Strike While the Iron is Hot

Congressmen that voted down the bailout measure on Monday must be pretty pleased with themselves. After blowing $1.2 Trillion dollars of stock market value the next day - heavily damaging pension funds and 401K plans across the country, they finally passed a heavily loaded up bill that swelled from 3 pages to over 400. Now we have more sheep studies, new Nascar track facilities, subsidies for Rum producers and even some money to help bail out Hollywood. Considering the country is just about tapped out and bankrupt, what did these Congressmen vote for - saving the country's economy or their own smelly job? Of course the voted for their jobs not for the good of the country.

Where will this extra $120B come from? Will we one day raise taxes to pay it off. No, it will be monitized in the form of future inflation and further erosion of our pensions, savings and our standard of living.

The time wasted before the measure was finally approved saw further weakening of economy increasing the odds against this $700B bail out bill actually working. Credit continued to implode and asset values fell quite a lot last week. At least we did not see banks shutting down in waves like 1932.

The wisdom of the Paulson approach to get the measure voted quickly was a good one, even if the salesmanship was lacking. This episode further confirmed what has been learned over the past few centuries in dealing with these finanancial crisis by Bagehot, Hamilton, Milton Friedman and many other great economists - that time is of the essence in dealing with a crisis like this.

We can now add a striking new dimension to our understanding - the startling revelation that our elected officials will still take the time to loot the treasury even while being warned the country is on the verge of a collapse. Sherman's bummers would never have gone that far.