Saturday, October 18, 2008

"We’ve Seen Worse"

Richard M. Salsmen talks very rationally about the current financial panic, effectively arguing that we have seen much worse, even within recent history.

The current credit and financial turmoil was inevitable, as long as the U.S. government persisted in massively subsidizing and regulating the financial sector; and the current turmoil is no more severe than what U.S. markets suffered in 1990-1991, when junk bonds crashed and the savings-and-loan industry virtually disappeared due to similarly reckless practices. Not even the housing sector’s current troubles can be said to match those seen in the 1974-75 recession.

In the near-term, the dollar will weaken and commodity prices (especially gold) will rise, due to fears of the Treasury plan being inflationary; but in the coming quarters and years the dollar should strengthen again as commodity prices decline.
He goes on to say:

….all the scare-mongering about a potential “systemic catastrophe” or “financial cataclysm,” should a major financial institution fail, is just that: scare-mongering. These unproven (and unprovable) assertions are made by those who don’t understand the financial system, or stand on the wrong side of trades or are eager to see still more socialist power accumulate in Washington.
I wish everybody could be so level-headed.

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