As I have repeatedly written, the largest U.S. banks have repeatedly gone bankrupt due to wild speculation which was blessed by the Fed, and then the government covered up their bankruptcy. [Washington then quotes from James Gailbraith's on the occasion of the publication of a new edition of J. K. Gailbraith's The Great Crash, 1929]: BILL MOYERS: So what should we do? JAMES GALBRAITH: We need to find another path for economic expansion. We need to set a strategic direction. Our problem now, our big social and environmental problem, is energy. It's climate change. It's the greenhouse gas emission issue. If we built a set of institutions that could deal with that problem effectively, you could employ a large part of the labor force for a generation, dealing with that. And you'd then make that profitable for private enterprise to get into in a serious way. BILL MOYERS: The candidate Obama talked a lot about this, green energy, in the campaign. And he's talked a lot about it since he became president. Do you see signs that those aspirations are being implemented, in institutional ways? JAMES GALBRAITH: They made a start, and certainly in the stimulus package, there were important initiatives. But the stimulus package is framed as a stimulus, as something which is temporary, which will go away after a couple of years. And that is not the way to proceed here. The overwhelming emphasis, in the administration's program, I think, has been to return things to a condition of normalcy, to use a 1920s word, that prevailed five and ten years ago. That is to say, we're back to a world in which Wall Street and the major banks are leading, and setting the path-- BILL MOYERS: To restore what was. JAMES GALBRAITH: To restore what was-- BILL MOYERS: Instead of reform what is. JAMES GALBRAITH: And I don't think what was can be restored. [Thus, in James Gailbraith's view, the implicit goal of Obama Administration policy is to restore the un-restorable--public confidence in our financial system. Washington finishes with a killer quote from Mario Seccareccia - editor of the International Journal of Political Economy]: The Great Crash of 1929 taught us that a modern monetary market economy is governed by confidence. As John Maynard Keynes put it, monetary relations and, more precisely, asset values, are held up by one's belief in the future. Without it, the whole credit-driven economic system comes to a halt and economic agents scramble for cover by seeking to acquire liquidity. While in a non commodity-based monetary system a central bank can quite easily supply liquidity in its role as lender of last resort, a central bank cannot single-handedly instill confidence in the future. When confidence is lost, monetary policy is impotent in building up asset values, which can only be sustained if people believe in future revenue arising from future production. The economy remains trapped in a state of paralysis in which everyone is seeking to remain liquid. History tells the tale: Excessive optimism prior to the Great Crash turned to hopelessness during the early 1930s. Without a thorough investigation like the Pecora Commission, and without prosecuting those who are guilty, confidence and hope in the future will not be restored, consumer confidence will remain depressed, and we will remain in an economic slump.
[Washington then quotes from James Gailbraith's on the occasion of the publication of a new edition of J. K. Gailbraith's The Great Crash, 1929]:
BILL MOYERS: So what should we do? JAMES GALBRAITH: We need to find another path for economic expansion. We need to set a strategic direction. Our problem now, our big social and environmental problem, is energy. It's climate change. It's the greenhouse gas emission issue. If we built a set of institutions that could deal with that problem effectively, you could employ a large part of the labor force for a generation, dealing with that. And you'd then make that profitable for private enterprise to get into in a serious way. BILL MOYERS: The candidate Obama talked a lot about this, green energy, in the campaign. And he's talked a lot about it since he became president. Do you see signs that those aspirations are being implemented, in institutional ways? JAMES GALBRAITH: They made a start, and certainly in the stimulus package, there were important initiatives. But the stimulus package is framed as a stimulus, as something which is temporary, which will go away after a couple of years. And that is not the way to proceed here. The overwhelming emphasis, in the administration's program, I think, has been to return things to a condition of normalcy, to use a 1920s word, that prevailed five and ten years ago. That is to say, we're back to a world in which Wall Street and the major banks are leading, and setting the path-- BILL MOYERS: To restore what was. JAMES GALBRAITH: To restore what was-- BILL MOYERS: Instead of reform what is. JAMES GALBRAITH: And I don't think what was can be restored.
JAMES GALBRAITH: We need to find another path for economic expansion. We need to set a strategic direction.
Our problem now, our big social and environmental problem, is energy. It's climate change. It's the greenhouse gas emission issue. If we built a set of institutions that could deal with that problem effectively, you could employ a large part of the labor force for a generation, dealing with that. And you'd then make that profitable for private enterprise to get into in a serious way.
BILL MOYERS: The candidate Obama talked a lot about this, green energy, in the campaign. And he's talked a lot about it since he became president. Do you see signs that those aspirations are being implemented, in institutional ways?
JAMES GALBRAITH: They made a start, and certainly in the stimulus package, there were important initiatives. But the stimulus package is framed as a stimulus, as something which is temporary, which will go away after a couple of years. And that is not the way to proceed here. The overwhelming emphasis, in the administration's program, I think, has been to return things to a condition of normalcy, to use a 1920s word, that prevailed five and ten years ago. That is to say, we're back to a world in which Wall Street and the major banks are leading, and setting the path--
BILL MOYERS: To restore what was.
JAMES GALBRAITH: To restore what was--
BILL MOYERS: Instead of reform what is.
JAMES GALBRAITH: And I don't think what was can be restored.
Washington finishes with a killer quote from Mario Seccareccia - editor of the International Journal of Political Economy]:
The Great Crash of 1929 taught us that a modern monetary market economy is governed by confidence. As John Maynard Keynes put it, monetary relations and, more precisely, asset values, are held up by one's belief in the future. Without it, the whole credit-driven economic system comes to a halt and economic agents scramble for cover by seeking to acquire liquidity. While in a non commodity-based monetary system a central bank can quite easily supply liquidity in its role as lender of last resort, a central bank cannot single-handedly instill confidence in the future. When confidence is lost, monetary policy is impotent in building up asset values, which can only be sustained if people believe in future revenue arising from future production. The economy remains trapped in a state of paralysis in which everyone is seeking to remain liquid. History tells the tale: Excessive optimism prior to the Great Crash turned to hopelessness during the early 1930s.
While in a non commodity-based monetary system a central bank can quite easily supply liquidity in its role as lender of last resort, a central bank cannot single-handedly instill confidence in the future. When confidence is lost, monetary policy is impotent in building up asset values, which can only be sustained if people believe in future revenue arising from future production. The economy remains trapped in a state of paralysis in which everyone is seeking to remain liquid. History tells the tale: Excessive optimism prior to the Great Crash turned to hopelessness during the early 1930s.
Without a thorough investigation like the Pecora Commission, and without prosecuting those who are guilty, confidence and hope in the future will not be restored, consumer confidence will remain depressed, and we will remain in an economic slump.
Washington links to the October 30 Huffington Post article:"Roosevelt Institute Celebrates A New Agenda for America": Eliot Spitzer, Elizabeth Warren And 13 Others Reflect On The 80-Year Anniversary Of The Stock Market Crash Of 1929". The original articles can be found at The Roosevelt Institute's web site New Deal 2.0. The articles on New Deal 2.0 are shown in summary form with clicks for the full articles and the earlier articles in the series are on the second page, accessed by a click on "Previous Entries" at the bottom of page 1.
Huffington Post is one of the more widely read on-line progressive news sources in the US. I am glad to see the work of New Deal 2.0 and the Roosevelt Institute getting broader exposure.
As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
But you cannot "restore" stability without changing the institutional arrangements underpinning the economy. En un viejo país ineficiente, algo así como Espańa entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
