http://www.nytimes.com/imagepages/2008/10/17/business/17bank.graf01.ready.html

In the long run, we're all dead. John Maynard Keynes

Op-Ed Columnist - Let's Get Fiscal - NYTimes.com

But the truth is that we were looking Japanese for quite a while: the Fed had a hard time getting traction. Despite repeated interest rate cuts, which eventually brought the federal funds rate down to just 1 percent, the unemployment rate just kept on rising; it was more than two years before the job picture started to improve. And when a convincing recovery finally did come, it was only because Alan Greenspan had managed to replace the technology bubble with a housing bubble.

Now the housing bubble has burst in turn, leaving the financial landscape strewn with wreckage. Even if the ongoing efforts to rescue the banking system and unfreeze the credit markets work -- and while it's early days yet, the initial results have been disappointing -- it's hard to see housing making a comeback any time soon. And if there's another bubble waiting to happen, it's not obvious. So the Fed will find it even harder to get traction this time.

We all bleed the same color.

Can we also acknowledge that the growth was also imaginary, and thus that "reforms" (deregulation, labor market flexibility, tax cuts) DO NOT WORK, except to channel massive sums towards a happy few!?

You seem too suggest that, as far as the serious people are concerned, channelling massive sums towards the happy few should be considered a bad thing. I have not noticed any senior political sentiment in the europe or america that agrees with that, indeed many would consider that the entire point of the policy.

Oh sure, Darling the UK Chancellor of the Exchequer has made noises about reducing bonuses and dividends, but noises made for quietening the public do not imply action will be taekn.

keep to the Fen Causeway

Speaking of Greenspan: could it have been that he was beyond short-sighted - more in a bubble fixation mode? I mean, how does one explain this little news item from March 2004:

Of all the peculiar things Alan Greenspan said last week, none was more mystifying than his suggestion that consumers should seriously consider taking out an adjustable-rate instead of a fixed-rate mortgage at a time when interest rates are near record lows...

...His comments on mortgages, however, left many financial advisers dumbstruck.

"It was possibly the strangest bit of advice ever to be proffered by an American central banker," says Jim Grant, publisher of Grant's Interest Rate Observer.

The article gives two possible reasons for the unprecedented advice from a Central Banker, neither of which looks nice today:

...Greenspan is really trying "to help keep the housing bubble, and by extension the U.S. economy, expanding. Greenspan knows that the only way most home buyers can afford these ridiculously high prices is with ARMs. Without them, housing prices would collapse. He also knows how important (refinance) money is to the U.S. consumer. Since long-term interest rates cannot fall low enough to facilitate another wave of fixed-rate refinancings, he is trying to encourage homeowners to refinance one last time: fixed to ARM."

Under this scenario he is utterly blind, displaying the foresight and the wishful thinking of a 4-year-old.

The other scenario is, equally disturbing in hindsight:

The "real agenda," Sandler says, is reining in Fannie Mae and Freddie Mac, the government-chartered but publicly held companies that buy fixed-rate mortgages from lenders.

The day after his credit union speech, Greenspan warned that Fannie Mae and Freddie Mac could pose a threat to the financial system if their growth was not restrained.

Fannie Mae and Freddie Mac enjoy certain government-granted benefits that have allowed them to amass a commanding share of the market for home loans.
...
Greenspan has become "increasingly aggressive about the fact that Fannie and Freddie do not really improve the situation of the homeowner. The subsidy they get from the government is disproportionate to the value they give the homeowner," Sandler says, without condoning or opposing this viewpoint."

The road of excess leads to the palace of wisdom - William Blake

Jerome, I don't want to cramp your literary efforts, but pointing out (again) the folly or lies of the free-marketeers seems mostly an act of schadenfreude at this point.

Perhaps there are a few at DailyKos who are still ignorant of the 30 year Ponzi scheme now collapsing and even more among those who only read the daily newspaper. So for those audiences continuing to explain what went wrong and why may provide a useful service.

The audience at Eurotrib, however, seems to have been on top of this since the founding of the site. So, what might be more useful is to assume that we all understand the causes and that we also understand that the "bailouts" are designed to protect the interests of the monied classes.

Thus the issues to discuss are what is to be done next, after the decline and the bailouts have run their course.

I see three things remaining after the dust settles.

1. A further consolidation into fewer big firms, especially those "too big to fail". Not only will there be only a few banks in each market, but a limited number of ratings agencies, brokerage firms and accounting companies.
   
2. An explicit acknowledgment that the government has a duty to protect these favored firms from failing and to ensure that they make generous profits. Before this crash these guarantees were mostly implicit with only oil and defense firms.
   
3. A permanent "big brother" spy and tracking system. This is being set up under the cover of fighting "terrorism", but as with all secret police efforts, is really being directed against political dissidents within countries.

When you add these three components together you get something that looks like Mussolini style Fascism. The only thing lacking is the brown shirts and the government-sanctioned attacks on the left.

To my mind, this is the real issue: is there a way to head off total neo-Fascism?

Policies not Politics
---- Daily Landscape