The Johns Hopkins economist Christopher Carroll has an interesting blog entry describing rescue plan which has been proposed by economists  which is better than Paulson's, and expressing puzzlement about why this alternate plan has been completely ignored in Washington. This plan involves temporary nationalization, something that was done by Sweden when it had a financial crisis in 1992.

In talking to people involved in the inside-baseball political side of the discussion on Capitol Hill, I get the impression that they are very unhappy about being asked to sign on to this bill, but are planning to do it because they have been told that if they don't sign on the dotted line then the apocalypse is around the corner.

The KEY point that I think is not penetrating from the economists to the Congress is that what sticks in our craw is ONE SPECIFIC ASPECT of the Paulson/Frank plan: Its focus on having the government buy up the toxic subprime securities. This is close to a pure bailout for Wall Street, and there is NO REASON that any of us sees that this has to be the core of the rescue plan. I think you could get near-unanimity from economists, from across the political spectrum, in FAVOR of a simple, easy-to-do alternative that would be both more economically sound and more politically palatable: The Federal government should do, with respect to the banking sector as a whole, what Warren Buffett did last week in his investment in Goldman Sachs.

Labor markets in America continue to become ever more flexible. The electronics retailer Circuit City—second only to Best Buy—has "fired 3,400 of its highest-paid hourly workers and will hire replacements willing to work for less" (Bloomberg). Circuit City felt pressured to cut costs because it has been making losses recently, due to being undercut in flat panel TV sales by Wal-Mart and Target. Workers that were fired made around $19 an hour, with healthcare benefits. Their replacements "will earn less than half that amount, without benefits. The company will graciously allow its allegedly overpaid former workers to reapply for their old jobs at starting wages after they endure 10 weeks of grueling unemployment. Fired Los Angeles worker Richard O'Neal was told he could eventually reapply for his job if he is willing to work for $7.50 per hour, California's minimum wage."

The 3,400 fired Circuit City workers are the guinea pigs of the latest experiment in aggressive wage reduction. Corporate America has become impatient with two-tier wages, which reduce the salaries of the newest generations of employees but still allow veteran workers to maintain higher wages until they retire. If Circuit City increases its profits by firing its highest-paid workers, this will become yet the latest corporate trend in slashing working-class living standards. If not, perhaps Wal-Mart's more subtle method will do. Last summer, Wal-Mart simply stopped granting wage increases for its long-standing employees, sending the clear message that their services are no longer wanted. These days, management prefers a revolving door of "entry-level" workers to a loyal workforce. (Counterpunch)

When will America's elites realize that unless they drop their neoliberal ways, which prevent unions from resisting pressure from management to keep down wages, America will end up like a third world country, with only a lucky few being able maintain an acceptable standard of living?

(Cross-posted at the Booman Tribune)

From the diaries - afew

In the current climate, it is taken for granted that there is the Judeo-Christian tradition on the one hand, and Islam on the other. But does that really make sense? If you look at the doctrines of these three religions, you will find that Islam and Judaism line up nicely on one side, with Christianity on the other.

CounterPunch has a piece today about a ten-minute interview with Jim Cramer, the former hedge fund trader and now host of the CNBC program "Mad Money". Since he isn't speaking on his own show, Cramer is pretty blunt that financial markets are just a casino, in which the successful players know how to manipulate share prices when they are at risk of making heavy losses. Sure it's illegal, but that doesn't matter: the Securities and Exchange Commission (SEC) "don't have a clue".

The video is here. It makes for interesting viewing. For those who don't want to watch it or can't, the CounterPunch article covers the gist of it. The New York Post also has a short story about it today. So the interview, from last December, is beginning to get some buzz since it was posted on YouTube last week.

There is already a diary which marks the 300th anniversary of the Act of Union and discusses the possibility of disunion, but I thought that an article on this subject in today's Independent merits its own diary.

Neither the diary nor the article discuss what a breakup of the UK would mean for Europe, so I'll say a couple of words about that. My hypothesis will  be that such a breakup would break the stalemate that currently exists between Atlanticism and pan-Europeanism.

From the diaries -- whataboutbob

There are a number of good pieces today pointing out that the real import of Bush's speech last Wednesday is that it is a further indication that the US is making preparations for an attack on Iran. Needless to say, such an attack would be disastrous not just for the Middle East and the US, but for Europe as well, if only because of the disruptions to oil supply that would be produced.