While local governments trade IOUs amongst themselves with borrowed dollars the savvy folks at the national level are busy hightailing it to the exits.

San Diego plans on borrowing money to buy more IOUs. Congress is racing to let businesses escape 80 billion dollars in obligations.

The best I can hope for is that the State Treasurers are just plain idiots -- which is not as bad as if they are orchestrating the transfer of the full risk of the certain drop in stocks to the taxpayer on behalf of business interests. Even Bill Gates has recently warned that a mini-bubble has emerged. At least Bill is thinking ahead to how he will be portrayed in future history books.

One thing I can count on is that government is always slow to react. This applies equally to efforts aimed at taking advantage of market opportunities through pension investments and to efforts to prop up declining stock values to which their pension valuations are dependent. The sloth like pace is reactionary and creates a lag time. We have yet to discover the precise measure of the time necessary to allow the market to hit bottom. The news stories about the doubling and quadrupling of pension expenses, instead of meager single-digit percentage increases, should soon work their way in the political psyche. The pace of the stock price support schemes cannot keep pace with the market itself.

The idicy of so-called capitalists (the state treasurers controlling public pensions) is easily understood in this simple piece about the Safeway labor issue. Both sides argue about "shareholder value."