Brad DeLong resorts to the apocalypse:
Q: What is the Geithner Plan?
A: The Geithner Plan is a trillion-dollar operation by which the U.S. acts as the world’s largest hedge fund investor, committing its money to funds to buy up risky and distressed but probably fundamentally undervalued assets and, as patient capital, holding them either until maturity or until markets recover so that risk discounts are normal and it can sell them off–in either case at an immense profit.
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.
Don’t get me wrong. He may be completely right about everything he says; my critique is with his rhetoric, not his economics. Something shifty happens when you grant, right from the start, that a very likely thing is not worth thinking about because if it is, the world is over. The world is never over! The “deckchairs on the Titanic” metaphor is a nice way to belittle people who prefer to rearrange deckchairs rather than address the iceberg, but the world is not a ship, ontologically defined by whether it is sinking or floating; the world is a place in which history has a way of going forward, even if those living in it have difficulty imagining how.
This was my critique of some of David Simon’s more pessimistic moments; he, too, talked about “going down with the ship,” and he can if he wants to, but if journalism is dying, I predict that it will be replaced by something else and declare that that something else will be profoundly important. Life always goes on, somehow, and maybe badly, but the character and dynamism of its continuity is of profound importance for those of us who want to live in the future.
By the same token, no fair bracketing off the “toxic assets” assesment: everything I’ve read suggests that the majority of these assets are not undervalued, that they really are basically worthless, and that we do live in a world economic system that’s just lost all four engines. But the difference between a controlled crash-landing, where most of the passengers have a good chance of survival, and pretending that the engines still work (because the alternative is too dire to imagine) is extremely important, and needs to part of this discussion. To ignore it would be stupid, almost suicidal. Or rather, it’s a kind of thinking that those members of our society equipped with parachutes are more likely to indulge in, isn’t it? They can afford the fallacy. They’re not the ones flying coach.