Citizen G'kar: Musings on Earth: Brad DeLong: Paul Krugman's Right, The Paulson Plan Will Fail

October 06, 2008

Brad DeLong: Paul Krugman's Right, The Paulson Plan Will Fail

Three weeks ago Paul Krugman said that the Paulson plan would do little or no good--that the key was to recapitalize the banking system, and that simply buying up assets at current market values wouldn't do that: we needed nationalization. I countered that a smart version of the Paulson plan would allow for the Treasury to buy equity as well as to buy up debt, and I deployed a portfolio-balance model to argue that even debt purchases could stabilize the market and, by raising the prices of risky and long-duration assets, recapitalize the banking system.
The stock market strongly suggests that I was wrong, and that Paul was right:
SPX - S&P 500 Index Stock charts - CNNMoney

When you consider that these are short-selling-free prices--that these don't include the opinions of those who want their portfolios to have a less-than-zero stock share--and that true prices are now somewhat lower, the case that Paul Krugman was right is even stronger.

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Quotes

"Any society that would give up a little liberty to gain a little security, will deserve neither and lose both."
- Benjamin Franklin (1706-1790), First US Ambassador to France

"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy."
- James Madison (1751-1836), 4th U.S. President and author of the U.S. Constitution

"When fascism comes to America, it will be wrapped in the flag and carrying the cross."
- Sinclair Lewis, (It Can't Happen Here, 1935)

"Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people. The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of a private power to a point where it becomes stronger than the democratic state itself. That, in its essence, is fascism - ownership of government by an individual, by a group, or by any other controlling private power."
- Franklin D. Roosevelt (1882-1945), 32nd US President

"...An empire is a despotism, and an emperor is a despot, bound by no law or limitation but his own will; it is a stretch of tyranny beyond absolute monarchy. For, although the will of an absolute monarch is law, yet his edicts must be registered by parliaments. Even this formality is not necessary in an empire."
- John Adams (1735-1826), 2nd American President

"I'm the commander in chief, see, I don't need to explain, I do not need to explain why I say things. That's the interesting part about being president. Maybe somebody needs to explain to me why they say something, but I don't feel like I owe anybody an explanation."
- George W. Bush, quoted in Bob Woodward's book 'Bush at War'

"'Come, you blessed of My Father, inherit the kingdom prepared for you from the foundation of the world: for I was hungry and you gave Me food; I was thirsty and you gave Me drink; I was a stranger and you took Me in; I was naked and you clothed Me; I was sick and you visited Me; I was in prison and you came to Me.' Then the righteous will answer Him, saying, ‘Lord, when did we see You hungry and feed You, or thirsty and give You drink? When did we see You a stranger and take You in, or naked and clothe You? Or when did we see You sick, or in prison, and come to You?’ And the King will answer and say to them, ‘Assuredly, I say to you, inasmuch as you did it to one of the least of these My brethren, you did it to Me.’"
- Matthew 25:34-40 (New King James Version)

"A free society cherishes nonconformity. It knows that from the non-conformist, from the eccentric, have come many of the great ideas of freedom. Free society must fertilize the soil in which non-conformity and dissent and individualism can grow."
- Henry Commager

"I came to understand that I am not the light or the source of light. But light -- truth, understanding, knowledge -- is there, and it will only shine in many dark places if I reflect it."

- Alexander Papaderosby

"Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship. ...but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."
- Herman Goering
Hitler's Reichsmarschall

"When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." - Dom Helder Camara

If a free society cannot help the many who are poor, it cannot save the few who are rich.
John F. Kennedy

Those who make peaceful revolution impossible will make violent revolution inevitable.
- John F. Kennedy

To announce there must be no criticism of the President, or that we are to stand by the President, right or wrong, is not only unpatriotic and servile, it is morally treasonable to the American public.
- Teddy Roosevelt

Tolerance implies no lack of commitment to one's own beliefs. Rather it condemns the oppression or persecution of others.
- John F. Kennedy

Too often we... enjoy the comfort of opinion without the discomfort of thought.
- John F. Kennedy

War will exist until that distant day when the conscientious objector enjoys the same reputation and prestige that the warrior does today.
- John F. Kennedy

The very word 'secrecy' is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths, and to secret proceedings.
- John F. Kennedy

We are not afraid to entrust the American people with unpleasant facts, foreign ideas, alien philosophies, and competitive values. For a nation that is afraid to let its people judge the truth and falsehood in an open market is a nation that is afraid of its people.
- John F. Kennedy

I look forward to a future in which our country will match its military strength with our moral restraint, its wealth with our wisdom, its power with our purpose.
- John F. Kennedy

Our lives begin to end the day we become silent about things that matter.
- Martin Luther King, Jr.

A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.
-Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

"I consider trial by jury as the only anchor yet imagined by man by which a government can be held to the principles of its constitution....
A little rebellion now and then ... is a medicine necessary for the sound health of government....

The price of freedom is eternal vigilance."
- Thomas Jefferson (1743-1826)

"The majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest breaks up the foundations of society"
- Thomas Jefferson

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."
- C. S. Lewis (1898-1963)

"The welfare of the people in particular has always been the alibi of tyrants, and it provides the further advantage of giving the servants of tyranny a good conscience."
- Albert Camus (1913-1960)

"He that would make his own liberty secure, must guard even his enemy from oppression; for if he violates this duty he establishes a precedent that will reach himself."
- Thomas Paine (1737–1809)

The church must be reminded that it is not the master or the servant of the state, but rather the conscience of the state. It must be the guide and the critic of the state, and never its tool. If the church does not recapture its prophetic zeal, it will become an irrelevant social club without moral or spiritual authority.
- Martin Luther King, Jr., Strength to Love, 1963.

This I believe to be the privilege and the burden of all of us who deem ourselves bound by allegiances and loyalties which are broader and deeper than nationalism and which go beyond our nation's self-defined goals and positions. We are called to speak for the weak, for the voiceless, for the victims of our nation and for those it calls 'enemy,' for no document from human hands can make these humans any less our brothers.
- Martin Luther King, Jr., Beyond Vietnam: A Time to Break Silence, 04-06-67

Somehow this madness must cease. We must stop now. I speak as a child of God and brother to the suffering poor of Vietnam [Iraq]. I speak for those whose land is being laid waste, whose homes are being destroyed, whose culture is being subverted. I speak for the poor in America who are paying the double price of smashed hopes at home and death and corruption in Vietnam [Iraq]. I speak as a citizen of the world, for the world as it stands aghast at the path we have taken. I speak as an American to the leaders of my own nation. The great initiative in this war is ours. The initiative to stop it must be ours.
- Martin Luther King, Jr., The Trumpet of Conscience, 1967.

Nonviolence is the answer to the crucial political and moral questions of our time: the need for man to overcome oppression and violence without resorting to oppression and violence. Man must evolve for all human conflict a method which rejects revenge, aggression and retaliation. The foundation of such a method is love.
- Martin Luther King, Jr., Nobel Prize acceptance speech, Stockholm, Sweden, December 11, 1964.

Man was born into barbarism when killing his fellow man was a normal condition of existence. He became endowed with a conscience. And he has now reached the day when violence toward another human being must become as abhorrent as eating another's flesh.
- Martin Luther King, Jr., Why We Can't Wait, 1963.

The curse of poverty has no justification in our age. It is socially as cruel and blind as the practice of cannibalism at the dawn of civilization, when men ate each other because they had not yet learned to take food from the soil or to consume the abundant animal life around them. The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

Discrimination is a hellhound that gnaws at Negroes [minorities] in every waking moment of their lives to remind them that the lie of their inferiority is accepted as truth in the society dominating them.
- Martin Luther King, Jr., speech, Southern Christian Leadership Conference, Atlanta, Georgia, August 16, 1967.

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that. Hate multiplies hate, violence multiplies violence, and toughness multiplies toughness in a descending spiral of destruction....The chain reaction of evil--hate begetting hate, wars producing more wars--must be broken, or we shall be plunged into the dark abyss of annihilation.
- Martin Luther King, Jr., Strength To Love, 1963

Like an unchecked cancer, hate corrodes the personality and eats away its vital unity. Hate destroys a man's sense of values and his objectivity. It causes him to describe the beautiful as ugly and the ugly as beautiful, and to confuse the true with the false and the false with the true.
- Martin Luther King, Jr., Strength To Love, 1963.

Human salvation lies in the hands of the creatively maladjusted.
- Martin Luther King, Jr., Strength to Love, 1963.

The bombs in Vietnam [Iraq} explode at home; they destroy the hopes and possibilities for a decent America.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

We must combine the toughness of the serpent and the softness of the dove, a tough mind and a tender heart.
- Martin Luther King, Jr., Strength to Love, 1963.

Power at its best is love implementing the demands of justice. Justice at its best is love correcting everything that stands against love.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

The Negroes of America had taken the President, the press and the pulpit at their word when they spoke in broad terms of freedom and justice. But the absence of brutality and unregenerate evil is not the presence of justice. To stay murder is not the same thing as to ordain brotherhood.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

Many of the ugly pages of American history have been obscured and forgotten....America owes a debt of justice which it has only begun to pay. If it loses the will to finish or slackens in its determination, history will recall its crimes and the country that would be great will lack the most indispensable element of greatness--justice.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

We must combine the toughness of the serpent and the softness of the dove, a tough mind and a tender heart.
- Martin Luther King, Jr., Strength to Love, 1963.

Power at its best is love implementing the demands of justice. Justice at its best is love correcting everything that stands against love.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

The Negroes of America had taken the President, the press and the pulpit at their word when they spoke in broad terms of freedom and justice. But the absence of brutality and unregenerate evil is not the presence of justice. To stay murder is not the same thing as to ordain brotherhood.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

Many of the ugly pages of American history have been obscured and forgotten....America owes a debt of justice which it has only begun to pay. If it loses the will to finish or slackens in its determination, history will recall its crimes and the country that would be great will lack the most indispensable element of greatness--justice.
- Martin Luther King, Jr., Where Do We Go from Here: Chaos or Community?, 1967.

Man is man because he is free to operate within the framework of his destiny. He is free to deliberate, to make decisions, and to choose between alternatives. He is distinguished from animals by his freedom to do evil or to do good and to walk the high road of beauty or tread the low road of ugly degeneracy.
- Martin Luther King, Jr., The Measures of Man, 1959.

Nonviolent action, the Negro saw, was the way to supplement, not replace, the progress of change. It was the way to divest himself of passivity without arraying himself in vindictive force.
- Martin Luther King, Jr., Why We Can't Wait, 1964.
ished from animals by his freedom to do evil or to do good and to walk the high road of beauty or tread the low road of ugly degeneracy.
- Martin Luther King, Jr., The Measures of Man, 1959.

Nonviolent action, the Negro saw, was the way to supplement, not replace, the progress of change. It was the way to divest himself of passivity without arraying himself in vindictive force.
- Martin Luther King, Jr., Why We Can't Wait, 1964.