I remember some folks telling me that the Lehman bankruptcy would be no biggie. [Whaaaat? “That’s how capitalism works!”], they said.
Seems they are right. You declare bankruptcy and badabing-badaboom a little over three years later everything is cleared up. Easy peasy.
One-time financial powerhouse Lehman Brothers emerged from bankruptcy on Tuesday and is now a liquidating company whose main business in the coming years will be paying back its creditors and investors.
Lehman, whose September 2008 collapse is often regarded as the height of the financial crisis, will start distributing what it expects to be a total of about $65 billion to creditors on April 17, it said in a statement.
That first group of payments to creditors, many of whom lost money in its collapse 3-1/2 years ago, will be at least $10 billion, Lehman has said previously.
The move is a legal milestone, but does not indicate the immediate end of Lehman Brothers.
We always said that after the storm had passed the seas would be calm, and here you go.
[callout]A CONCEPTUAL GEM: …the knowledge necessary to estimate the risk in any investment is not reducible to numbers that are semantically portable between individuals and therefore not convertible to commodities.[/callout]
But this *IS* how capitalism works. That organization will be gutted and torn apart and investors who supported their behavior will be punished. That we have created an institutional framework for the distribution of liquidity that cannot tolerate human failure is a comment about our foolhardiness in governance.
The solution to banking is the Swiss method: if you invest in it you own it, since the knowledge necessary to estimate the risk in any investment is not reducible to numbers that are semantically portable between individuals and therefore not convertible to commodities. That strategy would lead to lower interests rates and near zero consumer interest rates.
Of course, this would throw havoc into your innovations on the ISMP curve, but it would require we spend and provide liquidity differently than we recommend now.
It’s the answer you know. Not MMT.
Numbers are a knowledge problem.
And yes, the purpose of the system is to teach us fables. You’re just a prisoner of your method, and the inherent assumption that smart people can solve complex problems. And that’s a convenient illusion.
(This last bit is a reflection of one of his earlier posts that openly states that economic failure is not informative nor do we learn from it. Really. That’s his position. Really. I know. It’s crazy.)