Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
A Stalled Counter-Revolution
The finger-pointing for the economic crisis is in full force. In this review: Revisionism, I-Told-You-So-ism, human psychology, and a historical perspective.
There is no shortage of books attempting to sort out the dynamics of the great financial collapse that began in the summer of 2007. Since we are still in an early phase of the crisis and don't yet know whether it will rival the Great Depression in its depth and duration, all verdicts remain provisional. But rather in the spirit of the 1952 presidential campaign's arguments over who lost China, the battle is already on to define who lost the economy and what to do next.
| A Failure of Capitalism: the Crisis of ’08 and the Descent into Depression by Richard a. Posner, Harvard University Press, 346 pages, $23.95 Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism by George a. Akerlof and Robert j. Shiller, Princeton University Press, 230 pages, $24.95 Lords of Finance: the Bankers who Broke the World by Liaquat Ahamed, The Penguin Press, 564 pages, $32.95 Plunder and Blunder: the Rise and Fall of the Bubble Economy by Dean Baker, PoliPointPress, 170 pages, $15.95 |
It's clear that deregulation of finance played a leading role. However, the right is already marketing a counter-story that the crash is actually the fault of government regulation. You can read this narrative daily in the editorial pages of The Wall Street Journal. Surprisingly, one of the nation's leading conservative intellectuals is not buying the story. Judge Richard Posner is among the most prolific (and irritating) of the University of Chicago law-and-economics scholars who helped entrench the markets-über-alles paradigm in American academic thought. But Posner has managed to write a compelling book on the crash, A Failure of Capitalism, indicting the major role played by financial deregulation -- though without ever acknowledging that he was one of its intellectual fathers.
"A largely unregulated banking industry," he writes, "converged, fatally as it has turned out, with falling interest rates in the early 2000s." The unregulated issuers of credit-default swaps, unlike regulated insurance companies, "were not required to have reserves" to pay claims. The financial industry is rife with conflicts of interest and likewise, credit-rating agencies. "Libertarian economists," he declares, "failed to grasp the dangers of deregulating the financial markets and underestimated the risk and depth of the financial crisis." And rather startlingly, he concludes: "The aggregate self-interested decisions of these institutions produce the economic crisis by a kind of domino effect that only government can prevent -- which it failed to do." None of this is exactly breaking news. But coming from Posner, it is a notable rejection of free-market economics; Adam Smith's core teaching is precisely that individual self-interest aggregates to a general good and that government should keep hands off.
But how did all this deregulation come to pass? Or, as a good Chicagoan might ask, what is your theory of agency? Mostly, Posner isn't saying. The book has numerous worthwhile insights, including a surprisingly Keynesian analysis of the dynamics of depressions. But its major weakness, so characteristic of the Chicago school, is to leave out political power. He warns against "an orgy of recrimination against Wall Street," though the political influence of financial elites goes a long way to explaining the collapse of regulation. To read Posner, you would think that an autonomous actor called government made regulatory decisions in a hermetic realm beyond the vectors of power that operate upon it.
Michael Kinsley is fond of observing that the right welcomes converts while the left is suspicious of heretics. Kinsley has a point, but conversions would be a little easier to take if the convert had the decency to concede that his earlier mistaken theories had collided with reality. Posner, however, doesn't look back. The author of a leading textbook on law and economics, he was appointed to the federal appellate bench by Ronald Reagan in 1981. In the intervening 28 years, he has found time to write 53 books as well as to continue to teach part-time at the University of Chicago. This superhuman pace leads to a certain glibness, but one should welcome Posner's book even if it is a reversal without a recantation.
For a more straightforward primer on the crash, the reader cannot do better than Dean Baker's short volume, Plunder and Blunder. Baker anchors the gross financial and regulatory abuses of recent years in the fundamental shifts in the political economy that occurred in the 1970s. During that period, median wage growth adjusted for hours worked largely ceased, and many of the instruments that created the more balanced and managed economy of the postwar boom were either undercut by events (inflation, the oil shock, technology) or deliberately assaulted by shifts in political power (the attack on unions, the weakening of economic regulation, and the creation of a trade regime designed to serve business and undermine labor).
The stagnation of the incomes of most Americans, combined with the globalization of production and finance, Baker explains, set the stage: "More and more, the U.S. economy depended on something far less virtuous than productivity gains and broad prosperity. In pursuit of short-term growth, key institutions relied on risky bets and unsustainable policies. In short, we got hooked on bubbles."
To understand the dynamics of the crash that finally hit in the fall of 2008, it helps to comprehend the back story. Baker sorts out how much of the improved economic growth of the 1990s was the result of a more productive economy (some in the early years) and how much was the illusory gain of a financial bubble (most of it by the late 1990s.) He demolishes the Robert Rubin story that budget balance led to low interest rates, which in turn led to increased investment and growth. Rather, he explains, the low interest rates in a global economy had little to do with domestic fiscal policy but instead were Federal Reserve Chair Alan Greenspan's way of cleaning up after earlier bubbles and stimulating new ones.
Baker is a particularly good guide to the logic of the housing bubble. He disentangles the roles of the several culprits, including President George W. Bush, whose "ownership society" goals led the White House to induce Fannie Mae and Freddie Mac to begin large-scale purchases of badly underwritten loans. It was this policy shift coupled with serial regulatory lapses by Greenspan and others, and not the Community Reinvestment Act demonized by the right, that caused sub-prime mortgages to spin out of control. Baker has also been an astute critic of efforts by former Treasury Secretary Henry Paulson and his successor Timothy Geithner to prop up, rather than clean out, toxic securities, and he includes a useful summary of the kind of regulation that we need going forward.
The crash of the stock market in 2008 was also the crash of a reigning political ideology and its economic paradigm. While a leftist economist such as Baker never accepted the dominant view, the revisionism of a Posner attests to the breadth of that intellectual collapse. Also instructive is the new thinking of more mainstream academic economists.
For the subtitle of their new book, Animal Spirits, George Akerlof and Robert Shiller use the line: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. "Animal spirits" is a famous phrase of John Maynard Keynes' to characterize the impulsivity of much economic behavior. Though the new discipline of behavioral economics has added fascinating details about how this irrationality operates, thanks to the ingenious experimental work at the boundary of economics and psychology by such scholars as Daniel Kahneman, Amos Tversky, and Richard Thaler, it turns out that a lot of the fundamentals are right there in Keynes.
As the financial collapse has demonstrated yet again, markets are not self-correcting. If they were, Wall Street would not be lined up for trillions of dollars in government handouts. In saluting Keynes' quip, Akerlof and Schiller argue that much of the story is in the unreliability and incompleteness of supposedly rational behavior -- the micro-foundation of the free-market model. They contend that modern economics, even self-described Keynesian economics, has given short shrift to this core behavioral insight. They embellish the idea by exploring the importance of "norms" of fairness in setting wages and prices, and the key role of confidence in sustaining both normal economic price setting and also periodic euphoria. Episodes of systemic corruption, they suggest, are just another reflection of human fickleness. "The business cycle," they write, "is connected to fluctuations in personal commitment to principles of good behavior." And people's failure to fully calibrate the costs of inflation -- "money illusion" as Keynes called it -- is yet another dimension of nonrationality.
Yet, almost in spite of their effort to hang a whole new macroeconomics on the idea of nonrational micro-behavior, their book also follows Keynes' other insights about the instability of a purely free market economy. For Keynes, even if everyone were perfectly rational, there could be failures of the economy to reach its production potential at equilibrium, and there could be politically generated failures to pursue sensible financial regulation. My one quibble is that Akerlof and Shiller overstate the connection between less-than-perfect rationality and systemic instability.
Their best chapter is on the limited capacity of central banks to prevent or cure calamities. As they note, the Fed cannot push short-term interest rates below zero. Shadow banks are outside the Fed's purview. And, in an observation that has been frighteningly overtaken by events, they write that "the Fed usually trades only in safe, short-term bonds." No longer. Lately, as a desperate response to a crisis partly of the Fed's own making, the Fed has been buying all manner of junk assets. As Dean Baker points out, the Fed itself can be part of the problem when it combines low interest rates with feeble regulation. This is less a matter of animal spirits than the political capture of what is supposed to be a public-spirited entity. And who rescues the system when the Fed's own balance sheet starts coming apart?
The failure of central bankers is the subject of one of the most compelling works of economic and political history to appear in many years, Liaquat Ahamed's Lords of Finance. His subtitle says it all: The Bankers Who Broke the World. Ahamed, an investment manager and financial historian, writes about the fateful three decades between August 1914 and World War II. He combines biography of the four most influential central bankers of the era with riveting narrative history and lucid economic analysis. This is a story whose broad outlines most educated people vaguely know, but Ahamed magnificently fills in the details and extracts the larger significance. As a mirror of our own times, the history is chilling.
In World War I, the great nations of Europe spent about half of their total national output slaughtering each other. To finance this bloody orgy, they borrowed. In the aftermath, they drowned in war debts. All owed massive sums to the United States, which entered the war late, profited handsomely, and emerged with its productive powers enhanced. France and Britain had the insane idea that they could find the money to pay off the war debts by squeezing Germany "until the pips squeak," as the contemporary phrase had it. They were not bothered by the fact that this was plainly impossible. Lord Cunliffe, a former head of the Bank of England and a leader of the British delegation to the Paris Peace Conference, recommended that Germany pay $100 billion in reparations. "It was an astounding figure," Ahamed writes. "Germany's annual GDP before the war had been around $12 billion."
The central bankers of the war's victors, Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve, and Émile Moreau of the Banque de France, had one overarching goal -- to restore the prewar gold standard. Their German counterpart, Hjalmar Schacht of the Reichsbank, appointed in the aftermath of Germany's ruinous hyperinflation, had a different goal -- to lift the crushing burden of war reparations that was sandbagging the German economy and by extension the economies of the rest of Europe.
Had these central bankers not been so utterly orthodox in their thinking, they might have grasped that their historic role was not to restore the gold standard but to relieve Europe of the downdraft of war debts so that normal production and commerce might resume. In the end, they managed neither to restore the gold standard nor to get commerce flowing. And when the Great Depression struck, partly as the logical consequence of their folly, the central bankers failed yet again, bound by the orthodoxy of fiscal and monetary restraint.
In 1931, the final collapse of the debt-ravaged German economy ensued. That spring, the central bankers made one last effort to resolve the debt crisis. They failed, despite pleas and threats from Schacht, who had stepped down as head of the Reichsbank. By early 1932, German production had fallen 40 percent and a third of the work force was idle. Hjalmar Schacht went over to the Nazis, subsequently becoming Hitler's minister of the economy, directing public works and rearmament.
Once again, a familiar figure makes a fleeting appearance in this story -- John Maynard Keynes. It was Keynes, as a young adviser to the British Treasury at the Paris Peace Conference, who warned about the catastrophic consequences of the policy of extracting crushing war reparations. Subsequently, in one of the most prescient tracts of the era, "The Economic Consequences of the Peace," Keynes explained that if Germany were to pay reparations at all, its economy had to recover. "If Germany is to be milked," Keynes wrote, "she must not first of all be ruined." Despite a brief flirtation with Keynes by Prime Minister David Lloyd George, his warnings were ignored.
Keynes would get his chance, 25 years later, when as the leader of the British delegation at Bretton Woods, he helped construct a postwar financial and monetary system that used public institutions to restore credit and economic growth, rejecting the deflationary tendencies of private finance. As always, his enemies were the barons of banking, backed by their allies in government, who wanted to rely entirely on private financial flows and a system biased toward the interests of creditors.
"There is no greater testament of his legacy," Ahamed writes, than the fact that the world avoided a repeat of the Great Depression for six decades. But the Keynesian moment at Bretton Woods was very much the exception to a century-old pattern. Ordinarily, the forces of orthodoxy rule-as they do today, notwithstanding Wall Street's disgrace. It takes extraordinary circumstances for the top financial officials of leading governments to be as radical as Keynes.
The malfeasance of today's central bankers has different particulars but a common element -- orthodoxy. However, orthodoxy has a different meaning today, one that seems almost opposite to the rigor of the keepers of the gold standard but in its own way, just as unreal and dangerous. The parallels between the 1920s and the 2000s begin with a common element. Alan Greenspan and Ben Strong both pumped up a stock market bubble with cheap money and feeble regulation. The relative economic weakness of Europe allowed Strong to reconcile his penchant for a gold standard globally with support for cheap money at home. When Strong died in 1928 and the stock bubble seemed increasingly dangerous, his successors excessively tightened credit.
Today, however, orthodoxy has come to mean doing whatever it takes to revive the Wall Street casino. The plan recently announced by Treasury Secretary Geithner and Fed Chair Ben Bernanke is intended not to drive the money changers from the temple but to lend them public funds so that they can double down on their bets. The Fed's own balance sheet will quadruple. The one common thread that links the failed central bankers of Ahamed's tale with the folly of Geithner and Bernanke is that all were working hand in glove with private financial elites.
The economic ideology of laissez-faire has been shattered, but the political power of Wall Street is oddly intact. Keynes may be honored again in unlikely places, but as far as public policy is concerned, he is honored in the breach.
53 Comments so far
Show AllThe economic guilty parties have learned one thing from history, specifically the Great Depression: get out the counter propaganda immediately or suffer the fate of somewhat effective Depression era financial law & regulation that took many years of hard lobbying and influence peddling to overturn. Legislators are an inherently cowardly lot, and last week's Senate banking vote might have a different outcome if the issue continues to roil. Thus the need to obfuscate and keep the scam going, because if the house of cards fall, the possibility of pitchforks, tar & feathering, & perp walks becomes quite real.
"Akerlof and Schiller argue that much of the story is in the unreliability and incompleteness of supposedly rational behavior -- the micro-foundation of the free-market model."
Do not free-market models depend on what the definition of "rational behavior" is? Is it irrational to work for the common good, at individual cost, if the dearth of individuals working for the common good will lead to calamity for all? I suspect that in the free-market model it is "rational" to be a free rider, to only work to benefit oneself and hope that others do what is necessary to keep the system from collapsing.
Also, however one defines "rational," an act can only be "rational" with regard to some set of data points, which is problematic because every actor will have a different set of data points, from the unbounded number possible, leading to different "rational" decisions (even if the actors are assumed to have identical goals to be achieved through the economic decisions). And the analysis one may perform on a set of data points may be unbounded in depth, leading to different "rational" decisions for different depths of analysis (out of the infinite number possible) even given the same data points.
So the term "rational," with regard to analyzing economic decisions, does not appear to be all that useful for illumination, though I suspect it works wonders in the field of propaganda and manipulation.
Kivals, good analysis. But I don't think "hope" enters into free market thinking. It's a fundamental belief that self interest creates a self regulated market. Required of course is the capacity to write off anyone who stumbles for whatever reason.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
Yes, I believe you are right in that the free marketeers claim that the market is self-regulating, but I suspect most of them know deep down that is poppycock as it is contradicted by so much evidence. So I believe they hope that some unimportant cipher in the bureaucracy does whatever is necessary to keep the nearly perfect free market machine (in their warped imaginations) going when it has some minor mechanical difficulty, or even when the wheels the fall off.
Kivals, my grandson has become a raving Libertarian, and Ayn Rand is his God. He can't take his mind off the fixed idea that if the govt would just get out of the way everything would be fine. And social Darwinism is an important part of his belief system. His philosophy has become sink or swim. Those who can't swim are part of the problem and should be allowed to get out of the way by drowning. I must add that this belief of his appeared with his relationship with his new wife's father. We will see how enduring that will be.
I have noticed that belief systems have little to do with facts or evidence. Once most people make up their minds, they don't want to reconsider their decision. Although in my opinion, those who do are very interesting.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
"I have noticed that belief systems have little to do with facts or evidence. Once most people make up their minds, they don't want to reconsider their decision. Although in my opinion, those who do are very interesting."
It is a lot of work for anyone to rethink a belief system, though younger people often do, so maybe your grandson will. Us middle-aged and older folks are usually hopeless in that regard.
Kivals, I think it has to do more with personality and temperament. "Please Understand Me" does a great analysis on that topic. Most people are more comfortable sticking with a decision than keeping an open mind. Makes it hard to change the direction of a country. Pretty much takes a situation such as we have today for any chance of getting it done.
And we have to battle a Congress drenched in corporate money to boot.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
Not to minimize the mind numbing effect of cognitive dissonance, the conflict within that results when one simultaneously holds contradictory beliefs (ie. My country right or wrong & troops out now)
The prevalance of such "libetarian" thought in the US (the corruption of a word that in Europe meant almost the opposite) is just a natural consequence of the way the world is depicted in our mass media - both in fictional drama, advertizing and news.
Sioux Rose
KATHY: That's classic Capricorn/Aries think. IF he is not either sign, you can be sure he has a strong Mars-Saturn influence in his chart. The guy I date has the combination and he presumes everyone has the discipline of the athlete that he is. Bo Didley lived near me and was close to a friend of mine. She is the ultimate humanitarian and used to debate Bo on his relative good fortune. That just because he was a success in life (in the music industry), didn't mean everyone else had the same "luck" or inner fortitude to make use of those golden moments of opportunity. Bo was a classic Capricorn. (A lot of Capricorns have distinguished themselves in the music industry, Jimi Hendrix and Janis Joplin come to mind.) I made the mistake of once going on and on about progressive causes with the owner of one of the magazines I write for. I knew he was a Capricorn but presumed on account of his intelligence that he'd shared my humanitarian views. NOT at all. He has dined with the likes of Ralph Reed. His daughter told me how revolted she was to sit across the table from "mr." Reed; but the daughter followed Daddy in his footsteps, to identify as a Republican, and also is a Capricorn. (There are exceptions, like Phil Donahue!)
It's so difficult for persons to see others' choices without projecting their own modus operandi onto whomever they observe. This is why the concept of 12 basic paths and the perspectives each offers opens understanding way beyond "one size fits all." It truly widens our realizations about what flesh is heir to.
I doubt your grandson will ever be able to see past his new belief-system. The problem is that it is so personally-empowering to him. If he finds himself swimming rather than sinking: guess who he's to congratulate! Certainly not the environment that nutured him and even now keeps the waters calm (thereby invalidating the second law of thermodynamics which states emphatically that your environment is BIGGER than you... duh!) Meanwhile, he sees others at risk. Why help them? His philosophy suggests they are themselves to blame. At that moment, he might even ask, 'what do they have that could be better used by a successful competitor such as myself? A young wife? A better job? An undeserved home in the country?' As long as he remains constant to this philosophy, he cannot help but learn to prey on the rest of his community, and congratulate himself for having done so. That is INDEED personally-empowering! It personally-empowers the individual who espouses it by, frankly, DIS-empowering the community he's proudly learned to prey upon. For evidence, consider the history of one Rush Limbaugh.
Eventually, however, the philosophy of 'sink or swim' ends up in a peculiar place: an entire nation of libertarians treading water and calling it progress. This doesn't end until they notice another nation swimming together toward actual progress and begin to question their philosophy. Americans won't get out from under the Coulter-Limbaugh-Rand individualist philosophy your grandson has fallen in with until China makes it plain to us the consequences of having adopted it in the first place. And if I knew when THAT was going to happen, I'd be a millionaire.
Perfectly rational actors, acting on perfect knowledge, in a perfectly free market is a myth. Anyone trying to make claims about actors acting rationally on knowledge in a free market, has either just taken an intro course in microeconomics, or s/he is lying.
There are no perfectly rational actors, there is no such thing as perfect knowledge, and there is no such thing as a perfectly free market.
No argument from me. Every assumption underlying the model of the free marketeers is preposterous.
So true!
Something that I find so appealing about Marx's approach - even if his turgid prose is hard to handle - is that he does not succumb to building huge theories on imaginary fantasy world of actors making their way in this fairy-tale "free market", all exactly equally empowered, exhibiting rational behavoir and with access to prefect price information - what nonsense!
And yet all these complex, Nobel-Prise generating, mathematical-economic theories are all start whth this same unalloyed horseshit as their lemma's and axioms!
Of course, the real observations of human (and other large-primate) societies show it is composed of individuals with groosly unequal access to information and most importantly unequal access to power to exploit other individuals for gain. Capitalism arose as a natural way of creating a much more flexible and effective way to use these unequal power-relationships for the concentration of wealth and power into the alpha males.
It shouldn't have taken a genius like Marx to see this. Spend a day taking a human "cross section" the downtown business district of any modern western city. Go from from the sidewalk, up to the corporate suites (if they'll even let you up the elevator - the security in the corporate towers where I live is far stricter than the federal building or courthouse), then back down to the sidewalk. Check out the alleys and steam grates too. This is how one learn's about economics.
Good points.
To be fair, there are sane economists who do not base their understanding on the delusion of perfectly rational actors with perfect knowledge in a perfectly free market. Much of the interesting thought and research, and Nobel Prizes, in economics nowadays is into non perfectly rational actors with imperfect knowledge in imperfect markets.
Joseph Stiglitz, who is pretty popular around these parts, won his Nobel Prize for his contributions on information asymmetry and imperfect markets; he pretty much reverses the arguments of the (perfectly) free marketeers. Akerlof, the co author of one of the books featured in this article, is another such economist.
Unfortunately, that delusion of perfection and rationality is what is taught in intro level economics classes, and is widely regurgitated by the media.
As Ralph Nader so succintly put it -- "Where's My Change?"
"...to lend them public funds so that they can double down on their bets."
IOW, a made-member of the money-mafia, Treasury Secretary Geithner, has decided to "lend them" our money so they can lend it back to us, again, then skim off the interest and claim they "earned" a "profit."
The Marx Brothers would be proud...
DaveBronstein, I think you're right. And I think several things came together to create this scenario. Obama said during the campaign when the economy started imploding he wasn't an economic expert. I don't know whether he swallowed the idea Summers and Geithner were experts, or simply accepted them on his team as a condition of Sach's financial backing - or both. But I do think they will end up bringing down his administration. Like Germany after WW1, you can only squeeze a country so much before it goes off the deep end. I hope it doesn't result in fascism here. Desperate people do desperate things.
I read that the number of homes underwater is up to 20%, and another 3 million foreclosures predicted this year. That can only lead to greater unemployment and we appear to be headed in the wrong direction with this recovery plan. Meanwhile, I read that the bankers are stockpiling huge bonuses for years' end. Just in case we wondered where our tax dollars are going.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
Sioux Rose
DAVE: There is also "the fear factor," a quiet terror in our midst, and by that I mean, persons now are less apt to step out of line for fear they will be the one to lose their job and then their home. If we were a society taught to work together, the reflex to step in and help out those being foreclosed might be strong; but decades of competitive conditioning have led to a larger dog-eat-dog stance. Many people are just praying over their supper, thanking Jesus for their daily bread, and hoping they will not be next.
I broke a tooth last week and unfortunately have to face some expensive dentistry. Once the dentist gets the Xrays, the truth is out and anything and everything you hoped never to have to face is suddenly IN your face. I have had a lot of extra expenses lately and wasn't prepared for this. Instead of the dentist working with me, realizing I have no insurance (I am not making this up), she gave me a lecture on God will take care of it, to trust God. I should have asked if Jesus would lend me His credit card, but one cannot be so glib when they have to place themselves in another's care. In this Bible belt, church attendance is probably very high, and many of these persons are UTTERLY convinced that so long as they tow the authoritarian line, Jesus/God will take care of their needs. And as you probably know, the Calvinist reversal of that proposition is that if you do NOT have your needs fulfilled, you're not living right by Jesus. Nice tautology, but it also helps to keep the flock passive.
Sioux Rose
DAVE: I moved here because I like the closeness to nature unadulterated... the people, most of them, I could do without.
As for your brother, I have some intelligent friends (like the dentist today... she tried to tell me that Obama was going to "fix that" when I said our nation makes bombs but doesn't help people like myself afford dental care) who also want to give him the benefit of the doubt. I think it's his smile! He's got that "gift" like so many newscasters that retain their lovely toothy grins as they read outrageous statistics that should make their blood boil. Well, lawyers often do practice before video cameras to gain a visceral sense of how an audience/jury will respond to them. Makes for great acting!
Can your brother wrap his mind around this one: You can't end debt by making more debt? When Kivals makes his next trip to China, I'd like to hear his "word on the street reporter's acumen" of how the Chinese regard the fact that all the dollars they own have now been essentially cut in thirds, or worse, "thanks" to the infusion of all the redi-made-magic-money donated to all those honest Abe bankers. We truly are living in INSANE times.
"...super smart advisers & experts.....?
You can base good judgment only on good input. And good opinion on good intention. These ‘experts’ are not your friends.
"Open your mind and your ass will follow." I can't bear the thought that your brother has not yet taken a good long hard look behind the curtain to do scientific scrutiny some justice. And please forgive me the sarcastic quip (one shouldn’t let a good crisis –err- pun go to waste): academic achievement has never been a stringent indicator for independent investigative critical mindset.
I challenge you and your brother, with all respect and kindly, to examine with open mind:
www.scribd.com/people/documents/2169400-ep-heidner
Read ‘Collateral Damage’ part I and II
It will leave you upset and set up.
Sioux Rose
DAVE B: I read the link posted by YACHTIE and believe it is something you would be interested in. I wish this type of material could be published on a mass scale. It would likely go over the heads of those who don't have lots of brain storage, or those "true believers" incapable of peering into the dark shadow of those leaders they exalt, but there are enough intelligent persons who would be stunned--hopefully into righteous citizen action--by the data.
In Steven Pinker's book "The Blank Slate," he opposes left and right as the Utopian View and the Tragic View of government. I think he has something as far as it goes, but opposed to this would be the Utopian and Tragic views of markets, which would read right to left politically. The fact is that wherever humans have social interactions laws are necessary, no less in the market than anywhere else. To think otherwise is looney millennialism that does not deserve the dignity of public argument – except that billionaires and those who aspire to take their places naturally benefit from the removal of laws and will do all in their considerable powers to keep this delusion in the political arena.
David Ricardo remarked that laws to govern economy seldom performed as intended so that it might be better to have no laws. Likewise laws against murder have not reformed human character, but to propose that laws against murder should therefore be abandoned is unthinkable. We should test for the performance of laws in the economy and adjust them accordingly rather than abandon legislation altogether.
Many are saying that the laws passed in the 30s to regulate banks worked well for 60 years. Things started coming unglued when the banks were deregulated. I may be wrong, but it seems like the transfer of public wealth to the banks under Geithner, Summers and Bernanke is accelerating.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
'Likewise laws against murder have not reformed human character, but to propose that laws against murder should therefore be abandoned is unthinkable.'
what if there were no laws against murder? would you (not necessarily you, ClassAct, but a figurative 'you') be more likely to murder someone? who, and for what reasons? who do these laws protect, if not the people you might wish to murder, and, perhaps, for good reason?
a diversion from the normal exchanges...
I think it is likely that most male children in the US would end up murdering their fathers if there were no laws against murder.
“Parents of America … if your children find out how helpless you really are, they’ll murder you in your sleep.”
—Frank Zappa
oooh...interesting...I have a son who has just recently reached the age where he can physically rival me, and it is interesting to contemplate...let's see if anyone else comments along similar lines, or other...
do you think murderers are running the show here, protected against retaliation by playing those of us with more 'developed' moralities against such? are they taking advantage of our niceness by using it against us?
I did find the comment you responded to a bit disturbing, as I am also the father of a boy who will soon be capable of challenging me physically. I have a great relationship with him, but I do not find such sentiments as that expressed by Zappa to be particularly helpful.
As for murderers, isn't the lack of a penalty what makes aggressive war such a popular choice for US presidents, even though it involves wanton murder on a massive scale? Power corrupts and absolute power corrupts absolutely, and I think if the penalty for murder, or any other heinous act, were removed, then many would feel that power and be surprised by what thoughts would creep into their minds.
thank you for responding, kivals...I won't drag this out much further...would fewer laws regarding murder, theft, etc., actually wake what we like to refer to as the 'sheeple'? if the underlying problem is lack of individual self-awareness, self-reliance, and social influence at the hands of the state, would fewer laws regarding reverse this condition? is life better, more 'lived', when lived peacefully, albeit victimized, according to the Law of the State, or when lived aggressively, albeit more dangerously, according to Jack London's Law of Club and Fang? If the State is going to stick it to you anyway, whether you're peaceful or not...
Fewer laws? There are laws to protect the person, that primarily protect the physically weak and vulnerable (especially women and children and the elderly), and there are laws to protect property, that primarily protect the wealthy. I do not, and I doubt that many people do, want to abandon the laws to protect the person (where those laws do not operate one finds extremely harsh conditions, particularly for women and children). However, I am game when it comes to removing many of those laws to protect property, though I recognize the wealthy then would create their own security forces to protect their property.
Sioux Rose
DUBET: I think the laws give a society a sense that it is operating fairly. If that society murders those who kill (idiot capital punishment) it betrays its own ideals. Ultimately if persons were taught respect for ALL others, not just those that look like themselves or go to the same schools/churches, few laws would be required. America lives by the sword as seen in its over-use of all kinds of domestic policing forces, and its many wars of conquest abroad (not to mention 700 plus standing military bases). So regardless of all the hoopla around law and order, it undermines its own example in too many ways. If different values (as in more compassionate and life-affirming) were taught and exemplified by leaders, crime would likely go down. (And I also feel pot should be legal, along with other non-violent drugs. However I don't think people should drive under the influence.)
Sioux Rose
CLASS ACT: Your post rings very true. Think of all the think tanks that support those who espouse the nonsense that government intervention is a bane to business. Needless to say old money and corporate dollars are well-positioned to turn an idiot into a star by giving him or her a megaphone and LOTS of media coverage. Ann Coulter is a perfect example. Selfish Ayn Rand types who push the idea of individual determination while implying that such success eventuates in a raising of all other ships suits the agenda of the elites, and so the wordsmiths who can spin this tale "effectively" are given honors, speaking tours, and credentials which in turn produce an aura of respect around them. Think Alan Greenspan and his mea culpa about not realizing what has long been indicated as the ROOT of all evil: the love of money. As if business would just do the right thing.
"Adam Smith's core teaching is precisely that individual self-interest aggregates to a general good and that government should keep hands off."
Underlying Adam Smith's argument was the fact that in non-consumption societies, self-interest embodied the society's better interests. Such was necessary for survival on the frontiers and for prosperity in the cities.
Those societies simply could not compensate for the gargantuan wastes of infantile self-interest. And there are strong arguments that societies SHOULD not try to compensate. A society built on self-interest that reinforces the society's better interests, coupled with appropriate industrialization is likely to be the optimum.
Societies that carry on the true spirit of the European Enlightenment and related philosophies, manifest something much closer to that optimum today.
This isn't to say Smith was a great guy. Smith failed to explicitly point out the basis of his argument, that the self-interest among the people of his day was oriented toward the society's better interests. Smith's failure enabled the greed-stricken from his day on to abuse his work and deceive audiences by bolting a different definition of self interest into his machine: Greed-stricken infantile self-interest. And the Chicago School dirigible took flight.
We wanted McKane to get elected and finally pilot that damned thing into the lake, kamikaze style. Disciples of Saint O'Bamba preferred to keep it aloft. How long will they continue to obscure the difference between responsible and infantile self-interest?
Adam Smith also postulated completeness and accuracy of information as preconditions of a "free market."
Flash forward to today, when even graduate economists can't agree on what exactly was being bought and sold as derivatives, CDSs and CDOs, much less their "true market value."
"All professions are conspiracies against the laity."
---Mark Twain
Didn't Smith also include a requirement for egalitarianism - all actors equally empowered enough so one couldn't intimidate another in any transaction?
It sems that once one considerd all of his caveats, than it seem obvious that a real "free market" could only occur in the imagination, or a completly unrealistic computer model, not in a human society.
The inequality of parties to a transaction in a market is a critical factor that is too often overlooked. The powerful always bully the weak, and the bargain struck reflects that. And even if a strong government develops to regulate the transactions and prevent abuse, it is inevitable over time that the powerful market players will capture the government, or enough of it, to give them an advantage anyway, possibly even larger than their original advantage in the absence of regulation. The idea of the "free market" was created and promoted by minds that also embraced the idea of heaven, which is about as plausible.
The title is spot on. There's no doubt Obama and the top Democrats are the foilers.
A general note on the alleged stupidity of the American public:
Ever since they began doing polls of Americans, it has been evident that most of our citizens neither know nor care a lick about politics. They are clueless about politics in the same way we are all clueless about something we just don't care about.
Of course this makes them seem literally stupid to political wonks like us, and I share the frustration. But I hope we all understand it's not stupidity per se.
Nor is intelligence such an asset in our version of politics. Progressives are smart, and yet they were dumb enough to go for Obama. Whither your high IQ if you pick the worst possible candidate?
At times, people with higher IQ's are more easily hypnotized.
RE: citizens and intelligence
Micheal Albert has noted that when working class men pick up the newspaper, they go straight for the sports section - arguably, the only part of the paper where the reporting is actually true! Roughly, 40% of voting age Americans don't vote, they see it as a waste of time. Given the "change" we've seen from Obama, maybe they're not so dumb after all.
Emma Goldman's quote: "if voting changed anything, it would be illegal"
may not be a cynical joke but rather a simple statement of fact.
the use of force to influence economics belies all other reasoning...
the living planet, as source material for any and all economic activity, is the one true barometer, and the one true necessity...how's it looking?
What if the core concept of centralized economic systems and its handmaiden of interest is flawed? Then all this discussion of regulations, fault, and 'free markets' is a farce.
Legal Tender is a legal contrivance, and when issued in the form of debt is nothing more than a pyramid/ponzi scheme. The quantification of debt wrongfully applies the algebraic concept of exponential growth - compounding interest - upon money. The distinction between usury and interest is an arbitrary legal determination with no basis in mathematics. Nothing can grow forever at an ever-increasing rate. As time moves on, the emphasis of ever-increasing growth becomes omnipresent, is quantified and institutionalized in the societal structure, encouraging over consumption, over development, and excessive expectations, pushing economic stress to its upper limit of expansion, eventually inciting conflict and spawning War to insure growth.
Gotta grow. To what? Doesn't matter, just grow.
http://theformofmoney.blogharbor.com/blog/_archives/2005/9/18/1236759.html
Baker has also been an astute critic of efforts by former Treasury Secretary Henry Paulson and his successor Timothy Geithner to prop up, rather than clean out, toxic securities, and he includes a useful summary of the kind of regulation that we need going forward.
The only conclusion you can draw from this is that Snap, Crackle and Pop (Obama, Geithner and Summers) are either trying to be the Dr. Frankensteins of the collapsed housing bubble, or are trying to create a new bubble, whatever that might be. In the film "All The President's Men", Hal Holbrook, playing Deep Throat, tells Woodward, "Stop believing the myths the press has created about the White House. The fact is, these guys aren't very bright and things got out of hand." Snap, Crackle and Pop (the economic grave robbers of the Democratic party) should take heed because the same thing may very well happen to them.
"As always, his enemies were the barons of banking, backed by their allies in government, who wanted to rely entirely on private financial flows and a system biased toward the interests of creditors."
"The one common thread that links the failed central bankers of Ahamed's tale with the folly of Geithner and Bernanke is that all were working hand in glove with private financial elites."
"...it helps to comprehend the back story..."
There comes a time when ideas about the world undergo a Paradigm Shift.
Please examine:
www.scribd.com/people/documents/2169400-ep-heidner
Read Collateral Damage part I and II
The consequences are BEYOND BELIEF.
Friends,
Adam Smith's book, The Wealth of Nations, was well read by the Fathers of the Constitution of the American Republic. Most believed in a Free-market economy at that time. Basically, there were four laws of economic freedom outlined by Smith: 1. The Freedom to try. 2. The Freedom to buy. 3. The Freedom to sell. 4. the Freedom to FAIL.
In a TRUE Free-market economy, the banksters would have had the freedom to FAIL.
This is what should have happened. The fact that they are being propped up by the American Taxpayer is absurd! What you have, indeed, is a capitalization of the profits, and socialism of the losses. That is NOT a Free-market.
A Free-market would be self-correcting if the major banks were allowed to fail. It would have been hard in the short term, but may have left future prosperity a chance for a better life rather than being born into debt and despair.
What would happen if your business were failing? Would you get a bail-out?
I think future historians will look at the bail-outs as one of the greatest heists of all time, and the banksters and politicians of today as being truly criminal.
We'll see what happens.
First I congratulate all of you on your fine expositions. You have an intellectual grasp of the issues and complexities and you face them and argue your points without spitting at each other (except in cases of gross hagiography by the neo-cons or neo-libs who visit here on occasion). Because you and the author of this piece have already done so well, I direct your attention to the background here.
How many people in this country are even capable of reading these books today? How many could or even can throw out $16 to $33 (plus shipping/handling/sales tax)? How many Americans even have books in their homes at all (besides Louis L'Amour and Harlequin romances)? Do they count? What role do they play? Are they a resource for you or a liability. Do you look at them with the same eyes that Master does?
When you generate your hologram of our society and the dynamics of our shared world world, make sure they are included in your considerations. Are they ballast? What role do they play? Mindless meat? How does their presence impact the equation? And never forget: Peasants are MADE they are not born. How were they made? What pressures, forces, and strategies have been used to subjugate them? Do you wish to free yourself by helping them to free themselves? Would they turn on you for doing so? If they would, what chance do you have of changing anything here?
luckylefty...
if i'm not too late to respond to an aging thread, I liked your questions on this busy Monday morning...
the ultimate goal, to me, is to somehow reawaken the individual to the magic that life is, with the planet benefitting from immediate resulting reversals in human ecologic behaviors eveywhere...this involves both the spirit and the body, and would be assisted by the magic of the living world, as a resurgence in fleshy contact with the dirt becomes...it would involve the encouraged use of cannabis for many things psychological and industrial...it would center on watersheds, and music and sex and worship of the natural environs...mostly, though, it would be a sense of appreciative awe at being alive, at having free will and physical liberty and a mind and muscles, supported by reflective, critical thinking and a profound sacredness of the personal rights and responsibilities inherently possessed by each self and the other humans, animals and plants...
the class of people you describe in your later paragraphs are evolving through this widening separation between being physically alive and consciously living...the world I would envision, without electricity, for example, would provide much more opportunity for each individual to directly affect their own well-being, would provide undistracted time for exploring, playing and learning valuable skills with actual use for themselves and their group, would provide an actual transition into the rights and responsibilities of adulthood at puberty, when one is not only capable, but hormonally driven, to become a parent, rather than the hazy, gelatinous ride society forces us to take through our teen years, granting various rights at random ages until, at 21, we are finally acknowledged as adults...
no one is of lesser value when it comes to supporting themselves...
would they turn? hmmm...
my own thought is that the fundamental flaw lies in adam smith's belief that: "individual self-interest aggregates to a general good"
what complete nonsense! six buzz words! a magic formula makes! sublimated nonsense, utter unreason!
Bullseye.
Greenspan claims that he imagined that business leaders would sacrifice immediate corporate interest to public good at least as understood by those business leaders themselves, since the business community would be better off in the long run were it to do so.
If he's not just lying, what an astonishing error! Clearly the advantage of every single corporation lies in letting the other guy do it - allowing every other corporation to make the sacrifice earlier, more strongly, and more completely. This error fascinates me because it seems to be stock in trade for those who imagine that such decisions should be made based on individual interest.
This works like a game of chicken or a contest to take away the last card but one before a house of cards falls. The macroparasites stole too much at once. Now the host is suffering so much as to produce less.
The subtler error - only slightly subtler, granted - is to imagine that things were going well in boomtime.
Yes, Robert, the economic plunderers (as Dean Baker calls them) or "looters" (as Akerlof has called them) are the engines of our sorrows of EMPIRE, but it is the pompous, weak, and complicitous politicians like Bill Clinton and Barack Obama (along with the more overt proto-fascists, like Bush and Reagan) who have always been the deceptive 'instruments' of the economic EMPIRE's oppression and tyranny.
Democracy is people against EMPIRE ---- it's been this for five thousand years, and it still is, despite the fact that EMPIRE has morphed and disguised itself today as a veiled form of "friendly fascism" posing as the most lethal and modern type of EMPIRE by hiding behind the facade of its two-party 'VICHY' sham of democracy, and aided by gutless liars of politicians who look so cool and popular on the outside (like Clinton and Obama) but are so complicitous with fascism for their short term popularity, like Neville Chamberlain:
Obama “taking softer stands”, despite his “big plans” and his famous ‘hope’ for ‘change’, will end badly for very easily understood reasons --- which precisely parallel Bill Clinton’s legacy of failure.
The following was my earlier diagnosis of Clinton’s (and the Democratic Party’s) error in the lead letter to the Boston Globe (Jan. 2001) in response to their 1/19 editorial “Bill Clinton’s Legacy?”:
“Clinton's legacy? It will be as the Neville Chamberlain of the Democratic Party, and for the same reason: that he caved to fascism ---- not the old personalized, nationalist fascism, but a newer ‘friendly fascism’ of global corporate empire.
Clinton tried to triangulate corporate fascism with a slightly friendlier version, which could “feel our pain” while applying it also. He learned too late that you can’t co-opt fascists by applying half their programs for them. They will only grouse and continue to do the second half with rougher hands on the controls.
Clinton has left America without the defense of a democratic party ---- without an opposition party to the rule of global corporate empire.
Clinton, like Chamberlain stepping off the plane, is smiling to the crowd, while waving the death certificate of the Democratic Party, which he has just negotiated.”
My diagnosis is as accurate today as it was then. In fact, today the mortal error of Obama, as a popular liberal Democratic President, is even easier to understand, and more obvious, than it was for the ‘hopes’ of Clinton.
The tragic (and common) flaw of Clinton, and now Obama, was/is, to not level with the American people once elected. To not level about the fight between the American democratic Republic image which we believe in, and the reality of the deadly ruling-elite ‘corporate financial Empire’ that today IS America.
I have no argument with candidate Bill Clinton, nor Obama, during the campaign in avoiding the issue of our deadly cancerous tumor of Empire, in order not to scare people, nor appear radical, and thus be ‘unelectable’. However, as a tragic hero once learned, "the fault is not in the stars but in ourselves", and Obama himself, as president now, has still not chosen to level with the American people --- when in leveling he could now provide the truth, and in doing so cast out that deadly poison of Empire.
And thus this tragic play continues like some kind of absurd “Groundhog Day”, with 'fox-smart', but weak Democratic presidents continuing to try to be ‘pragmatic’, ‘moderate’, ‘compromising’, ‘triangulating’, and now “taking softer stands”, but being predictably co-opted and beaten down by the groundhog of Empire that “knows one thing well” --- how to rule by dividing and conquering.
Obama needs to level with all the American people about the real battle for control of our indivisible political-economy --- just as our founding fathers did with the people, regarding the inevitable conflict between Empire and democratic Republic.
Obama needs to have the confidence that the vast majority of Americans, who believe in the American dream of democratic self-government but need to understand the danger of a guilefully combined political, economic, social and corporate Empire, will support his goals, the American goals, and the path of ‘hope’ for the world.
Obama also has to have enough “trust in the people” (as FDR said), to be confident that the miniscule minority of elitists and ‘financial royalists’ controlling this ‘corporate financial Empire’ of death, who already know the truth of how power is not democratically shared, will find it more comfortable (and safe) to leave without violence, as the British Empire’s royal governors, royal landholders, royal capitalists, and Royally Chartered Corporations (like the East India Corporation --- which caused the real ‘tea party’) left the new democratic Republic of the United States of America.
http://www.opednews.com/articles/opedne_alan_mac_070226__22vichy_america_22.htm
http://www.opednews.com/articles/opedne_alan_mac_070319__22economics_of_empire.htm
http://www.opednews.com/articles/-Empire-Elitism-External-by-Alan-MacDonald-090310-224.html
Alan MacDonald
Sanford, Maine