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> He's arguing that the government should not need to prop up confidence.

But that's the most important function of the government in any economy. I understand he is point: make the markets fail-safe and idiot-proof and there won't be a need for government to keep reassuring us that everything is fine. And that's precisely what I'm disagreeing about. I'm saying that is not how markets work. Things HAVE to have risk, things HAVE to go up and down. Government HAS to step up every now and then to reassure me that everything will be ok. Even if you remove all possibility of corruption and theft from both the markets and the government, I will still need the government to assure me because of the uncertainties and unknowns in any market-driven economy.

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Government HAS to step up every now and then to reassure me that everything will be ok.

No -- the government should step up every now and then to make things ok. There's a big difference between that and just stepping up and making reassuring sounds without actually doing anything.

Not to make this is an N-level deep thread but I totally agree with you. I didn't mean President going on national TV and saying "it's all good". I meant it in economic terms, like http://www.federalreserve.gov/monetarypolicy/fomc.htm doing their job.

There is disagreement about what steps central banks and others should take to control the economy. NNT thinks the Federal Reserve is incompetent, for example. I don't know whether he's right or not, but the point of view being expressed is not against central banks, regulation or interventions. It's against the necessity (perceived or otherwise) of these things to keep things running.

Its not the government's job. Nor is it somehow equipped to provide a better assessment of the economy than the citizenry. Its only equipped to present an overly optimistic view, which it has consistently done, as leaders tend to try to get re-elected. An inaccurate view is not helpful.

I don't think investors need government to reassure them. They need independent judgement that is not swayed by what the crowd or the leader of the crowd thinks. They need to assess facts.

Those that easily lose confidence sell too cheaply to those who don't lose confidence. And, in the process, increase the average confidence with which dollars are invested.

And the same thing is true of those who listen to the government versus those who pay attention to facts.

Over time, those that practice what works are rewarded and control more of the decisions. So, government handholding and back rubs are irrelevant.

Much more relevant is confidence that the government isn't giving deals to its friends. Bailouts and other goodies for those lobbying the system with lots of money.

You can assert that the government "has to" do these things, but I do not believe you can substantiate that point. I don't think NNT can prove that things would be better without government intervention, either. However, there is an important general point here about kinds of fragility that are being built into society. I think it will (sadly) go ignored while people argue about fiat currency, quantitative easing and other magic cures.

He's not arguing that "things would be better without government intervention". My impression was that his argument was that government shouldn't assume only the risks and not the profits. Quoting from the article:

"Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and riskbearing."

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