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by Jerome a Paris Thu Sep 25th, 2008 at 04:14:43 PM EST

Crisis Stirs Critics of Free Markets Around the World, Calls to Reconsider U.S.-Style Policies

In Europe, the U.S., along with the U.K., represents a deregulated "Anglo-Saxon" version of capitalism -- in contrast to Germany's system involving unions and corporations in government and vice versa, and the strong role taken by the French state in shaping corporate decisions. America's track record of fast-rising productivity and growth has for years pressured Europe to change its ways.

(...)

Most economists in Europe still say the region needs more free-market changes to improve long-term growth. And there are limits to how much retrenchment is likely to occur. "The fact is that no policy maker in Europe has a clear vision of what re-regulation would mean," says Nicolas Véron, finance-policy scholar at Brussels think tank Bruegel.

Nicolas, you need to read European Tribune more... Sure, we're not "policy-makers", but I think we have pretty clear ideas on what needs to be done:

  • increase marginal tax rates significantly;

  • re-regulate labor markets, in particular with increases in minimum wages, and with actual enforcement of existing rules;

  • make banking boring by limiting leverage and eliminating banks that are "too big to fail";

  • launch a massive public investment plan in public transport infrastructure and renewable energies.
What else? Add your ideas. Let's make it clear that the ideas ARE out there.


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I said just yesterday or the day before that he never had anything good to say about continentals - he just proved me wrong:


The other lesson of this conflicting tale of two French corporate champions [Alstom and Alcatel] is that the French interventionist way of fixing industrial problems seems to achieve better results than the American way. The US also appears to have reached the same conclusion - at least judging by the way the government is now intervening to save everybody, from the bankers on Wall Street to the hard pressed carmakers of Detroit.

It's time for State interventionism again, of the kind long promoted by France - the kind that plans things for the long term, focuses on infrastructure, social resiliency and cohesion, and basic (public) services for all.

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

by Jerome a Paris (etg@eurotrib.com) on Thu Sep 25th, 2008 at 04:38:34 PM EST
We are not simply "bloggers," we are people with day to day experience in the fields of commerce which will determine our future.  We have direct understanding of how today's policies will affect future econometrics, and we know the relationship between existing (now discredited) theories and the reality of what needs to be done.

First there was the time when western capitalism triumphed over the "planned economies" of the enemy.  Now is the time where the entire infrastructure of western capitalism has proven hollow.

We can't throw the baby out with the bath water, but we can throw the underlying real economy back into the mix of helplessness that defines what the central banks are trying to accomplish.  Intelligent "interventionism" must now find the balanced frame of reference to define all economic policy going forward.

Enough of the brigands.  Enough of ignorance of external costs.  It's time for real value to be rewarded.  That means, simply, accept a change in paradigm or perish.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Thu Sep 25th, 2008 at 06:45:50 PM EST
[ Parent ]
here's a good post from a kossack

Daily Kos: What Is This Money Even For?

   It's more hype than real risk. A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry.

Actually, a nasty recession is more than possible, it will happen. It is happening already. The housing bubble was the last spasm of our latest Gilded Age, which is now over. We've been living beyond our means, on money borrowed from foreigners, and we can't do that any more. People who spent their lives nurturing small businesses will see their creations destroyed. People who struggled all their lives to build a modest nest egg will see their retirement dreams evaporate. Hunger and want will grow in the land. This will not happen because the credit markets lock up and hedge funds and investment banks fail. It will happen regardless.

There is much that the federal government can do to ameliorate the pain and hasten the day of recovery. In addition to enhancing the safety net for the people who will be seriously hurt, we need to invest in a sustainable future, in real job creating and wealth producing activities. What we don't need to do is rescue the socially destructive, unproductive and parasitical financiers of Wall Street from the horrible prospect of losing a portion of their billions and ending up as mere millionaires.

The legislation the Congressional Democrats are talking about now is certainly more defensible than the outrage Henry Paulson tried to impose on us, and it might even have some desirable elements such as help for distressed homeowners and limits on executive compensation. Best of all, they're talking about committing only a portion of the money, maybe $150 billion, and taking another look before they pony up the rest. A case can be made for passing something like that, so everybody calms down and the markets stabilize and we can get past this and go on to a serious discussion about the nation's future. But right now, we aren't having that.



'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Fri Sep 26th, 2008 at 03:40:31 PM EST
[ Parent ]
1/ Taxes on Privilege

(a) Location Benefit Levy or tax on Land Rental Values - a simple, fair and unavoidable tax on the privilege of the exclusive right of occupation of the Commons of land;

(b) Carbon Levy - a levy on the privilege of use of the Commons of non - renewable energy;

(c) Intellectual Property Levy - a levy on the privilege of exclusive rights of use of the "Creative Commons".

(d) Limited Liability Levy - a levy on the privilege of "free" limitation of liability for investors.

Apply the proceeds to remove indirect taxes, drastically reduce income taxes for low and mid-level income earners, abolish Corporation Tax, and with it most of the need for accountants and tax specialists.

2/ A National Equity

(a) Public Equity - use partnership and trust based frameworks to "unitise" revenue earning public assets, and pay a reasonable, index-linked "Capital Rental" to long term risk-averse investors;

(b) Debt/Equity Swap - convert all distressed secured mortgage debt to quasi REIT "Rental Pools" of properties on a "Rent to Buy" basis for Occupiers.

3/ Carbon Dollar

Use a Carbon levy to fund a "Carbon Pool" to be "unitised" and used for investing directly in production of renewable energy and in energy efficiency savings.

Monetise the intrinsic energy value of carbon, rather than attempting to monetise by "fiat" CO2 and tradable energy quotas with no intrinsic value.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Sep 25th, 2008 at 05:11:35 PM EST
I'd develop, so to speak, Cambio Chavez.

Let 'em go bankrupt. Fuck 'em. Then buy out a few choice firms lock, stock n barrel --the BoA Option, only the "nice" assets-- with US debt, since US has no funds. Contract, say, Robert Half International to recommend management hires and retain labor, pending redundancies. Run the whole damn thing NON-PROFIT to repurchase treasuries, THEN run 'em FOR PROFIT to competete with FRB subsidiaries.

That's the way a government TRUST does business.

Pay dividends to common shareholders, ya know, all the contribution defined 401(*) plan participants who currently believe their "retirement" mutual funds --strictly capital gains, mind you, on cash out-- are sufficient living wage beyond one year.

Diversity is the key to economic and political evolution.

by Cat on Thu Sep 25th, 2008 at 08:00:33 PM EST
In other words, if the problem is that the banks are providing a vital service to the economy, then it doesn't follow that those organizations' actual shareholders and managers are also necessary for this service. Once they crash and burn, the infrastructure can be recuperated on the cheap, restaffed, repurposed, and government run with much more reasonable salaries all around, and an ethical mission statement.

You know, if they take too long to crash and burn, it might make sense to declare war on the financial meltdown and let the military commandeer the banks for a few years ;)

--
$E(X_t|F_s) = X_s,\quad t > s$

by martingale on Thu Sep 25th, 2008 at 10:38:27 PM EST
[ Parent ]
it's quite ironic you said that, because what paulson inc. is trying to pull off is no less than a coup d'etat, without a gun or a uniform in sight, (though i suspect they are under the table in case things go pearshaped).

just as seeing all the lawyers and magistrates out in pakistan this last year gave a new twist to 'street protest', this gives new meaning to the term 'coup d'etat'.

the proof to me is in the fine print, the unaccountability...this is where the mask of democracy flakes off completely.

we're asking nicely....

there's no need for bloodshed of the old 'hack'n'hemorrhage' variety, with inflation our removing a few cc's of blood from your veins daily, and your children's, and their childrens', you'll barely feel a thing.

one of the reasons life has been so hard for so many these last decades (of peacetime), is costs of past wars amortised to a penny a day for everyone, on and on and on, paying back the interest on loans to buy weapons, that kill people (future productivity), and destroy infrastructure (architecture is living history)....

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Sep 26th, 2008 at 10:44:51 AM EST
[ Parent ]
harumph. ahem. Yes, well said. Thank you. My inner shark carried me away somewhere.

Diversity is the key to economic and political evolution.
by Cat on Fri Sep 26th, 2008 at 11:23:09 AM EST
[ Parent ]
There's nothing wrong with "tough love", I'm partial to it :) Does your inner shark have fricken' laser beams on its head?

--
$E(X_t|F_s) = X_s,\quad t > s$
by martingale on Fri Sep 26th, 2008 at 08:16:35 PM EST
[ Parent ]
Evidently not.

Diversity is the key to economic and political evolution.
by Cat on Sun Sep 28th, 2008 at 01:05:34 PM EST
[ Parent ]
Could we get some strong regulation as to size and domination of single companies, then that would be nice. As merger upon merger creates behemots of companies it is becoming increasingly clear that our current regulations to stop monopolies and oligopolies are insufficient.

Companies that are to big to fail are to big to exist.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Sep 25th, 2008 at 10:05:47 PM EST
During a financial crisis during the Nixon Administration Nixon was told by advisers that an institution was too big to fail.  His response? "Tell 'em to get smaller!"

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 26th, 2008 at 09:48:36 AM EST
[ Parent ]
Yes, the next executive's guidance to DoJ on RICO PROSECUTIONS would be nice. Before the legislators even begin reformulating a "modern" financial regulatory structure or REPEALING certain regulatory provisions.

Diversity is the key to economic and political evolution.
by Cat on Fri Sep 26th, 2008 at 11:28:31 AM EST
[ Parent ]
Do you expect anything to come out of this?

Washington Post: Wall Street Scrutinized for Fraud, Fat Paychecks (09/24/2008)

The FBI's decision to investigate criminal wrongdoing at four troubled financial firms at the center of the market's dramatic shakeup represents one of the bureau's largest undertakings in years, a potentially more daunting task than the five-years-long investigation into Enron.

Federal officials announced that they will probe Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. and American International Group Inc., bringing to 26 the number of financial institutions under scrutiny, The Post's Carrie Johnson reports. (CNN reports that Countrywide Financial is part of the investigation, too.)

...

The highest profile criminal cases related to the housing crisis so far involve two former Bear Stearns hedge-fund managers indicted in June for allegedly misleading clients about the risk of certain investments, a case that took months to establish.



A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Fri Sep 26th, 2008 at 11:37:01 AM EST
[ Parent ]
LOL, no. But. (1) I refer to the next executive; and (2) someone solicited my opinion.

Diversity is the key to economic and political evolution.
by Cat on Fri Sep 26th, 2008 at 11:49:00 AM EST
[ Parent ]
LOL. 'K. We know state attorneys general have already successfully prosecuted a number of firms ("core banks") to recover (settle, in lieu of court judgement) proceeds of auction rate securities issued. Core banks' dealer subsidiaries agreed to buy-back.

Here's one Joe Citizen's blog. It ain't purdy but, damn, it's dedicated.

http://www.auctionratepreferreds.org/

I'd be pleased if attorneys general continue to prosecute, but I don't expect that to happen since they inevitably hit the federal law wall which protects the FRB member banks from all sorts of litigation.

Enter FBI: If the next executive gives a damn, FBI material evidence could provide the basis for DoJ litigation of malfeasance defined by federal statutes.  The US political economy being what it is however, I suspect prosecution to end at class action settlement, minimum civil damages award, distributed among creditors. How likely is that to occur? LOL, well, DP caucus in both chambers is "battling" for the bailout "remedy" to bar all other possible remedies.

Funniest post ever, mebe.
Earth to Dems: Stop Trying to Own The Bailout
I don't know everything.

Diversity is the key to economic and political evolution.

by Cat on Fri Sep 26th, 2008 at 12:12:54 PM EST
[ Parent ]
My recomendation is CAMPAIGN FINANCE REFORM FOR ALL WHO WHISH TO CALL THEMSELVES DEMOCRACIES: About 5 euros per citizen per year should do, straight out of the treasury as part of the fundamental overhead of being a true democracy.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 25th, 2008 at 10:40:02 PM EST
Telegraph: US taxpayers are being enrolled in an economic chain gang

In between the Jeffersonian quotes, Jeff Randall lays out the good stuff...

"To preserve their [the people's] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude" - Thomas Jefferson

Jefferson, America's third president (1801-09), is widely regarded as the White House's most intellectually gifted occupant. He believed that "banking institutions are more dangerous to our liberties than standing armies", and that "the principle of spending money to be paid by posterity ... is but swindling futurity on a large scale."

Which brings us back to Jefferson. Two hundred years ago, he demanded: "The issuing power should be taken from the banks and restored to the people to whom it properly belongs." Twas ever thus.



You can't be me, I'm taken
by Sven Triloqvist on Fri Sep 26th, 2008 at 02:34:23 AM EST
You're hard to follow, Jérôme. Your 4-point programme nails the main things.

I think it would be useful to examine how to cap the return-on-capital requirements of pension and other big funds. The 20% rule has, over the last 2-3 decades, turned real-value businesses into shareholder cash machines.

In any event, the role of pension funds is going to have to be re-evaluated after this meltdown. We're going to have to go back to working out a solid system of nationally guaranteed retirement pensions by allocation rather than listen to squawks about how such systems are doomed, cannot work, etc; and how workers need to entrust a lifetime's savings to the markets.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 26th, 2008 at 02:50:22 AM EST
Do not forget housing isolation support, taxes on cars Co2 emission (like in Spain), zero taxes on renewable enrgy, flexibility on labor hours so as to introduce collecive bargaining and increses in minimum wage.

Implementation of strong punitive measures with tax-heavens.

I would like to have aclear emssage on trade, but unfortuantely it is too complciated to give a general recipe.

Public-private reseach partnerships.

Public offering of retns, huge increase in second residence taxes.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Fri Sep 26th, 2008 at 05:01:08 AM EST
Comprehensive media reform.

Public discourse - that is, the range of subjects which people discuss, and the way in which they discuss them, right down to the language that they use and the inflections of meaning that those words have - is incredibly powerful.

What people can say in public, and how they can say it, defines the range of possibilities and options that are available to THINK.  It is a very, very short step between able to say and able to think, and it is an only somewhat longer step between able to say in public and able to say at all.

In the current system, the mass media sets the terms of what can be said in public - not by outright censorship and thought police, but simply by marginalizing and ignoring those who do not respect the bounds of debate set by the media entities.

In this way, the media controls what can be thought and what can be done.  So long as the media is controlled by a few consolidated powers with visible political agendas, those powers will set the terms of debate, and thus effectively control the future. This is fundamentally incompatible with any notion of a democratic society.  Furthermore, this same consolidation leads to a homogenization of viewpoints in the media, so that all one sees are the rich urbanites of the metropole, and all one hears are their thoughts and ideas.  This is a gross injustice in and of itself.

While the Internet helps quite a bit with this problem, it's still a fact that it requires a substantial bit of infrastructure to put together high level audio or video programming, and it seems that regardless of the transmission medium, there is still a huge market for audio and video material, and a large number of people who, given their choice, will inform themselves about their world through audio and video materials.

My preferred solution would be a massively decentralized network of local public text, radio, and video content production studios, funded and run to encourage local reportage, by locals, on local and regional issues, and to produce locally-oriented entertainment materials.  Distribution could be wired, wireless, or both, depending on the situation and demand.  There is such a wealth of talent and creativity out there that is ignored by the centralized system, and it's a shame for everyone when it's allowed to wither from lack of support or exposure.  Further, local independent media producing a wealth of narratives and perspectives would help shatter the echo-chamber that is the current centralized media system.  A multiplicity of independent voices would also dramatically expand the range of what could be said, and thus what could be thought, and would it dramatically easier for dissenting voices to be heard and for their complaints to make it into the mainstream.

by Zwackus on Fri Sep 26th, 2008 at 05:57:56 AM EST
Reform of political campaign finance should also be high on the list.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 26th, 2008 at 06:14:49 AM EST
[ Parent ]
Reform of campaign finance is almost a prerequisite for the rest. I would add investment in education and, perhaps more important, an oversight mechanism that is robust against corruption by unitary executive abetted by craven legislature and reactionary judiciary.

sidd

by sidd on Fri Sep 26th, 2008 at 11:57:00 AM EST
[ Parent ]
Zwackus:
There is such a wealth of talent and creativity out there that is ignored by the centralized system, and it's a shame for everyone when it's allowed to wither from lack of support or exposure.  Further, local independent media producing a wealth of narratives and perspectives would help shatter the echo-chamber that is the current centralized media system.

great comment, zwackus!

the media is crippled by its own conformity, what you suggest is surely the cure...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Sep 26th, 2008 at 10:49:25 AM EST
[ Parent ]
Zwackus,
I like your preferred solution.  At present the most significant venue for diverse political opinions consists of the Letters to the Editor column in local papers.  There anything new must compete with dreary, strident repetition of traditional views by at least half of the contributors.  But I have seen a significant shift in the number of "out of the mainstream" comments during the past few months.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Oct 25th, 2008 at 11:32:17 PM EST
[ Parent ]
Most economists in Europe still say the region needs more free-market changes to improve long-term growth.
Market fundamentalists masquerading as mainstream economists are part of the problem, not part of the solution.


A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Fri Sep 26th, 2008 at 11:42:47 AM EST
Lots of good comments. My addition - I believe in more regulation as always. There needs to be DEATH OF DEREGULATION once and for all.Why it is so incomprehensible to make financial institutions and their leaders accountable and make them operate within very strict guidelines? Why is it ALWAYS those of us at the bottom who have to "tighten our belts" and do without, while those at the top go scotfree? There was an Austrian economist, Leopold Kohr, who said that these behemoths merging would not last - he was a colleague/friend of Schumacher's - and that in future small and local would be more prevalent. Listen more to the so-called "devolutionists." There is a tiny movement in US led by economist Thomas Naylor which focuses on secession, but I'm not interested in that - as I wrote to Prof. Naylor, more interesting are his local economics ideas. Some of the Peak Oil writers say the US WILL have to go to the informal economy - you guys are all talking macroeconomics, fine, but what does a working-class stiff like me do with that? To survive I'd have to do something like they do in Ithaca NY - have an alternative currency and much more bartering. But on the macroeconomics scale - wasn't it FDR who imposed a 75% tax rate? They have hated him ever since for that - he wanted I think a 90% tax rate, but Congress would only give him 75%. Absolutely, Jerome - invest in infrastructure and employ all the people as long as there is a huge centralized government. There was a conference here back in May of labor/religious/activist leaders that called for just that but no one listens to them - they're too busy listening to Faux News - good that Faux says "capitalism as we knew it is dead!" The leadership here near where I live in Dayton, Ohio are a bunch of idiots - they have invested in a military future. I think there needs to be a tax revolt, or some kind of revolt by American citizens - and that's the energy Naylor wants to tap into. I like the quotes from Jefferson - like FDR, despite being a man of privilege, he grasped the limits of his position and wanted to do the right thing. So far my countrymen/women are still too glued to their TV sets and idiotic comparisons of Palin versus Biden to do anything useful. Many of my friends from California to NY call us a "nation of sheep." I'm hoping the sheep wake up to something more than ripping off gas stations or blaming their fellow citizens, or believing some kind of hate rhetoric.
by lachatte (stormydogger at yahoo dot com) on Fri Sep 26th, 2008 at 07:53:08 PM EST
In addition to Jerome's well-taken proposals, I would like to suggest (to Mr Sarkozy, no less, since he claims to be concerned) that less noise on red herrings (such as golden parachutes or stock options, which rub the French the wrong way because they sound English, but are really very small culprits, if any) and more action on actual villains would be appreciated.

My pet peeve: the financial ambulance chasers who pester people with wonderful offers for unconditional, practically unlimited "revolving credit" at rates close to usury. Of course only the very poor with no access to real credit will even consider this kind of sweetened poison. If the offenders were shady characters operating out of suburban cellars, the picture would be clear. As it is, they are (in France) subsidiaries of big financial institutions which make the bulk of their profit from legitimate, asset-backed lending (automotive, real estate). Why play that ugly game at all?

One has to wonder if this is not a deliberate policy to bolster the (miserably low) French rate of terminal indebtedness, which has been shielding us from some effects of the subprime crisis. A nation of hopelessly indebted consumers addicted to extended credit is such a breeze to steer and drive... no strikes, no demos! (I won't name countries, but the high priests of fundie liberalism in France and across the seas have been lamenting the reluctance of the stubborn French to borrow at all).

Even if the above is a paranoid fantasy, the 'easy credit' street pushers should be identified as dangerous, especially in the light of the subprime crisis, which their US cousins started, and put out of business by the law. This would signal an earnest will to address the issue of financial chaos, rather than throttling and gutting a few sacrificial fat cats.

by Dominique on Sun Sep 28th, 2008 at 05:29:30 PM EST


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