Nantucket Nectar

In the short term, the efficacy of the government's plan to buy stakes in major banks is clear. The stock market's performance since the lows last week is a good indicator. And in terms of the financial system's immediate stability, it might be the best option. But there's a larger reality that's become unavoidable. Any system that, after barely a year of unpleasant consequences, resorts to taking money from teachers, doctors, cops, farmers, scientists, and small business owners and giving it to people like this is not only fatally flawed but deeply immoral. And the more immoral and desperate it gets, the more important it will be to punish those who balk at participating. With deflationary factors temporarily and partially supporting the dollar, that's less of an issue in the short term. But going out a year or two or five, the inflationary consequences of the government's current actions are going to knock your soon-to-be-unaffordable socks off. That would be true even if someone with this record could be trusted to adjust monetary policy in a timely fashion.

To the extent the overused term "military-industrial complex" actually describes a set of distinct interests, and to the extent those interests have skin in the current electoral game, the issue of punishing "balkers" is important. Part of the Right's lasting enmity for Jimmy Carter was his geopolitical fecklessness -- especially vis-a-vis Iran -- in a terrible economy that was defined primarily by inflation. In other words, he didn't use the military to enforce dollar hegemony (whether he could have so soon after Vietnam is another subject). The government's response to the financial crisis will be extraordinarily inflationary, and foreign nations that profit from and/or resist that will represent an even greater threat than they have recently. For those whose worldview is defined by natural resources and currencies and the unfettered ability to print money for bailouts -- in other words, those who have benefited from and been responsible for the past eight years -- the prospect of a saner foreign policy come January is a nightmare.