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Since markets are effectively based on beliefs even beliefs about other people8217;s beliefs, how the markets react...

Since markets are effectively based on beliefs even beliefs about other people8217;s beliefs, how the markets react to the bailout depends not only on its real consequences, but on the belief of the markets in the plan8217;s efficiency. The bailout may work even if it is economically wrong.

There is a close similarity between the speeches Bush has given since the crisis began and his addresses after 9/11. Both times, he evoked the threat to the American way of life and the necessity of fast and decisive action to cope with the danger. Both times, he called for the partial suspension of American values guarantees of individual freedom, market capitalism in order to save the same values.

Faced with a disaster over which we have no real influence, people will often say, stupidly, 8220;Don8217;t just talk, do something!8221; Perhaps, lately, we have been doing too much. Maybe it is time to step back, think and say the right thing. True, we often talk about doing something instead of actually doing it 8212; but sometimes we do things in order to avoid talking and thinking about them. Like quickly throwing 700 billion at a problem instead of reflecting on how it came about.

8230;The problem is that there is no way to separate the welfare of Main Street from that of Wall Street. Their relationship is non-transitive: what is good for Wall Street isn8217;t necessarily good for Main Street, but Main Street can8217;t thrive if Wall Street isn8217;t doing well 8212; and this asymmetry gives an a priori advantage to Wall Street8230;Throw enough money at Wall Street, and it will eventually trickle down to Main Street. If you want people to have money to build, don8217;t give it to them directly, help those who are lending it to them. This is the only way to create genuine prosperity 8212; otherwise, the state is merely distributing money to the needy at the expense of those who create wealth.

It is all too easy to dismiss this line of reasoning as a hypocritical defence of the rich. The problem is that there is a truth in it: the collapse of Wall Street really will hit ordinary workers. That is why the Democrats who supported the bailout were not being inconsistent with their leftist leanings.

Extracted from an article by Slavoj Zizek in the 8216;London Review of Books8217;