner or later, at great costs, they will prevail, we will get back to living, and some reforms will be made. Now our Grants have asked Lincoln’s Copperhead Congress for a three page marching orders, the details left to their good lieutenants at the Treasury and Federal Reserve. Congress, in supposedly the worst financial times since the Depression has come back with a novel.
Basically, Congress is saying that this is so important, that we have to be bribed to do the public good.

Hello? What is next, grants of lands for Senatorial estates?

Oh well, it took Rome 3-400 years to decay.

Paul from Florida, I’ve been meaning to read Joseph Tainter’s archeological study of that process. Cf. Glenn Reynolds:

The bailout bill — once three pages long — is now the length of a novel and larded with “sweeteners.”

Supposedly innovation can counteract complexity-based decline. Unfortunately, much contemporary innovation involves the deliberate fabrication or manipulation of complexity to the overall detriment of society.

I don’t have any faith that they are right, and if so, that they could execute it well, and if so, that they very soon wouldn’t just go back to doing the same, with the same private rewards and public costs, such that we will soon find ourselves back again, but with even greater problems.

I think this is all natural and how complex and elderly social systems decay and collapse.