How Poker Explains the Wall Street Meltdown

21 Oct

Bill Maher on the October 17 episode of Real Time with Bill Maher offered a clip of a quote from the Federal Reserve chairman, Marriner S. Eccles, who served from 1934 to 1948, and retired from the Board of Governors in 1951.

In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

At the least, this is an efficient illustration of a cause for the current financial meltdown. Here’s the complete quote Maher excerpted.
Steve McDevitt, after offering the Eccles quote as a foil to Milton Friedman monetary policy, goes on to conclude that Senator Barack Obama’s fiscal policy, devised by University of Chicago advisers, trumps Republicans supply-side nonsense and populism.

Following this line of reasoning Obama would be opposed to more adjustment of the interest rate by the Fed. This would be a move that seeks to make credit more available to consumers or investors. Instead, Obama seems to be advocating what I would consider the more sound policy of organically growing both purchasing power and investment capital (the grassroots mentality apparently filters through to his governing style as well). The way he seems to be doing this without the federal government engaging in active monetary or fiscal policy (as opposed to laissez-fair monetary and fiscal policy) is through wealth redistribution by tax restructuring.

While some may disagree with these conclusions there is no doubt that there is heavy intellectual and rational thought going into the formation of Democratic economic and tax policy. It is not just populist rhetoric, as some Republicans claim. Here is a list of Obama’s economic advisors with links to their profiles and other articles just in case you’d like to see what their theoretical backgrounds are.

Listening to Senator Bernie Sanders is a bit of a red herring, since FDR, Eccles, and Obama are not devising ways of deploying socialism in the US. It just goes to show that there is a place for a redistributive fiscal policy in a capitalist society.

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