I was watching the news this morning and the talking heads were all over the Michael Jackson story. But one discussion hit me as a particularly useful way for us to understand how absurd our bailout (and heavily subsidized) economy has become.
The discussion turned to the promoters of Michael Jackson's planned tour over the next year. It turns out that the promoters are going to lose a bundle in money that they fronted for the concert and did not insure. This is the easy part. We all understand that they should lose the money. This is what "investing" is all about. You roll the dice and take your chances.
But then the discussion turned to the resellers of Michael Jackson concert tickets. These people have already bought tickets with the intention of reselling them. Should the resellers (and their clients) be compensated? They think they should. Common sense, and market rules, says no. If common sense and regular market rules prevail the speculators (resellers) will not be compensated, and stand to lose a lot of money too. This is the way the market is supposed to work.
This, in a nutshell, is what the market players in our economy did. They made bets on products that had not yet matured. However, when their product went bad they went to the federal government (the U.S. taxpayer) for a bailout. They got it.
Too bad for concert ticket resellers. Somebody should tell them that they need more lobbyists in Congress.
I'm not sure, but I think this "Jackson-Ticket-Reseller" story goes a long way in helping to explain how absurd these bailouts are (we should have nationalized the failing institutions). It also helps explain how pampered and unmarket-like our financial sector has become too.
- Mark
2 comments:
interesting analogy, it works.
Dr. Martinez, you've out done yourself. I finally get it! My understanding of the bailout was still fuzzy. I understood businesses received money because they screwed up, and in doing so received govt money even though they didn't deserve it. I just didn't fully understand in what way they screwed up. I knew they were passing "stuff" along onto other business that were "no good." I just still didn't fully understand it. But when you explained the MJ ticket deal, oh man, I complete understand what the corporations did wrong. Thank you!
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