Damned if you do, damned if you don't: We're damned, folks

My opinion on the Wall Street bailout/financial stabilization package/call it what you will shifts endlessly between do it yesterday and don't do it at all.

I'm in good company with either position, it seems. I'll be the first to admit I'm basing my ever-shifting opinion on things I read that make sense, because I just can't delve too deeply into the economic crisis without being fluent in Martian. When both sides can present convincing arguments, I end up vacillating. The trouble is, I have no idea who's really fluent in Martian and who's faking it.

In a case like this I go looking for people who have a good track record predicting outcomes. And when I go looking for such people in this current situation, the first one I stumble across is Nouriel Roubini.

Here's a man, as Wikipedia notes, "unusual in his talent with both mathematics and intuitive understanding of economic institutions". He has correctly predicted every financial paroxysm of this crisis so far. Once dismissed as a "permabear", he's earned increasing respect from the mainstream. Every time economists have suggested the worst is behind us, he's said they're wrong. Pessimistic? I'm reminded of what Leonard Cohen said when asked if he was a pessimist: "I don't consider myself a pessimist. I think of a pessimist as someone who is waiting for it to rain. And I feel soaked to the skin."

Of course, Roubini was off by a couple of years--in late 2004, he said we'd be facing turmoil by 2006. Economists almost always are off, when they're talking about coming recessions. In fact, most economists seem reluctant to predict recessions at all...who wants to be the bearer of bad news? And yet, every economy is subject to recession. In the immortal words of Blood, Sweat and Tears, "What goes up...must come down".

It was, I think, the delusion (primarily American) that what goes up can just keep on going up forever that led us into this mess. Wall Street kept on devising cleverer and cleverer ways to keep the music playing and eventually they clevered themselves--and all of us right along with them--in the proverbial nuts. The wind is blowing: the house of cards is starting to come down. Says Roubini: "We have a subprime financial system, not a subprime mortgage market".

His critics suggest Roubini's prognostications are no different than those of people who read Revelation and see the End Times lurking behind every burning bush. Indeed,  Roubini has stockpiled his reasons for economic collapse: rising trade deficits, current account deficits, Hurricane Katrina, soaring oil prices, and most recently debt in all its forms. These critics seem to be missing the point: maybe one of these factors isn't enough to push us over a cliff, but all of them in concert will give us a mighty shove.

So what does he say could be next? The mother of all bank runs.
This is likely to happen with or without the bailout, argues Roubini. As usual, my problem is thinking that financial institutions will use this money for its intended purpose: to inject liquidity into the market. Instead, they're hoarding it. There Ken goes again, naively thinking the common good might trump greed for a change.

I'd suggest we pay very close attention to matters financial over the next month or two. If Roubini's right again, we'll eventually see: money kept under mattresses and buried in backyards; money exchanged for precious metals or anything of lasting material value; millions upon millions of dollars in savings wiped out...and I refuse to speculate further, for fear of being dismissed as just another fear-mongerer...just another pessimist...just another Roubini.