September 19, 2008

Different Methods of Analysis: Public versus Private Agendas and Goals

I'm already receiving emails questioning one passage in particular in my post earlier today. The passage is this one:
Third, and I underscore this at least ten times, insofar as their publicly proclaimed aims are concerned, no one knows what they're doing.
[See also, Krugman, "Uneasy feelings": "But while Paulson and Bernanke are a lot better than the people we might have had in there (thank you, Harriet Meiers!), their track record to date does not lead to the automatic conclusion that they know what they’re doing. "]

I now emphasize this phrase from my earlier entry: "insofar as their publicly proclaimed aims are concerned..." I recently wrote in some detail about two different methods of analysis: see, "Death Match (III): Follow the Money." The critical difference is that between what government officials and other members of the ruling class say publicly (and whether and to what extent they may believe what they say publicly), and what may be profoundly different purposes and concerns that motivate them privately.

With much more to come on this subject, including how the different kinds of analysis manifest themselves with regard to the economic meltdown, I offer part of one of the emails I've received on this question. With the emailer's permission (and many thanks to this person), I am reprinting it, having made certain editorial alterations (with the emailer's approval), so that identities won't be revealed:
I suspect that the no "one knows what they're doing" trope goes too far. I think that most of them know that there is no way to prevent the ultimate blood bath and know they're just deferring it a bit. But the deferral is the point. They're shoring up the illusion that the system will be fine just long enough for the big dogs at the top to liquidate a lot of their now somewhat depreciated but still substantial remaining holdings in stock, real estate etc. and get their wealth into some secure hard assets before the crash wipes out the stock market and financial system.

I'm a XXX. One of our clients, a former CEO of a large company, moved his money into Treasuries on Monday, and was talking to me on Tuesday about this crisis and saying that he is thinking that maybe he should buy a farm in upstate New York or Canada where he could grow his own food [emphasis in original] and have a retreat for himself and his family to weather the coming downfall, and considering openly whether it is time to start hiding cash in mattresses. Just think about that for a second. This person was a CEO of a major company. This is what he is thinking.

I'm no financial wizard, but if I had to guess, I'd say that the manipulations going on right now are not unlike the Enron Board of Directors telling its employees to keep buying the company stock right before the company went bust, knowing that the company was about to go bust. They just need us to keep the stock market and credit market going for them a little longer, while they position themselves to weather the storm.
In connection with this email, take a look at that earlier essay of mine, and pay special attention to Robert Higgs' analysis. But I emphasize that, in my view, the two kinds of analysis should not be viewed as being fundamentally opposed to each other -- but rather, they should be viewed as complementary. They represent different perspectives on the same question, as discussed in the earlier piece concerning foreign policy.

More to come on all this, if you can stand it (and if I can).