Paul Krugman says ...

8 Words of Wisdom for Week Ending 4/17/2009 #1

Ten years ago the cover of Time magazine featured Robert Rubin, then Treasury secretary, Alan Greenspan, then chairman of the Federal Reserve, and Lawrence Summers, then deputy Treasury secretary. Time dubbed the three “the committee to save the world,” crediting them with leading the global financial system through a crisis that seemed terrifying at the time, although it was a small blip compared with what we’re going through now.

All the men on that cover were Americans, but nobody considered that odd. After all, in 1999 the United States was the unquestioned leader of the global crisis response. That leadership role was only partly based on American wealth; it also, to an important degree, reflected America’s stature as a role model. The United States, everyone thought, was the country that knew how to do finance right.

How times have changed ...

Indeed, these days America is looking like the Bernie Madoff of economies: for many years it was held in respect, even awe, but it turns out to have been a fraud all along.

It’s painful now to read a lecture that Mr. Summers gave in early 2000, as the economic crisis of the 1990s was winding down. Discussing the causes of that crisis, Mr. Summers pointed to things that the crisis countries lacked — and that, by implication, the United States had. These things included “well-capitalized and supervised banks” and reliable, transparent corporate accounting. Oh well.

The whole column should be read of course, but Krugman makes a wonderful point about our reputation ... our credibility. It's a given that most Americans recognize our loss of standing on the world stage on matters of foreign policy. George Bush and the war in Iraq robbed our nation of that. We lost the moral high ground through our use of torture. Still, we were the richest country in the world. We encouraged all the world to follow our economic lead. Now we find ourselves in the midst of the worst economic crisis since the Great Depression, and we no longer have our credibility on financial matters.

Perhaps it's good that we now have a President who is so thoroughly charismatic. If we can't get the entire world to take this crisis seriously, we will never solve the problem. It's an uphill battle for President Obama and just another example of the ultimate legacy of George W. Bush ... the fall of America as the world's moral and economic leader.

Source - The New York Times

Josh Marshall says ...

8 Words of Wisdom for Week Ending 3/20/2009 #8

First, to the greatest extent possible, those who took the risks and enjoyed the upside should suffer the downside -- a principle that seems straightforward but is far from the way we're running the current response to the crisis.

Second, the financial sector has become increasingly prone to excessive risk taking and spawned a climate of opacity that has bled into fraud. For both reasons, I believe we need a substantially expanded regulatory regime.

Third, I think the financial sector has become over-swollen. I concede at the outset that this is an assumption where I am most out of my depth in terms of specialized knowledge. But based on my own understanding and the opinions of more expert minds whose opinions I respect, I think we've developed a basic imbalance in the structure of the economy over the last couple decades in which the financial sector, the proper role of which is to efficiently allocate capital in (or in other words, service) the real economy, is dominating the economy and organizing the real economy in its own interests.

Source - Talking Points Memo

I think Josh has it exactly right. At what point do we have a serious discussion about the role of the financial industry in our economy? Their present role is not a role that is supportive of the American people. It is not a role that is in service to the broader economy. It is a role that is largely undemocratic. It is a role that has played an active part in destroying the financial stability of mush of the middle and lower classes. Our system of government was designed to represent people, not industry ... and certainly not the financial industry. To recover from this crisis, and to recover in a way that prevents this outcome in the future, we must deal with the financial industry.

Rep. Gary Peters (D-MI09) says ...

8 Words of Wisdom for Week Ending 3/20/2009 #6

It is beyond outrageous that the very people who brought AIG to its knees and helped create the current financial crisis are scheduled to receive hundreds of millions of dollars in bonuses while tax dollars keep their company afloat. These bonuses are in effect a raid on taxpayer dollars. The legislation I’m proposing will get taxpayers their money back. Congress must act swiftly on this matter to show AIG, other companies receiving federal support and taxpayers that we mean business when we say that tax dollars are not to be used to enrich company executives.

Kudos to the freshman congressman for expressing the right amount of outrage and determination. His plan, a big time tax on these types of bonuses is great. Read about it at the link. This is the type of creative progressive legislation that will win the confidence of the American people. Mr. Peters has a great future ahead of him.

Source - Daily Kos

Crisis

8 Items to Learn About Banks and Bailouts #1

From the birth of our country through the great depression, financial crisis leading to bank panics were not uncommon. The situation would play out around every 20 years. Citizens would flock to their banks and withdraw their savings. Banks would go under. The banks that didn't go under would stop lending. Businesses, unable to receive loans, would stop hiring. Unemployment would rise. One crisis after another.

We thought we had learned our lesson after the Great Depression. The problem was solved. Through the judicious use of monetary policy, through the control of the money supply, it was thought that any recession could be controlled. We now find ourselves in a liquidity trap where the interest rate for Fed loans to the banks is already zero. Monetary policy is not an option on the table.

It doesn't help that we are no longer a nation of thousands of community banks. Mergers and acquisitions has left our system controlled by a handful of large national banks. These banks, we are told, are too big to fail. It is feared that they could bring down the whole system. The fears are not unfounded.

Here we sit in the midst of the largest financial calamity this country has faced since the Great Depression. We seem to be relying on the minds of the very people who got us into this mess to get us out. No one in the administration or the Congress seems to be listening to our finest economic minds and their prescriptions for handling the mess. People, both lay and expert, are cynical. Yes, everyone agrees that things will get worse before they get better, but how bad will they get? How long will the recession last?

Here's the problem: there are no easy answers and politicians like easy answers. They do not want to stick their necks out, not while a small group of rabid conservatives lie, distort, and scream about every move made. After all, there surest path back to power is to obstruct any chance to end the crisis. Until the administration and the Congress face up to the challenge, we will sit where we sit today. In trouble, with little hope in sight for a conclusion.

DZ says ...

8 Words of Wisdom for Week Ending 3/20/2009 #2

This is not some conspiracy theory that "they" have some detailed plot to take everything over but a recognition that the psyche of Wall St. and corporate finance has infiltrated the previous as well as the current administration. Additionally, as the facts show, all the supposed economic growth over the last 10 years was on Wall St. such that they have become the biggest economic force in this country. Collective greed inevitably throws its weight around and we are seeing that now. Geithner is a creature of this financial structure and as such he is completely blinded by what he knows. Obama has been good at getting a lot "experts" but in this case virtually all the experts are beholden to what got us in trouble in the first place. Volcker may be the only exception but he seems to have been effectively marginalized to the detriment of us all.

The biggest oversight in all of this is the mantra that what is good for Wall St. is good for the country. This is highly delusional at this moment in time. Wall St. has and still is extorting trillions of taxpayer dollars and the government is an accomplice in the crime. I am making this point to illustrate just how pervasive and how much political power the collective psyche of Wall St. actually has.

Source: Talking Points Memo

We are all paying for the sins of Wall Street, yet, they are the ones who are given multiple seats at the table for fixing the crisis, when the crisis is a direct result of their mentality. I have no idea what kind of man Tim Geithner is, but I'm fairly certain his boss is a good man. It is up to us to put the pressure on President Obama and his administration to do the right thing and to dig us out of this situation. If we sit back and do nothing, then we get what we deserve.

You want your government to serve you? Then raise your voice.

Dan of A Blog Named Sue says ...

8 Words of Wisdom for Week Ending 3/13/2009 #8

You know, in every movie I've seen about the end of the world, civilization collapses because of something wicked cool happening - an asteroid hits, nuclear war, a supervirus, an ape revolution, whatever. If civilization collapses over credit default swaps I an going to be pissed.

Source - Eschaton

Hey, welcome to the world of the conservative. They are the only people who could have dreamed up this crap anyway.

Josh Marshall says ...

8 Words of Wisdom for Week Ending 3/13/2009 #7

Let's just stipulate DC Republicans are simply not part of the discussion when it comes to repairing the US economy or arresting our slide into deep economic misery. And any reporters who aren't clear about this are just lying to their readers or viewers. The latest Republican plan, in the face of today's new spike in unemployment, is a freeze on federal spending. I'm not even sure it's fair to say that this is a replay of the disastrous decisions the magnified the Great Depression between 1929 and 1933. It's more a parody of it. When the crisis is a rapid and catastrophic drop off in demand, you handcuff the one force that can create demand (i.e., the federal government) in the throes of the contraction. That's insane. Levels of stimulus are a decent question. Intensifying the contraction is just insane and frankly a joke. It's time to recognize that the only debate here is happening among Democrats and sundry non-affiliated sane people. The leaders of the GOP are simply not part of the conversation.

Source - Talking Points Memo

The point sort of makes itself here, doesn't it?

President Obama says ...

8 Words of Wisdom for Week Ending 3/13/2009 #6

Well, I just think it's clear by the time we got here, there already had been an enormous infusion of taxpayer money into the financial system. And the thing I constantly try to emphasize to people if that coming in, the market was doing fine, nobody would be happier than me to stay out of it. I have more than enough to do without having to worry the financial system. The fact that we've had to take these extraordinary measures and intervene is not an indication of my ideological preference, but an indication of the degree to which lax regulation and extravagant risk taking has precipitated a crisis.

Source: County Fair

The President makes a very good point here and illuminates something about liberalism. Big government is NOT an ideological preference. However, at times, we are forced to take action. The only institution capable of taking this type of enormous action in our country is the federal government. Conservatives are ideological, liberals are pragmatic.

Paul Krugman says ...

8 Words of Wisdom for Week Ending 3/13/2009 #5

The benefits from nationalization come from (a) giving taxpayers a share of the upside rather than just a share of the downside, which is where we are now (b) ending the gaming of the system, even looting, that is encouraged by the current system of implicit guarantees (Simon Johnson has been very good on that) (c) making it politically and fiscally feasible to put in enough capital to revitalize the system.

Source - The Conscious of a Liberal

As a course of action, the FDIC takes banks into receivership all the time. A conservative considers their ideology. A liberal looks at what works, rather here or abroad, and tries to apply it to our own situation.

Eric Boehlert says ...

8 Words of Wisdom for Week Ending 3/13/2009 #4

In an effort to tag the current economic crisis on the new president, more and more business news outlets are pretending there was no unfolding financial crisis before Obama's Inauguration Day, and that the Dow for some unexplainable reason has suddenly gone south with his arrival in the White House. Mouthing the anti-Democratic complaints from the Street, the business press pretends our economic woes started January 21.

...

In the wake of the unfolding economic collapse, lots of people have pointed the finger at the business press, suggesting for years they failed the see the current troubles forming; that they played dumb. Well, it turns out some portions of the business press aren't done playing dumb.

- Source: County Fair

I've always been amazed at the Republican lies that somehow end up as accepted truth. My personal favorite is the concept of the "liberal press" ... you know ... the accusation that the traditional media carries a liberal bias. It simply isn't true of course. They have no evidence to back up the position. Here's a little lesson about conservatism though: they know how to sell a talking point. Many people (on the left even!) just assume that all the talk about the liberal media is somehow true. For anyone who buys this crap, I strongly recommend the work of Eric Boehlert at County Fair and Eric Alterman at Altercation.

Paul Krugman says ...

8 Words of Wisdom for Week Ending 3/13/2009 #3

I suggested a little while ago that the GOP has become the party of Beavis and Butthead, reduced to snickering at line items in legislation that sound funny. And we’re not just talking about the usual crazies: we’re taking about Saint John McCain, cracking jokes about “Mormon crickets” and “beaver management” when a minute or two on Google reveals that these are, in fact, serious issues.

But it’s getting truly serious when the House minority leader — essentially, the nation’s second-ranking Republican (after Rush Limbaugh) — declares that the answer to the economy’s downward spiral is a spending freeze. That’s not a retrogression to Herbert Hoover; even Hoover knew better than that.

- Source: The Conscious of a Liberal

Here's a truth about the differences between a liberal and a conservative that I will be repeating, I would imagine, weekly. Liberals learn from the mistakes of the past. Conservatives ignore them.

Tragedy

8 Random Items for 2/13/2009 #4

The crash of Continental Flight 3407 into a home in suburban Buffalo is a massive human tragedy, but it is not one with larger implications for the country. Should the entire news cycle be lost to tragedy while we are in the midst of the debate over the stimulus bill? 

The priorities of our news organizations is astounding. Journalism ceased being about "nobility" and has become far more about the fame. That's the irony of "All the President's Men". The reporting by Bernstein and Woodward was impeccable and just, but the movie and the fame ruined a generation of journalists. The goal is no longer to expose the corruption behind power, but to be played by Robert Redford in the movie based on your story.

Well, those two paragraphs were random.

Fred Barnes says ...

8 Words of Stupidity for 2/12/2009 #3

Democrats couldn't hide their self-consciousness about the excesses of their own bill. Supporters made few TV appearances to defend it and rarely talked about specific spending items. Obama sounded like Al Gore on global warming. The more the case for man-made warming falls apart, the more hysterical Gore gets about an imminent catastrophe. The more public support his bill loses, the more Obama embraces fear-mongering.

- Fred Barnes from the Weekly Standard as reported by Talking Points Memo.

I guess someone should alert all of our scientists that the case against global warming has fallen apart. I mean, it has been cold lately so clearly its all bull. Clearly, conservative hacks are much more qualified to make these determinations than scientists.

Of course no one knows more about "fear-mongering" than conservative hacks, so I can only assume Barnes is lying when he accuses Obama of it. You see, telling the truth to the American people is not fear-mongering; it's being honest. Lying about the possibility or Iraq detonating a nuclear weapon in the United States to justify a war is fear-mongering.

Simon Johnson says ...

8 Words of Wisdom for 2/10/2009 #6

Our unsustainable debt-fuelled boom, in other words, produced both the conditions for a major global financial disaster, and a political strengthening of the people who benefited most from the risk-taking and associated compensation packages that made this disaster possible. Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system - although this will not immediately lead to an economic recovery (more on that here). But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today.

How can you do it? The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization - if implemented right - can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail. And then... there is always more to do to contain the power of a lobby that is boosted by any boom and which, the more it succeeds, the more likely it is to ruin us all.

- Simon Johnson on a bank bailout we can believe in.

Read This ...

8 Things to Learn for 2/2/2009 #4

Read the list at this link and tell me, what have you learned?

A. Lots of banks are failing.

B. Georgia has a disproportionally large number of banks failing.

C. All of the above.

Needless to say, you should have learned C. One more reason that I'm proud to be a Georgian.

More Genius from Paul Krugman

8 Random Items for 1/27/2009 #8

Here's a list of my favorite comments from Paul Krugman's most recent column in the New York Times.

• "Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated. So they are reaching for any stick they can find with which to beat proposals for increased government spending."


• "(T)he obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers."


• "(W)rite off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money."


• "(I)t’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created (see the previous fraudulent argument) — because a large fraction of any tax cut will simply be saved."


• "It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero."


• "Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject — and therefore has no business weighing in on the debate — or is being deliberately obtuse."

I recommend reading the entire column. While you're at it, read everything he ever wrote.

Further John McCain Stupidity

8 Random Items for 1/27/2009 #6

We need to make tax cuts permanent, and we need to make a commitment that there'll be no new taxes. We need to cut payroll taxes. We need to cut business taxes.

- Presidential Loser, John McCain on solving the crisis

You were rejected at the polls sir. Get on board or condemn yourself to irrelevancy. The idea that conservative economic policy has ANY role to play in solving the current crisis is ridiculous. People like John McCain causes this mess, why would we listen to his opinion on fixing it?

Sprint? 8,000

8 Random Items for 1/26/2009 #7

The crisis deepens. Sprint will be getting into the game with about 8000 employees looking for new work by the end of March.

Note to Congress: Get to damn work on the damn stimulus bill. Damn it.

Government Intervention

8 Random Items for 1/26/2009 #6

If government had intervened and forced higher gas mileage standards on the car companies years ago, the current crisis would not have been nearly as devastating to the auto industry. Acting now was necessary, and kudos to the Obama administration for doing so, but ultimately, it is like closing the barn door after the horse has been stolen.

The dirty little secret about capitalism is that many industries need to be protected from themselves by the government.

20,000 More

8 Random Items for 1/26/2009 #5

Wow. Caterpillar is in such bad shape that they cut 20,000 jobs today, and the stock fell anyway! 20,000 more lives thrown into disarray. When will it stop?