Don’t Cry for Me, America
Mexico. Brazil. Argentina. Mexico, again. Thailand. Indonesia. Argentina, again.
And now, the United States.
The story has played itself out time and time again over the past 30 years. Global investors, disappointed with the returns they’re getting, search for alternatives. They think they’ve found what they’re looking for in some country or other, and money rushes in.
But eventually it becomes clear that the investment opportunity wasn’t all it seemed to be, and the money rushes out again, with nasty consequences for the former financial favorite. That’s the story of multiple financial crises in Latin America and Asia. And it’s also the story of the U.S. combined housing and credit bubble. These days, we’re playing the role usually assigned to third-world economies.
For reasons I’ll explain later, it’s unlikely that America will experience a recession as severe as that in, say, Argentina. But the origins of our problem are pretty much the same. And understanding those origins also helps us understand where U.S. economic policy went wrong.
The global origins of our current mess were actually laid out by none other than Ben Bernanke, in an influential speech he gave early in 2005, before he was named chairman of the Federal Reserve. Mr. Bernanke asked a good question: “Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets - rather than lending, as would seem more natural?”
His answer was that the main explanation lay not here in America, but abroad. In particular, third world economies, which had been investor favorites for much of the 1990s, were shaken by a series of financial crises beginning in 1997. As a result, they abruptly switched from being destinations for capital to sources of capital, as their governments began accumulating huge precautionary hoards of overseas assets.
The result, said Mr. Bernanke, was a “global saving glut”: lots of money, all dressed up with nowhere to go.
In the end, most of that money went to the United States. Why? Because, said Mr. Bernanke, of the “depth and sophistication of the country’s financial markets.”
All of this was right, except for one thing: U.S. financial markets, it turns out, were characterized less by sophistication than by sophistry, which my dictionary defines as “a deliberately invalid argument displaying ingenuity in reasoning in the hope of deceiving someone.” E.g., “Repackaging dubious loans into collateralized debt obligations creates a lot of perfectly safe, AAA assets that will never go bad.”
In other words, the United States was not, in fact, uniquely well-suited to make use of the world’s surplus funds. It was, instead, a place where large sums could be and were invested very badly. Directly or indirectly, capital flowing into America from global investors ended up financing a housing-and-credit bubble that has now burst, with painful consequences.
As I said, these consequences probably won’t be as bad as the devastating recessions that racked third-world victims of the same syndrome. The saving grace of America’s situation is that our foreign debts are in our own currency. This means that we won’t have the kind of financial death spiral Argentina experienced, in which a falling peso caused the country’s debts, which were in dollars, to balloon in value relative to domestic assets.
But even without those currency effects, the next year or two could be quite unpleasant.
What should have been done differently? Some critics say that the Fed helped inflate the housing bubble with low interest rates. But those rates were low for a good reason: although the last recession officially ended in November 2001, it was another two years before the U.S. economy began delivering convincing job growth, and the Fed was rightly concerned about the possibility of Japanese-style prolonged economic stagnation.
The real sin, both of the Fed and of the Bush administration, was the failure to exercise adult supervision over markets running wild.
It wasn’t just Alan Greenspan’s unwillingness to admit that there was anything more than a bit of “froth” in housing markets, or his refusal to do anything about subprime abuses. The fact is that as America’s financial system has grown ever more complex, it has also outgrown the framework of banking regulations that used to protect us - yet instead of an attempt to update that framework, all we got were paeans to the wonders of free markets.
Right now, Mr. Bernanke is in crisis-management mode, trying to deal with the mess his predecessor left behind. I don’t have any problems with his testimony yesterday, although I suspect that it’s already too late to prevent a recession.
But let’s hope that when the dust settles a bit, Mr. Bernanke takes the lead in talking about what needs to be done to fix a financial system gone very, very wrong.
Paul Krugman is Professor of Economics at Princeton University and a regular New York Times columnist. His most recent book is The Conscience of a Liberal.
Copyright 2008 The New York Times Company
Well as a poorly educated layman on the subject of higher finance, I for one cannot argue the points made by Mr. Kurgman, or the explinations given by the wizards who run our banking systems of why we may or may not have a recession with any technical data, or the “theory” of economics jargon.
I can argue we will have a serious recession and firmly believe it will become a depression in the near future, unlike anything we have ever experienced using common sense and observations of what is happening. Many things we can all see with our own eyes and see our banking account bottom lines.
For one thing, the current unempoyment rate broadcast by the government is faulty by at least 6%. There are millions who are still out of work after their six months of unemployment insurance was used up. There are millions who are employed who were in the $70 to $80 thousand a year income bracket, who now have taken part time jobs at minimum wage and have lost their medical benefits.
Millions of people are using their credit cards just to buy essentials. We kow severa families who’s heating fuel costs are over $500 a month and their budget had been set up for less than a hundred a month. That’s actually a hundred dollar a week loss, money which cannot be used for anything else, for savings, or for a college fund etc.
Thirty five years ago, the manufacturng jobs were 34% of the American labor force. Every job in that force created another five jobs. Now manufacturng jobs have dropped to 12%, that is a lot of lost jobs andthe picture gets worse every month. A majority of the kids graduating from college now are having a hard time finding a decent job, although I understand Blackwater is hiring. All one has to do, is join the military be a good shot, request sniper school and when their military tour is up, get a job with Blackwater, good pay too.
We are in big trouble and the signs of a very possible depresion are there for any to see, hope I am overly pessimestic. we’ll see.
As much as I respect Krugman’s posts and opinions, I feel he missed the boat on this one. The ‘global origins of our current mess” weren’t laid out in 2005 - they were set out in the 1980’s by Ronnie Rayguns when he and his administration set out to destroy regulation of the banking/loaning industry under the misapprehension that regulation is bad for the economy. Bernanke just put a new face on the old problem of greed overseeing government.
So long as those with a vested interest in making a profit off of government have the only say in it, this kind of financial nonsense will continue.
“Global Investors”=Predatory Financial Capitalists/Speculators. Krugman’s explanation is as much a fairy tale as Bernake’s. David Korten got it right–”When Corporation Rule The World.” Somewhere is a paper titled “The Global Casino Economy” that is far more explanatory. It’s wise to remember that Krugman is a member of the Establishment that engineered this mess.
Karlof1,
What exactly makes Krugman a “member” of the establishment? He is an economist? How did he help engineer this mess? Are you suggesting that Global Investors are generally NOT predatory financial capitalists?
When I read - yes, actually read - his comments, I see the same contempt for the “establishment” as most of us that read this site have. For instance:
“The real sin, both of the Fed and of the Bush administration, was the failure to exercise adult supervision over markets running wild.
It wasn’t just Alan Greenspan’s unwillingness to admit that there was anything more than a bit of “froth” in housing markets, or his refusal to do anything about subprime abuses. The fact is that as America’s financial system has grown ever more complex, it has also outgrown the framework of banking regulations that used to protect us - yet instead of an attempt to update that framework, all we got were paeans to the wonders of free markets.”
This kind of crap is just as bad as the thugs that called anyone who opposed the Iraq War a traitor.
Argue the ideas and stop the ridiculous insinuations.
Even if every man, woman and child in America were living in the street, Krugman and his cronies would never admit it. At this point, they have no creditability left. The illusion is over except to the few still “believers” of system. But, I can’t fault or blame ‘em for “believing”…if I had a couple of kids, a house that’s worth thousands LESS than what I owed on it, I’d be believing my ass-off, too.
let that darn dollar sink.
Ill move
We in the 3rd world give to the US & Eu too much undue respect. We tend to think that all the answers are to be found in the so called west; but since 1987 when the west engineered a collpase of our Asian financial systems we learn to respect ourselves more because we know that in the end it is upon ourselves that we must look for answers.
The USA very often talk themselves into all sorts of mess, and they are all too often misled by their own hype and they believe their own fantasy. Words, Words and more words that do not jell with the facts on the ground. I do not know anything about economics, and thenk god for that advantage; but I am told by my parents that when we owe money and spend it, it means that we are spending money that we do not have; and to repay that loan, we need to make us some profit from out of that loan. NOTHING COMES OUT OF NOTHING. NO amount of sophistication or economics is going to change that very simple truth.
That the US$ is loosing its value is because the USA has been printing too many DOLLARS and you are not making near enough profit to pay off that debt. What is even worst are the many futile wars waged against helpless 3rd world nations. This puts a hole in your economy, as big as one a whole truck can drive through. It is as simple as that.
Let us suppose Mr Patrick is perfectly correct and Mr Krugman is too optimistic by half.
Let us suppose that the business contraction in which we are presently engaged is an enormous depression.
Still, Mr Krugman makes a lot of sense in that case.
Looking back at the Great Depression of the 1930s which acts as Mr Patrick’s historical template, the depth and duration of the contraction were increased by the extended failure by the financial elites to take action to put in place remedial institutions.
That is, President Hoover and his Cabinet just sat there for a couple of years while the country went to hell, hoping that things would get better.
Finally, when Roosevelt did take action, some of it was counter-productive and some of it was judged unConstitutional; but there are several regulatory institutions now in place which date from the prudent efforts of the federal government of the 1930s to respond positively to the problems revealed by the years 1929-1933.
But that’s exactl;y what Mr Krugman is recommending, is it not? Does he not end his commentary with the hope that there will be proposals for institutional change, before things get any worse?
“markets running wild”? Or banks and corporate monopolies controlling the market?
We don’t need more government intervention.
No new government regulations!
Free markets self correct and provide economic stability, we don’t need the government tinkering in the markets.
Massive tax relief will help the American economy.
The Failure of the American Narrative.
“But even without those currency effects, the next year or two could be quite unpleasant.”
Unpleasant for whom?
And what, specifically Mr. Krugman, is your definition of unpleasant?
60 million Americans with no healthcare?
5 million more Americans sleeping under freeways?
35% of children go hungry?
Suicide rate quadruples?
Life expectancy for Americans drops?
How do you define “unpleasant”? I know, its unpleasant for you to read about it. That’s the definition. Answered my own question.
Peece.
Brissot–I emailed Mr Krugman on numerous occasions attempting to inform him of numerous problems which he has NEVER said anything about: Failures to Deliver Securities through a manipulation known as Naked Short Selling that’s stolen billions under the watchful eye of the SEC; Deliberate manipulation of business, labor and financial statistics by USG; the dystopic illusion that economic growth can continue infinitly; the REAL effects of what it will ACTUALLY take to mitigate Climate Change; the econoimic disaster of ethanol; and the reality of Peak Oil. As a tenured professor, he is indeed a member of the Establishment, and a member of the Military-Industrial-Congressional-Academic-Complex–an exponent of the lie: A Rising Tide Will Lift All Boats. A far more realistic observer and commentator on the US politicaaleconomy is William Grieder, but note how he’s maginalized to writting for The Nation.
The USA is in bigtime Overshoot. The massive correction that’s coming will solve that porblem; and it’s going to be very messy and unpredictible.
“The real sin, both of the Fed and of the Bush administration, was the failure to exercise adult supervision over markets running wild.”
Krugman conveniently omits the small fact that the markets were running wild during the Bush years because the deregulatory atmosphere initiated during the Reagan Era was accelerated under Clinton causing a false “economic boom,” that both Clintons continue to brag about.
The next step will involve the recognition of the minefield that exists with regard to interest sensitive derivatives. Why not let the American people know what they have to face before these “instruments” also crater?
Why not tell them that the feet of Wall Street and Washington are pressed firmly on the gas pedal because only heaven knows what will happen if they back off and allow rates to self-correct by rising. Many, many circuit breakers will trip at precisely the wrong time, of course.
Welcome to Weimar. We need a patriot who can lead us into righteousness and away from the next rightwing foreclosure man (disaster capitalist). Otherwise, hello, thugs.
leftyrite, I don’t know what you’re talking about…Could you give us a little more information/explanation?
I’m wondering what America would look like if land and housing were dirt-cheap again. Would it be all that bad? Who would suffer? Who would actually benefit?
The crux of our problem is inseparable from a racketeered/speculated real estate situation. I’m not an economist, but we KNOW that borrowing/lending rules were loosened up, appraisers were stiff-armed into inflating values by lenders (who should be in PRISON right now), and local governments were all too happy about it: higher property taxes (on everyone) means more revenue. Developers, contractors, and others who benefit from large-scale projects (roads, civic buildings, etc.) are also obvious beneficiaries. Further, you have a generation of people who took out home equity loans on illusory equity.
The whole thing is predicated on grossly unrealistic/racketeered property values. It’s not a free market when so many are owned by developers and (increasingly) revert back to the banks after foreclosure.
It’ll be more visible when we see the ultimate of paradoxes: rise of homelessness and foreclosure, coupled with a rise of vacant properties. The ONLY way this paradox is possible is if racketeering, rather than “free market” (whatever that means) dynamics, is at work.
Do banks pay property taxes on foreclosed homes? Because lets remember, no one really owns their property, we all rent it from the government…
I believe I read somewhere that it’s possible to dodge taxes for awhile, but that they’ll need to be paid by someone when the property is sold.
In any case, this means that the rest of the community has to make up the difference in the meantime. As vacant houses increase, the missed tax revenue (schools, roads, community projects, etc.) will undoubtedly begin to be felt.
“But let’s hope that when the dust settles a bit, Mr. Bernanke takes the lead in talking about what needs to be done to fix a financial system gone very, very wrong.”
I’m not going to hold my breath waiting for Bernanke and our government leaders to actually fix the broken system they’ve created by manipulating growth numbers and allowing the banking system to engage in predatory lending schemes.
The day that our government leaders admit they are the cause of this coming disaster, I’ll eat my hat!
The repeal of the Glass-Steagall Act in 1999 was critical to todays current crisis.
Crony capitalism at it’s best.
“Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, “You’re buying the government?”"
Greenspan now has a job with Paulson and Co, who operates a hedge fund that shorted sub-primes.
Our Secretary of Treasury Henry Paulson worked for Goldman Sachs, another company who did well by shorting sub-primes, and he received a very nice 16 million dollar good by bonus when he left GS to take on his current job.
Economists built a road to the edge of a cliff. Now they would like us to follow their advice to keep from going over. Not me man ! I’m stepping out of line. I’ll watch as the true believers are pushed over the edge.
That Mafia-style Godfather of Bankers, Citibank Sandy “We don’t need no stinkin’ Badges” Weil, was first out of the gate in the ’90s with breaking down barriers between banking and stockbroking and other financial whiz-bang whirlygig financial manipulations. And his “meet-my-little-friend” Alan Greenspan… the neo-con Republican ‘greed is good’-AynRandian banking toady that he is… let him get away with it EVEN when it was against the law (a little oversight which they had fixed retro-actively, a right-wing specialty).
Both Citibank and Merrill Lynch are really EFFECTIVELY BANKRUPT NOW. They are doing an awful lot of backstage pedalling to stay afloat, including asking the sheiks to bail them out. But it was Greenspan and the bankers that wanted to shove real estate values (real estate that in fact bankers OWN and COLLECT INTEREST ON - from the indentured mortgage holders)into the stratosphere, at a time when the ability of the American people to pay actually went down significantly. This disconnect has now come home to roost.
The original gangstas and scammers who took America for a ride are not going to to the massive jail time they so richly deserve. They still wind up rich, implicitly laughing in America’s collective face with a sneering “so whaddaya gonna do ’bout it, ya frickin nobodies”! Same as Bush and the Republican Congress.
The American Economy can now be nakedly seen to be held up ONLY by the government, and thus is TOTALLY POLITICAL. That is why Cheney has been in DC his whole life, because (like Dillinger said when asked why he robbed banks) “that’s where the Money is.”
With the current mortgage crisis, it is self-evident that some abstract theory of the ‘free’ market, and about how that is more ‘efficient’ is an absurdity. Even slavery can be more ‘efficient’ too, looked at from a purely one-dimensional economic view.
Without the massive deficit spending by the Bush government, the Bush tax cuts could not happen, not without discarding the safety nets of millions of ‘worthless, inefficient’ people and basically letting them die, and not without totally discarding the American military machine. If the government then cannot discard people like the ‘efficient’ corporations do (as well as the ‘efficiency’ of not having to pay royally up the yinyang for their own defense like the government does), and the government couldn’t raise the debt ceiling, then the tax cuts for the RICH would be seen as a form of WELFARE PAYMENT to the rich that the government cannot afford, as are tax-free government bond interest payments.
These payments are surplus monies to the rich, that wind up inflating prices in homes and stocks, so the wealthy tend to get wealthier in our new Gilded Age at the expense of the govenment, directly and indirectly. And the poor fall farther behind and get poorer still as prices of property and real things inflate.
Because of the Neo-Con doctrinaire Bush years, the US Government now owes $10 Thousand Billion dollars, with another $56 Thousand Billion dollars in accrued-deficits-forward. Tell me this doesn’t prop up the ecomomy. Or would bring it down with a US government bankruptcy. And of course, BushWar spending and Homeland Security spending have goosed the economy, as well.
The housing bubble has made the whole economy appear wealthier -for a time, thanks to the Fed furiously ‘printing’ money at 1%- due to the mark-to-market nature of home prices and the massive margin housing relies on. But, say, if the stock market were allowed to margin (loans on stocks) like housing, you could see DOW 300,000. But would this be good? Would this be real? It would all be borrowed. Just like America today. And it couldn’t be paid back. Just like America today. And now, America is getting its margin call. Pay up, or you’re out.
The Republican (and libertarian) version of democracy seems to be not one man, one vote but “for each dollar you own, one vote.” I’m sorry, the libertarian, pure capitalist, or FEUDAL system was tried before, and failed way back in the Dark Ages, if you recall. Why, if states could be ‘efficient’ and ‘fire’ their own citizens, and tell them to leave the premises (the state or country), then the states’ deficits for helping these same people (or imprisoning them) would also disappear. This is what Mexico is kind of doing now. And of course, with the new efficient model government, if you are defrauded, or poisoned by food or medicine, or injured by a product, or have a crackhouse move next door to you, or are murdered, well tough. No ‘Nanny’ state will be there to help protect you. So be sure to shoot first, in the new-old libertarian/capitalist wild-west dog-eat-dog world.
I see examples of the ‘free’ market around the world… take Mexico, with its many billionaires. It seems a lot of people want to leave that capitalist paradise. Take the average American CEO. Is it efficient to pay so much for a CEO? More than a brain surgeon or a general? Why? Just because Mr. CEO has the sociopathology and callousness to fiire thousands of people for short-term gain because these living people were ‘inefficient’ and wouldn’t work for the $1 an hour he was offering?
Let’s face it, one guy’s version of efficiency is another’s example of gross waste. So where efficiency when life is completely inefficient? Don’t talk about efficiency. Talk about fair trade and fair play and teamwork and community. And ‘Free’ Markets care not about any of these things, so it is absurd. It is also a lie. Witness the 1500 page corporate-written ‘free market’ trade agreements we have seen in the past years. Packed with special intereste and unfairness as only lobbyists and attorneys could deliver. But supposedly about ‘free’ trade. Lunacy. Read “The Shock Doctrine” by Naomi Klein, for a better analysis of free trade and free markets.
And please don’t talk to me about the run-by-and-for bankers private Federal Reserve, that Nanny State Institution for the Capitalist Class, conjuring up money to give away, and lowering interest rates for the banks and corporations BY DECREE when the ‘big boys’ have screwed things up royally, in order to save their asses. So much for the so-called ‘free’ market.
Remember, a thumbnail version of capitalism is: buy low and screw that guy, and sell high and screw that guy, too. Some kind of morals and ethics, eh? Don’t look for morals and ethics in raw unfettered capitalism. It has not put this country in a good place. There is a balance of capitalism and socialism that is best. The ‘free’ market myth must be discarded. The ‘Fair’ market is a better and more humane model. And right now we need our own version of an FDR to deliver it, and save the nation and the world.
The current situation as I have heard put when all is said done,could have people questioning the merits of capitalism itself.Perhaps that would do us all a favor.
To bad it as come with so much pain.
FVHorn January 18th, 2008 10:24 pm
FV,
Thank you for the direct hit and nice delivery.
I’ll give you a little advice if you’re wise enough to take it. Get out of the stock market real quick and set yourself up independantly if you can. That means equipping your home with solar power with wind and/or generators as backup and even setting up your own food supply, whether that is by earth garden or hydroponics. This is no joke or alarmist manipulation. The U.S. is going down for the count and if you are not prepared for all eventualities, then you are going to suffer with the scum that needs to be got rid of. If you don’t attend to the basics, then nothing else matters.
Hey Folks……
I hear a lot of people here bad mouthing Paul Krugman.
HE had nothing to do with things reaching the sorry state that they have.
As someone who has read everything that I could find that he wrote I wanna tell you that he has ALWAYS been on the side of the workers.
Google his writing as far back as you wish and I promise you will find that Mr. Krugman has ALWAYS covered MY BACK as a working class American.
And I have yet to find an instance where Krugman has been wrong in his appraisal of the class warfare being wage against the working class.
His support of US has been absolute.
And anyone who wants to say differently can gas up and drive their ass to my doorstep and I’ll afford them a cost free ass kicking that they will not soon forget.
And I will even go so far as to defray a portion of their Med-Flight to the nearest Charity Hospital.
You dumb fucks who denigrate PAUL KRUGMAN need to either shut the fuck up or pay me a visit.
I am not hard to find.
Great synopsis, FVHorn.
Although I respect Paul Krugman’s opinions — he’s one of the few economists who has been right more often than he’s been wrong over the years — I think he should see more of the country than the Princeton campus or the offices of The New York Times building. I doubt he knows many people who are unemployed or underemployed and scrabbling to get by.
Out here in the space between the coasts, heating bills have doubled, and it’s been a cold winter; many people have moved from homes to apartments; and those in apartments have moved to trailers, and some who were in trailers have moved into tents. (That’s right, I actually know a couple who were living in a tent on public land.) Most of these Americans are working, some at two jobs, but can’t afford to maintain the standard of living they enjoyed even two years ago. In some areas, America is in a depression; in most of the country, we are already in a deep recession.
Aside from my anecdotal evidence, we also have these proofs: If not for foreign investors, several major US banks and lending institutions would have closed their doors, just like during the Great Depression; the dollar has dropped to its lowest level in modern history, inflating prices, while our trade deficit and our national debt are at record high levels; our housing market has collapsed, and our unpaid credit card debt is astronomical; oil prices are at an all-time high, and our manufacturing base in nearly non-existent — even our service jobs are going overseas. You don’t have to be an economist to see that we are borrowing ourselves to death, and it simply can’t continue. As Yap.chongyee has noted, you can’t spend what you don’t have and you can’t make something out of nothing, something our benighted media and the jaundiced plutocrats running the show have failed to appreciate as they loot the national treasury. Only in the Ivory Towers of official Washington and the glass canyons of New York are they still worrying about staving off recession; everywhere else, it’s a grim reality and it’s getting worse.
The ‘dismal science’ of economics, tied to the fluctuations of the calcified stock market and the satire of rosy government economic figures, have not yet found a way to calculate the misery index — in other words, the impact all of this is actually having on the average American. Without that, economics is just a lot of polysyllabic hogwash designed to nail a Master’s thesis, blow hot air up the skirts of the affluent, or secure university tenure, without relevance to the real world; no more substantial than Bush’s dizzy bleating that we have a ’strong economy’ that’s doing so well we need a ’stimulus package’ to salvage it.
Speaking of that ill-fated Bush ’stimulus package,’ it will have no long-lasting effect; people will pay off a few bills with their ‘tax rebate’ and we’ll be right back to square one in a couple of months. This economy is an open sucking gut wound and Bush’s stimulus band-aid is not going to heal it. To even begin to correct the damage, we’d have to immediately quit these expensive overseas wars we can no longer afford, cut the defense budget by two/thirds, impose tariffs on corporations that import products and export jobs, crack down on corporate crime, strictly regulate the banking, lending and investment businesses, cancel trade deals like NAFTA and CAFTA that work against our public interest, nationalize health care and bring down the cost, end all forms of corporate welfare and tax dodges, substantially raise taxes on corporations and those making over $200,000 a year, institute FDR-style job programs that pay a decent wage, ban corporate money from our political system, eliminate energy monopolies, and free ourselves from the bondage of foreign oil and the slave masters like Exxon Mobil who peddle the stuff.
Since none of that will be done, we’re fated to watch the US sink to the level of a third-world country over the next twenty years, while other players call the tune economically. I just hope we come out the other side as well as our ancestors emerged from the Great Depression — and without a world war.
Unfortunately, some of us will only get the hint when they are unable to afford batteries for their MP3 player. Don’t worry — that’s coming soon.
Learn more by reading the article on bubble economies in the latest Harper’s (February 2008)
We’ve all seen this movie before — or those too young to have actually seen it, have read the movie script; John Kenneth Galbraith’s spectacular;
“The Great Crash 1929”.
Now comes the sequel we’ve all been breathlessly waiting for;
“The Great Crash II — Beyond the Grave of Glass-Steagall Regulations”
Yes, you’ll see all the favorite actors back; like Goldman Sachs, Morgan, all the Wall Street bankers, and the Federal Reserve including Alan Greenspan playing the role that Charles Mitchell made famous in the original film.
You’ll thrill to the same plot twists: the inflation of values in those same old artificially created ‘trusts’ and ‘investment companies’, but featuring new CDOs, SIVs, and other exciting off-book financial Ponzi vehicles.
Who can forget that memorable scene in which Charles Mitchell strides onto the floor of the New York Stock Exchange, buys $100 million of distressed stocks and shouts, “Organized support is coming from the banks.”
In the modern sequel, your heart will be taken away not once but twice as first the President and Hank Paulson dance onto your TV screens and perform a perfectly choreographed version, shouting, “Organized support and stimulus is coming, not from the banks, but from the US Mint itself”.
And finally after an emotional roller coaster and the breath-taking realization that the ‘organized support’ from the US Mint has been hijacked, you are sure to be delighted and tear-up in the final scene, when Hillary Clinton dressed as Miss Liberty herself, bursts on stage and shouts, “No. Here it is!! The ‘organized support’ has just arrived all the way from the burning sands of Saudi Arabia, and it’s right here in this pretty Sovereign Wealth Fund trunk.”
All we can say is, “Don’t miss this film in 2008.”
“Oh, that’s right, you can’t miss it —– you can’t get out of this theater.”
I am certainly no economist nor do I even have a moderately clear understanding of the complex workings of economics. But you don’t have to be rocket scientist to see that this country is in deep shit.
Corporate greed and deregulation has brought us to the brink of total
collapse. All the signs are there. I truly believe that the US is in for a major “reality check” very soon.
jmacneil (January 19th, 2008 12:10 am) is right on. Y’all better cover your own asses. If you think the Government will come to your rescue when it all comes crashing down, you’d better think again.
~Peace
“The real sin, both of the Fed and of the Bush administration, was the failure to exercise adult supervision…”
“Incredible! Outrageous!” Those words should have been flashing in red since 2000 if our newsmen had any sand, along with “criminal.”
Remember that video clip of Karl Rove on stage ‘dancing at the rascal fair’ with the crazed grin? Run that again.
The foxes have been partying it up in the henhouse lo these many years. The fact that propaganda minister in chief Rove is now a paid columnist for Newsweek and his pet rat Bill Kristol for the NYT, shows it only just continues.
Jeff Moehring-Jeezus, you’re a hard ass…Krugman is one of my heroes too. I got to hear him give a talk in MN a few years ago. If only we had a few more voices of his caliber in the MSM.
Greg R….
Yeah, that was definitely over the top:).
It was Friday night and 5 beers into catching up on my blog reading.
Fine evidence of why I mostly quit drinking several years ago.
I am a bit embarrassed by that outburst.
Not that it’s any excuse but I am lately soooo disgusted by this swooning Obama mania and the equally inexplicable enthusiasm for the queen of DNC/DLC corporatist Democratic triangulation (closet Republicanism) that I guess my feeble beer fueled brain snapped.
But despite my goofy outburst I stand behind the basic thrust of my point. Whatever it was:).
Amacd, Lee Driver and Cosmicharlie, your economic vision is 20/20 — the same can’t be said for Greenspan, Bernanke and Paulson.
This crap of ruinous deficit government spending goes way back, from what I understand, to Alexander Hamilton, who believed it was good to be a warmonger nation and borrow your way out of the hole. The Skull and Bonesmen, who now all the world is hostage to, worship this Hamiltonian federalist (strong central gov and no safeguards for the individual) view.
My heros, the Anti-Federalists, Like Jefferson, Patrick Henry, Thomas Paine, George Mason, George Clinton, and Luther Martin, rejected the views of the dogmatic federalists, fearing (correctly) that a strong central government would trample the rights of the individuals, through all means at it’s disposal: law, finance and the “evils of big party” influence. The anti-federalists refused to ratify the constitution without assurances that a bill of rights would be part of it.
I dare say the anti-federalists were wise men indeed.
Maybe it’s time indeed for the rise of a third party in the US. I like the historic name: “The Anti-Federalists.”
AMACD: Love your mockery of the great production, which it were as much a fiction as the parody on Hitler in THE PRODUCERS (the original Broadway version).
Kem Patrick,
Great job and right on the money, I agree completely. This theory will be looked upon by some as alarmist. Well, this is the scariest scenario I have ever seen in my time on the planet, and most people still think the government works in their, (meaning the average stiff’s) interest. I have long since abandoned this illusion.
Jeff Moehring, I have been banging nails, Carpenter, and other such things, welding, diesel engineer,pump mechanic,(for pumping crude oil), in other words a working class stiff, for over 40 years. As much as I like Krugman, he has never seen or touched anything that would get his hands dirty. In fact, he did quite a bit of consulting for ENRON, yes that ENRON, when they were riding high. He is a Demopublican!!! You really ought to refrain from these offers of free ass kickings!!!! Someone about 6′4″ who won the golden gloves may show up at your door and you probably wouldn’t be too happy when they left. Plus, this stuff is hardly worth getting this upset about.
FVHORN, Good post, except the person who said “cause that’s where the money is”, was actually Willie Sutton, not John Dillinger, just for accuracy’s sake.
It takes no PhD in economics to sense that our unprecedented trade imbalances, coupled with this administrations war against science including conservation and pollution mitigation measure, can only lead to economic disaster–not to mention intolerable degradation of this planet and loss of world stature.
Unless Americans compels this defaulting legislator to force meaningful and urgent reforms on to this reckless unelected zealot and his supporting interests now–conditions can only worsen, and Americans will have only themselves to blame.
Pacplyer, yes, back in those bygone days when Jefferson ran as a Democratic-Republican against the Federalists. Sweet Jesus, what would Tom make of the Democrats and Republicans these days? Maybe, like Tom Paine, he’d head to France and hang out — they still have a semblance of sane democracy over there, Sarkozy’s election being just a quirky case of temporary insanity, like believing Jerry Lewis is a genius. (He won’t get any of his batty ‘work more hours’ neocon ‘reforms’ passed.)
FVHorn, great analysis.
But this situation is not new, it has been going on for last 30 years.
This narrative of “free markets”, “free trade”, “unfettered capitalism”, “less regulation”, “right to work”, “CEO pay”, “American interests” is a fraud or at least it should be by now recognized as a failed ideology which has led to more economic hardships for the average American.
When will Americans see the light? What will it take?
The Failure of the America Narrative.
I have a younger brother who has worked (among other similar institutions) in the financial end of things for the Bush administration, for a large international organization, and recently joined a large international bank. He assures me that the economy will be back on track by the summer, tells me to shut up about my belly aching about the economy, et. al., and to just get back to work (’course I’m presently on unemployment…). He smirks when I talk about the misdoings of the financial, corporate & political sector. He says little people like me just don’t understand….
And I think that’s what we’re all up against here: people in positions of power & influence don’t give a bloody hoot about any of the very real problems that are discussed here & elsewhere in these Common Dreams comments. I’m currently reading Robert Kuttner’s latest book, “The Squandering Of America” which deftly (& densely) shows how the economic situation in the U.S. has changed since the 70’s due to de-regulation, & etc. Almost no “average” people I know want to read about this, discuss this in detail/depth, and so many are almost immediately dismissive of such conversation. Ouch!
Someone tell me there’s another undiscovered continent out there we can just sail away to where we focus on nice housing, good food & good music! And Jeff Moehring - have a another beer on me!
Oh, c’mon! Let’s be honest: Bush gave all the money we had, and everything they could borrow, to the Pentagon so he could play war. And everybody who had some kind of security scam ready got millions. And now the money’s gone.
And what did we get from it? Safety from Iraq and Afghanistan?
Americans, what rubes and sorry, pussies!
Ooh Mama! The scary Muslims are after us!
Guitar54, I heard the same nonsense last summer from people supposedly ‘in the know’ — quit your bitchin’, everything would be rosy by the Xmas shopping season. The closest thing to your ‘undiscovered continent’ would be Norway or Sweden, but they’ve already been discovered, of course. The Scadinavians mind their own business and, consequently, everyone ignores them.
Mooser, when I grew up our nightmares involved massive atomic assaults killing millions and reducing the country to radioactive rubble; by comparison, fearing a group that hides in caves and hijacks airplanes to attack us is ludicrous.
James Kunstler, who may not be an”economist” but who does incorporate the limits of available oil in his economic picture has a rather less rosy picture of what is going down. Krugman is a New Deal economist in a post New Deal world. He lives in a world where soil, water , air and even in many cases the actual limits on the availability of raw materials are somehow magically separated from the economy.
His newest edition to the ClusterFuck Nation archives, which deals with the loan crisis feels truthier and definitely is both funnier and sadder than this pablum. Check it out.
The article in Harper’s “the Next Bubble” is also enlightening.
http://www.kunstler.com/index.html
What a load of crap Mr. Cruel-Gman would sell us about why finance is bad.
CEO’s swet this much 0. Get this much Billions.
That’s the long and short of it.
How bout this solution Calorie Economics. Eliminate finance as a means of transaction. It devalues human effort lending weight to inanimate objects as being more valuable than human effort. Kaput, Kabish?
Measure CALORIES of effort spent on PRODUCTION, AWARD with CALORIES exactly EQUAL direct democratically determined PRODUCTIVE EFFORT.
NO Middlemen; NO GUN TOTING DISTRIBUTION NECESSITY; All material divided EQUALLY honed to consumer choice delivered at it’s EXACT WORTH in Calories; Pinacle economic organization.
Kruel Gman is on the big money, super confusion infusion side.
jmacneil is half right. You do need to get some neodymium magnets and magnet wire coil, hook it up to a bike and bike while listening to the radio so you can cook your dinner, sleep with your face under your covers so you can keep your heat with you at night…
Get work at a local farm or setup a green house in your back yard or study wild foods.
He is wrong however that the scummy people will be digested by this financial storm. The very bad people are buying robot attack jets, hooking nuclear generators to space lasers and building all kinds of guided munitions to flesh out the good courageous people who will stand up to their incomprehensible abuses. Mostly who will die are the young, the frail, the (for lack of a better word) knoble.
It’s a shame there’s not a word that really means knoble, and is not bound up in being double speak meaning nobilities disguise and wish as to be viewed as, even while, as King David, murdering whole villages for their cattle.
To Jonabark regarding Kuntsler…
I read a bit of his PetroCollapse piece. Didn’t get through the first paragraph without smelling the bullshit.
He wants to place blame on the consumer for what the big money major media is printing… Saying that Americans are disengaged, not paying attention. What’s above this comment, disproves his view thoroughly. It sure would be convenient for the Bushes if lots of people felt like no one else cared or was paying attention though eh?
Hell that’d be a pretty good excuse to just cut everyone off and not be bothered to unite against our common enemy, financial dominance. Just go about making yourself independent and buy enough guns to stem the looting…
The better solution is though to be as prepared and efficient as you can and to bring as many people along with you, strength in numbers. Make your followers strong by teaching them what they can teach others that will make them strong.
Access to underground, basement, sewer, cave is critical to surviving nuclear atrocity. 75% of the fallout is out of the air within 3 days. You will still need breatheing protection as multi layer wool to filter the metal dust that will be in the air.
The financial dominant are going to be steering laser satellites and flying robot attack jets. I think we’ll need to just keep our heads down until the infighting places someone at all reasonable in charge. That will hopefully be obvious.
I’m guessing that their super militant dominance trained will get smart to the afterlife implications of their having taken orders from these ever life seeking freaks AND recognize that they’re on schedule for extermination as soon as their utility to these ever life seekers expires. Hopefully eventually someone who can wrest control of a laser satellite will put it to good use. I’m sure some group of satellite communications knowledgable, generator and battery knowledgable people will make it under ground.
To comprehend the potential for ever life google:
regenerative medicine “fountain of youth”
Anyone who wants to know more about what I know about this situation, these people, their holdings, dominance facilities and plans, feel free to email me. I must share as my best score for this lifetime depends on it.
Thanks for your time reading and consideration,
Daniel Vincent Kelley
rocyahsoul@yahoo.com
http://myspace.com/danielvincentkelley
http://lamegame.name