Response to Brad Delong
By Earlier today, Brad Delong observed:
At the moment “Fear of Reese Witherspoon Look-Alikes on the Pill” has 116 comments, while “The Geithner Plan FAQ” has only 89 comments. I confess this leaves me somewhat disappointed: I thought money would be dominating by this point…
It’s a fair point. The mockery of Douthat’s all too public sexual peculiarities is a grand internet tradition, but at the end of the day, we all knew that Bill Kristol’s slot would be filled by a ridiculous person, and the particular nature of that ridiculousness is pretty inconsequential. The current ongoing collapse of the global economy is a much more serious matter. As someone who has little economic security to speak of, I’m particularly concerned. Obviously, I very much hope that Delong’s apparent relative optimism about Geithner’s plan is warranted. But I must register some frustration with this part of his FAQ:
Q: What if markets never recover, the assets are not fundamentally undervalued, and even when held to maturity the government doesn’t make back its money?
A: Then we have worse things to worry about than government losses on TARP-program money–for we are then in a world in which the only things that have value are bottled water, sewing needles, and ammunition.
On one level, this is a fine example of Delong’s well known dry wit. On the other hand, it’s a somewhat disturbing evasion. The possibility that the assets in question are not fundamentally undervalued seems like a very serious possibility to me (I’d say a likelihood). Indeed, if one makes the seemingly plausible assumption that property values will continue to decline until they reach something in the neighborhood of pre-bubble trendlines, they’ve got a fair amount left to fall, which is one of several reasons the ‘undervalued’ assumption looks potentially suspect. So what I’d ask for from Delong is a more serious answer to the “what if the assets are not currently undervalued?” He’s got a number of readers who probably don’t know whether they should actually be investing in bottled water, sewing needles and ammunition. Delong should give a more direct account of how he sees things playing out under Geithner plan under the less than optimistic scenario, because I have no idea how tongue-in-cheek the above response is.