Saturday, September 20, 2008

Sovereign is he who decides....

There’s no free lunch and no free economy
By Christopher Caldwell

“Sovereign is he who decides whether there is a state of emergency,” wrote the German legal philosopher Carl Schmitt in 1922, on the eve of the Weimar Republic’s great economic crisis. Authorities that can be bypassed in times of stress are not real authorities. Laws that are suspended when push comes to shove are not real laws. Whether this is true in all places and times, it is true for those Americans who believed, up until this week, that they were living in a capitalist country. Having been lectured that there is no such thing as a free lunch, they are coming to suspect that there is now no such thing as a free economy, either.

An extraordinary credit crisis that arose from a real-estate bubble, excess leverage and financial instruments too complicated to value has goaded the US government into action. It has begun a programme of economic interventionism more typical of socialist governments in moments of utopian zeal. In March, a Federal Reserve loan helped sweeten the sale of the dying investment giant Bear Stearns. Treasury took over the secondary mortgage giant Fanny Mae in midsummer. This week the Fed assumed a 79.9 per cent stake in AIG, the world’s largest insurer, in return for an $85bn (£47bn, €59bn) loan. On Thursday, the Fed, the Treasury and Congress began discussing a plan, potentially costing hundreds of billions of dollars, to bail out homeowners with illiquid mortgages and the banks that hold them. whole story here

1 comment:

Gabriel Hudelson said...

Wow.... Good stuff. I am glad that we live in this world, but not for this world!