Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Some lessons from Bailout Week

by Jerome a Paris Mon Sep 29th, 2008 at 02:49:53 AM EST

While I still haven't seen the details of the now apparently agreed bailout as I write this [on Sunday afternoon], it is rather unlikely that the final version is going to be very satisfactory and that the following notes will be contradicted by the final result:

  • the consequences of the financial crisis are so dire that the lesson here should not be that a bailout is necessary (it is, at this point) - but to acknowledge that the financial sector has the power to hold the rest of the economy to ransom during both good times and bad times and thus that it need to be emasculated so that we never get again to the stage where a bailout is necesary. The lesson is that the financial world cannot behave responsibly, if left to its own devices and thus should not be left to its own devices;
  • another is that the main argument to give financial markets a free hand - that they have created so much growth and prosperity - needs to be called for what it is: a lie. Not only the so-called prosperity of the past years was highy unequally shared (see the next point), but it was not even real, as the income and profits of the good years are now dwarfed by the losses of today. Arguments about growth need to be dismissed by a reference to the "full cycle", ie the prosperity of the recent past can only be accepted as real if it wasn't a capture of the prosperity of today and the near future. If the forthcoming growth and GDP numbers are dismal, this should be seen as a direct proof that the growth of the past was nothing but, and that the policy prescriptions focused on financial profit are abject failures;

Bumped by afew


  • as the bailout calls for yet another transfer from poor to rich, it is worth noting that even in the good years, the vast majority of the population saw very little of the then much touted prosperity: incomes were stagnant or declining, while benefits declined, and healthcare and energy costs skyrocketed. Thus, current policies seem focused, at all times, on maximising the income of the few rather than that of the general population;
  • the next conclusion is that our political systems are completely geared towards fulfilling that last goal: politicians of all stripes are supporting the bailout despite massive protests by their constituents, just like they supported financial deregulation, labor market "reform", "free" trade, the tax race to the bottom and other similar policy prescriptions in the past. Politicians are supported in that by a media system that brings to the fore pundits that are fully aligned with these prescriptions, and creates an incestuous class of insiders who, as it were, tend to personally benefit directly from the overall winner-takes-all policies put in place;
  • the quasi-unanimous support of the Serious People for the bailout, or at least their inability to point out that the current crisis was the inevitable conclusion of the policy framework pushed by the neolib cabal shows how successful they have been at killing alternative ideas as fringe or absurd or dangerous, and suggests that there still is an ideologial vacuum; alternative ideas are not "there" enough to be taken seriously despite the ongoing reality, and I'm not sure they will until the current elites are completely pushed out;
  • given that staying in power and doing whatever it takes to achieve that goal is their main competence, I fear that we're going to be pushed into ever more dangerous brinkmanship, as the McCain campaign has amply demonstrated in recent days. They will not leave without a fight, even if reality is overwhelmingly against them, and I expect obfuscation, distraction and worse to be used to deny or avoid that reality. Quite frankly, the alternative now, just like in the 30s, is either a full break from the past (a new "New Deal") or a move towards fascism and war - the latter being our current elites' only chance of holding onto power.
The question therefore is: will the new President, and the new Congress, be part of the problem or part of the solution? With respect to Obama, I'm willing to suspend judgement given the requirements of campaigning in today's environment. But with respect to Congress, many future members are already in now, and their performance, frankly, is not encouraging. what will it be?

In other words: nothing short of a revolution will do. Can it still be a peaceful, democratic one?

Display:
The FT has the opposite conclusion, in their main editorial:


In praise of free markets

The financial system has reached the point of maximum peril. After years of profligacy, banks have all but stopped lending to each other as the US Congress decides whether to extend support. If the unravelling of the banking system continues, the economic consequences will be dire. Yet there is an even greater risk: that the politicians now contemplating Wall Street's follies draw the wrong conclusions and take the wrong decisions, losing their confidence in markets altogether.

It would not be the first time. After the Wall Street Crash, markets were deemed to have failed and US lawmakers attempted to regulate short-cuts through the crisis. The widely-copied Smoot-Hawley Tariff Act quadrupled the effective tax rate on thousands of imports and deepened the "Great Contraction" of 1929 to 1933. The price of popular anti-market sentiment was much higher in some of Europe's fledgling democracies: fascism.

Yeah, right - the only policy decision of note after 1929 was Smoot-Hawley. Not the regulation of banking and the New Deal. Interesting vision of history...


Consider the Washington rescue package first. Why should taxpayers bail-out millionaire bankers, and what should we force them to give back in return? Those are natural questions but not the only ones. We should also ask whether taxpayers will profit, directly or indirectly, from spending money to shore up the banking system. The answer is "yes". The system is close to collapse, and the consequences of collapse would be misery for Main Street. Profitable businesses and creditworthy consumers would suffer. A successful rescue would prevent that and there is even a small chance that it would be profitable in its own right. That is the justification for the rescue. Congress was right to scrutinise it - especially its lack of oversight - but has become distracted by a desire to clip Wall Street's wings.

Yes, let's focus on the short term: it's true that Wall street can take down Main St with it. That would seem like an additional argument for clipping Wall St's wings, not a mitigating factor - but hey, what do I know?


The case for more effective regulation is nevertheless undeniable. It is hard to defend a system where top banking executives walk away with millions in compensation when their businesses are, in retrospect, fundamentally flawed. This looks like a reward for failure. We have witnessed two financial crises - the dotcom crash and the current banking disaster - in the first decade of this century. That is hardly a record which inspires confidence in the current efficiency of capital markets or their transparency.

The current crisis is routinely described as a symptom of deregulation, but it is equally the child of earlier, ill-fated interventions. Subprime mortgages grew because the prime mortgage sector was dominated by Fannie Mae and Freddie Mac, two institutions founded, regulated and effectively underwritten by the government. Securitisation was an effort to sidestep capital requirements. But it also created instruments that few could understand and, in Warren Buffett's prophetic words, really were "financial weapons of mass destruction".

Deregulation = bad regulation = government sucks

The chutzpah is quite amazing, really. They pretty much got all the deregulation they wanted, and all the downside protection the financial sector wanted, and now the government is to be blamed because it obyed the financial sector's every wish?


Capital markets clearly need better regulation but policymakers should guard against unintended consequences. Markets are places of trial and, very frequently, error. Their genius is not perfect efficiency, but the rewarding of success and the weeding out of failure. No better alternative has ever presented itself.

Isn't the point we're at today pretty much that failure is NOT BEING PUNISHED????


This is a difficult time to defend free markets. Nevertheless they must be defended, not only on their matchless record when it comes to raising living standards, but on the maxim that it is wise to let adults exercise their own judgment.

Matchless indeed:


Market freedom is not a "fundamentalist religion". It is a mechanism, not an ideology, and one that has proved its value again and again over the past 200 years. The Financial Times is proud to defend it - even today.

The only silver lining is that, for the first time in a long time, they sound a tad defensive to me...If they feel the need to argue they are not a "fundamentalist religion", we're finaly making progress. yey!


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

by Jerome a Paris (etg@eurotrib.com) on Sun Sep 28th, 2008 at 10:15:47 AM EST
"Subprime mortgages grew because the prime mortgage sector was dominated by Fannie Mae and Freddie Mac, two institutions founded, regulated and effectively underwritten by the government."

Rereading that sentence using advanced technology such as my eyeballs and plain English semantic analysis, I think what it says is:

"Quasi-Government organisations were unbeatable in the segment of mortgages that made sense, so truly private ones, to pretend that they were better, had to create a market of mortgages that made no sense".

And that despite the fact that Fannie and Freddie were actually private institutions that relied on corruption. Imagine a genuine government bank -it would have wiped the floor with those offering insane salaries to their top managers.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sun Sep 28th, 2008 at 11:49:23 AM EST
[ Parent ]
Imagine a genuine government bank -it would have wiped the floor with those offering insane salaries to their top managers.

I don't think you have to imagine one: just look at what the Scandinavians do - or used to do until the politicians were browbeaten into thinking this was "unfair" competition to the private sector....aided and abetted by EU directives, unless I am much mistaken.....

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

by ChrisCook (cojockathotmaildotcom) on Sun Sep 28th, 2008 at 12:50:19 PM EST
[ Parent ]
The 'unfair competition' claim stems from the argument, that public banks can borrow money without a risk premium, which private banks have to pay. The public banks are not better managed, they get a subsidy.

As now of course private banks get this subsidy as well, one might rethink the idea.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sun Sep 28th, 2008 at 01:16:02 PM EST
[ Parent ]
Well, what if they do? If the net result is better for the eonomy, that the total utility is higher, well then let's do without private banks.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sun Sep 28th, 2008 at 01:38:29 PM EST
[ Parent ]
pinko-hippy-tree-hugging-communo-islamo-fascist
by Metatone (metatone [a|t] gmail (dot) com) on Sun Sep 28th, 2008 at 02:27:59 PM EST
[ Parent ]
Better for whose economy?
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 29th, 2008 at 04:43:19 AM EST
[ Parent ]
"Subprime mortgages grew because the prime mortgage sector was dominated by Fannie Mae and Freddie Mac, two institutions founded, regulated and effectively underwritten by the government."

Fannie and Freddie were privatised in the 1960's!!!

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 Mon Sep 29th, 2008 at 05:20:04 AM EST
[ Parent ]
Arguments about growth need to be dismissed by a reference to the "full cycle", ie the prosperity of the recent past can only be accepted as real if it wasn't a capture of the prosperity of today and the near future.

This is a key point, because the view of the full cycle is exactly what is lost when the current quarter's profits become the main criterion of a company's performance.

Had such a mentality obtained in the 1950s and 1960s, the blue chip companies of that period either would have been dumped by shareholders, or else Xerox and IBM and BellTel would have been forced to ignore their own long-term planning.

by Ralph on Sun Sep 28th, 2008 at 11:14:08 AM EST
as the bailout calls for yet another transfer from poor to rich

I was watching an interview with a Columbia Business School professor, whose name I did not catch, who challenged this point.

According to him, the bail-out will be paid for by federal taxes (as opposed to state/local taxes and social security taxes), on corporations and individuals.

Although I cannot remember the exact figures he gave, he claimed the vast bulk of these federal taxes would be paid by people making $150,000 or more per year.

Looking this up, I could only find the following figures for 2006 from the "Tax Foundation" (in turn based on IRS figures) for "Federal Individual Income Tax Data, 2006":

  • 70.79% of all federal individual income tax was paid by people making $108,904 or more (i.e. the top 10%)

  • 86.27% was paid by people making $64,702 or more (i.e. the top 25%)

So even if we make "under $65,000" our threshold for "poor", those people would collectively contribute only about 15% of federal individual income taxes.

Figuring in corporate taxes, the relative tax contributions of the those making under $65K will be even smaller.

Thus, I am not sure if it is accurate that this will be a "transfer from poor to rich".

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Sun Sep 28th, 2008 at 11:25:52 AM EST
I'm pretty sure, he is right.
What the bailout however will do, is transfering wealth between different branches of the economy.
From the reality based economy to the accounting economy.
From the economy of future growth to the economy of past growth.
From the creating economy to the redistributing economy.
From those rich people, who have 'earned' their money to those rich people, who have 'made' their money.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Sun Sep 28th, 2008 at 12:07:40 PM EST
[ Parent ]
I greatly doubt that the story is so simple.
Federal taxes mmm... Does the bailout come with a dedicated new tax?

I thought it didn't. So it's simply increasing the debt, which will either mean new taxes, and it's just our guess as to who they will hit, or reduced programs. Either cancellation or transfer to local organisations. Which will have the choice of either raising local taxes or reducing benefits.

There are several ways of 'paying'.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sun Sep 28th, 2008 at 12:22:40 PM EST
[ Parent ]
But these are income taxes, whether paid by individuals or corporations.  It makes a big difference whether one makes $65,000/yr and owns a house with substantial equity, flush IRAs and primo benefit packages or is just making $65,000 for the first time in one's life, is self employed, pays the full 14.5% SSI & FICA, etc. and pays for one's family's health insurance out of pocket and as an individual enrollee. (Kaiser HMO is well over $1,000/month for a couple, depending on age; and you will pay more taxes than couples with a house and mortgage and half again the income.)

The point is wealth matters and benefits matter.  The self employed renter would have to make over $90,000/yr to be as well off as the $65,000/year employee with good benefits, but the statistics don't take that into account.  The point is that those with $109,000/yr  had  probably 90 to 95% of disposable income before real estate started to dive.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 28th, 2008 at 03:01:29 PM EST
[ Parent ]
of course the rich pay more of the income taxes than the poor. But spending $700 billion of taxpayer money means:

  • less money for other government spending (which disproportionately favors the poor);
  • either taxes are increased (on whom to be determined), or debt will be increased, which means, all things being equal, higher interest rates. With the rich being net creditors and the poor net debtors, this favors the rich;
  • more generally, given that most taxes (not just income tax) are not that progressive, more taxes mean nothing good for the poor;
  • and, of course, given where hte money goes, the transfer is undoubtedly to the rich; almost irrespective of the source of the funds, this is NOT progressive.


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Sep 28th, 2008 at 03:22:54 PM EST
[ Parent ]
All good points but your third point cannot be repeated enough.

It's difficult though and goes back to my questions from last night.  

No the actions of Congress are not encouraging. But for argument's sake let's assume the best, that McCain won't win and that an Obama administration would have the will and the actual leadership ability to be able to change things and institute a new New Deal. That we can have, in the end, a peaceful democratic revolution.  

If we agree that we need a democratic revolution in the US and we need a new New Deal but we also agree that  Wall Street has the ability to bring down Main Street and that we are in a crisis where Wall Street may be bringing down Main Street - then we have a dilemma of timing.

I know many people would argue that it would only be possible to pass a new New Deal if Wall Street has destroyed Main Street as during the Great Depression.  I consider those people idealogues who care only for theory and not for flesh and blood people.  As a practical matter and as a matter of common decency it would be easier on the average person if the new New Deal could be passed before Wall Street has destroyed Main Street. So that should imo be our goal.

There is no possible way that a new New Deal can be passed in less than 4 months when the new Congress and new Administration take office and that is just a possibility and not reality. In reality it is going to take much longer.

So even a good intentioned Congressperson TODAY who cares nothing for financial elites and would pass a new New Deal as soon as possible has to think about doing something to stop Wall Street from destroying Main Street in the interim.

To me, that is how we are going to have to evaluate whatever this very flawed package turns out to be.

Because despite the idea that Congresspeople only work for elites - they also work for average constituents and they DO know that (at least on the House side).  If by doing nothing the majority party in Congress is seen as throwing us into another Great Depression, their constituents will throw them out. Deservedly so. It is inconceivable to me that the majority party would be able to do nothing in this situation once the administration threw out the idea of another Great Depression unless they were positive that the adminsitration is wrong.  So in the end they will pass legislation that they will justify as helping the have-nots by averting a Great Depression (which it might) but will help the haves more.

If it is possible and probable to have frozen credit markets for the next 6-9 months and not destroy Main Street then they should have done nothing.  If that isn't possible then they needed to do something NOW.  You say the credit markets can't get any worse but this isn't sustainable over the long run.  I ask what is the long run.  It is what every Congressperson is asking. How long is the present situation sustainable.

If it isn't sustainable for 6-9 months then all this talk about alternative plans that should be considered right now seems ridiculously idealistic to me.  The only practical question right now is how many good changes they managed to get into the administration's plan and how hard it is going to be for the next administration to come up with a new New Deal with this plan in place.

by Maryb2004 on Sun Sep 28th, 2008 at 11:37:53 AM EST
The only way Congress can make a complete break from the past is to first pass government funded campaign finance reform.  Even a partial break from the past requires significant damage to the wealthiest 5% of the population. Most MOCs rely on these people to fund their campaigns. They can't go against the interests of those to whom they are beholden.  "If you strike at a King, you must kill him!"  I have proposed possible scenarios.

Arise, members of Congress, you have nothing to lose but your chains   :-)

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 28th, 2008 at 03:20:10 PM EST
[ Parent ]
Things are changing.  Ten years ago, yes, that was the case.  Alternative revenue streams have opened up for candidates up and down ticket, and they are not trivial.

Take a look at this old article in the New York Times from the primaries last year.

Of the $33 million Mr. Obama raised in the second quarter, about a third consisted of donations of less than $200 -- more than the $10 million raised in $2,300 checks from big donors. Mrs. Clinton, in contrast, raised $2.3 million in donations of less than $200. Contributions of $2,300 made up $12.3 million -- or more than half -- of the $21.5 million that she raised for the primary during the second quarter. Both candidates now have about the same amount of cash to spend on the primary.

Mr. Obama's roster of 258,000 donors has exceeded the national mailing list that Mrs. Clinton accumulated through her two Senate races and Bill Clinton's two runs for the White House. None of the other primary candidates in either party has claimed more than 100,000 individual donors.

In some ways, Mr. Obama's donor base differed from those of his rivals. An analysis of his Federal Election Commission filing using census data by ZIP code found that in the 3,210 ZIP codes with the largest proportion of black residents -- at least 25 percent -- Mr. Obama led the other candidates for both parties in money raised in the first half of the year. He received $5.2 million from those ZIP codes in the first half of the year, while Mrs. Clinton received about $3 million.

For a more recent take, see this article by the AP from May.

Riggs and Schwartz are foot soldiers in Barack Obama's 1.5-million-strong army of campaign contributors. Dozens of Associated Press interviews with donors and an AP financial analysis show how contributions that make only a soft ka-ching by themselves, arriving in increments of $10, $15 and $50, have collectively swelled into a financial roar that has helped propel Obama toward the Democratic presidential nomination.

Altogether, Obama's campaign has taken in an unprecedented $226 million, most of it contributed online. His donor base is larger than the one the Democratic National Committee had for the 2000 election.

These are hardly political fat cats. Ninety percent of his donors give $100 or less, and 41 percent have given $25 or less, according to the Obama campaign. Overall, he has raised 45 percent of his money in small contributions. Hillary Rodham Clinton's figure is 30 percent, Republican John McCain's is 23 percent.

Obama does have big donors, and they do have an influence on the campaign, as shown by this article in the Washington Post from April.

But those with wealth and power also have played a critical role in creating Obama's record-breaking fundraising machine, and their generosity has earned them a prominent voice in shaping his campaign. Seventy-nine "bundlers," five of them billionaires, have tapped their personal networks to raise at least $200,000 each. They have helped the campaign recruit more than 27,000 donors to write checks for $2,300, the maximum allowed. Donors who have given more than $200 account for about half of Obama's total haul, which stands at nearly $240 million.

Obama's success in assembling bundlers offers another perspective on a campaign that promotes itself as a grass-roots effort. While the senator from Illinois has had unprecedented success generating small donations, many made online, the work of bundlers first signaled the seriousness of his candidacy a year ago and will be crucial as he heads into the final Democratic primaries with a lead against Sen. Hillary Rodham Clinton (N.Y.).

The bundler list also sheds light on those who might seek to influence an Obama White House. It includes traditional Democratic givers -- Hollywood, trial lawyers and Wall Street -- and newcomers such as young hedge fund executives, Silicon Valley entrepreneurs, Chicago-based developers and members of the black business elite. One-third had never contributed to a presidential campaign, much less raised money.

The list includes partners from 18 top law firms, 21 Wall Street executives and power brokers from Fortune 500 companies. California is the top source, with 19 bundlers. Both Illinois and Washington, D.C., have six, and five hail from New York.

However, even this article notes that

The campaign maintains that its fundraising success among average Americans has lessened its reliance on big donors. Donations of less than $200 account for nearly half of Obama's contributions, compared with a third of Clinton's and a quarter of Sen. John McCain's, according to the Campaign Finance Institute. More than 1 million people have given money to Obama's campaign.

When the third quarter filings are posted, we'll be able to see better how this trend has fared during the general election campaign.

It's harder to see the influence of this internet-mediated small-donor revolution on down-ticket races, but a quick glance at the Daily Kos Orange to Blue page says something.  $150,000 in a House race means quite a bit.

by Zwackus on Sun Sep 28th, 2008 at 05:25:13 PM EST
[ Parent ]
Yes, Obama's fund raising methods and prowess are important and impressive.  Younger politicians are also learning to do likewise.  But for the short term and medium term, a federal system is mandatory in order to have a congress that could even consider actions that impinge on privelige.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 28th, 2008 at 11:18:53 PM EST
[ Parent ]
In response to that, I'd argue that in any political system, run by anyone, throughout all history, it's almost impossible to consider using the mechanisms of government to seriously hurt the interests of the elite, given that government is almost always a tool of the elite to protect the interests of the elite and to manage the problems of the elite.

The modern system is only unique in that enough non-elites ALSO get something from the system that it is not universally loathed and despised as a tool of oppression.

The debate now is more between neo-feudalist elites and those elites who still believe in the industrial state.

Given that, I'd argue that the "elites buy our politicians" argument is not so useful, and that the "neo-feudalist elites set the terms of debate and prevent the arguments of any other elites from being heard" is the bigger problem.

by Zwackus on Mon Sep 29th, 2008 at 06:20:29 PM EST
[ Parent ]
If the plan is anything like described here :
Congress expected to pass financial rescue package

then it is a rotten deal. Typically, one that should be a "no deal".
It should never be stock warrants. It should be shares, full stop.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sun Sep 28th, 2008 at 12:51:13 PM EST
I've been looking through the entire Anglo Disease series for a specific thread in which Jerome posted like two dozen graphs taken from all kinds of sources, magazines, the FT, graphs he made himself and so on... But I just can't find it!

Can anyone help me?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Sep 28th, 2008 at 02:08:24 PM EST
It's not in the Anglo Disease list:
France is not in decline and the last thing it needs is 'reform'

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Sep 28th, 2008 at 03:24:18 PM EST
[ Parent ]
It would be nice to have a similar thing like on dkos with hot list/favourite of diaries, which are specially relevant, and new comments hotlist.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Sun Sep 28th, 2008 at 03:34:02 PM EST
[ Parent ]
Quite frankly, the alternative now, just like in the 30s, is either a full break from the past (a new "New Deal") or a move towards fascism and war - the latter being our current elites' only chance of holding onto power.

That's it.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Sep 28th, 2008 at 02:27:28 PM EST
there is a point worth mentioning...or two..

First, most of the economists in important universities and academia are completely on our side... or at least not on the other side.. ten years ago there were no economists favoring fair trade, strong regualtion, and so on in big U.. now everybody agrees.. Krugman is not alone anymore..

Do not understimate the importance of being in Princeton, Berkeley, etc.. and have these center-left ideas... within five years economists will be like climatologists, people Republicans will have to fight against... and as you may notice the narrative to fight us is very very difficult to create even in the US.

The second thing to notice is that the media meta-narrative (as talkinpoints' boss calls it) has changed in our favour in the US..the cotnrol of the media by right-wing idiotic forces which go uncostested does not exist anymore...

In other words, the advance is clear... the US left should have started earlier to movilize but still..even most of the commentariat in the FT goes against their own editorials...

So,a green economic transition seems possible.

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 Sun Sep 28th, 2008 at 03:36:45 PM EST
It's all the more frustrating to see the punditry in Europe still moving in the other direction.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Sep 28th, 2008 at 04:32:27 PM EST
[ Parent ]
The point about the bailout of course is that even when all of the money has been spent, it's still not going to solve the problem - and there will be much more pain to come.

There's the possibility of a tipping point very soon, and I think we're getting very close to pitchforks and torches in the US.

If the reality-based economists started putting out press releases, that would speed things along.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 29th, 2008 at 04:48:25 AM EST
[ Parent ]
Note that

  1. Goldman Sachs has admitted the Investment Bank business model is not viable;
  2. it has accordingly announced plans to spend $50bn buying retail banks (small regional ones)
  3. it is likely the bailout will buy GS's bad assets at at least a $50bn premium

On 3) it is clear that the solvent banks will be the ones to benefit from the bailout - even if they don't overprice their assets significantly (and, being solvent, they don't need to and in a "reverse auction" they won't). The funny thing about the bailout is that the insolvent banks would have to overprice their assets in the auction in hopes of being recapitalised and that reduces the likelihood of their assets actually being bought in the "reverse auction".

<sigh>

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 Mon Sep 29th, 2008 at 05:14:48 AM EST
[ Parent ]
Migeru:
Goldman Sachs has admitted the Investment Bank business model is not viable;

PN point, they've declared Investment banking as not viable for them, that is:

  • Not viable with their expectations of X% yearly profit growth (where X is a large number for their industry.)

  • Not viable now they've lost a huge heap of money from risky investments.
by Metatone (metatone [a|t] gmail (dot) com) on Mon Sep 29th, 2008 at 05:30:56 AM EST
[ Parent ]
PN taken.

I'm distinguishing "Investment Banking" of the Wall Street variety from the kind of "Commercial Banking" that Jerome does.

Properly, Jerome does Investment Banking and Wall Street did Speculation Banking but that's the nature of doublespeak.

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 Mon Sep 29th, 2008 at 05:33:22 AM EST
[ Parent ]
This isn't a bailout - it's a round of civil war on Wall St.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 29th, 2008 at 05:48:07 AM EST
[ Parent ]
I said the other day that paradoxically the more traditional banking methods in the Eurozone will prevent Market Fundamentalism from being discarded at the policy level. Our governments including the EU Commission will press ahead with deregulation and liberalization.

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 Mon Sep 29th, 2008 at 05:18:38 AM EST
[ Parent ]
This is the hole in the argument that needs filling. I haven't gone through it yet, but this is the case right-wing economists are making. If we cannot deconstruct this, we're going nowhere with the academic economics narrative:

http://www.heritage.org/Research/Labor/bg2040.cfm

by Metatone (metatone [a|t] gmail (dot) com) on Mon Sep 29th, 2008 at 05:39:41 AM EST
[ Parent ]
Good find.

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 Mon Sep 29th, 2008 at 05:42:22 AM EST
[ Parent ]
[sigh...]

Does 'Shut the fuck up you mendacious oily toads' count as a serious deconstruction?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 29th, 2008 at 05:50:53 AM EST
[ Parent ]
Well, it's my gut reaction... but I think we'll need something a bit more reasoned until we own the media...
by Metatone (metatone [a|t] gmail (dot) com) on Mon Sep 29th, 2008 at 07:07:26 AM EST
[ Parent ]
  1. Paid holidays and benefits still lag significantly behind those of civilised countries, like Europe.

  2. Saying that a dollar paid to health care is a dollar taken out of wages is nonsense - employers benefit from the having reliably healthy employees and are sometimes the direct cause of health problems. In a free market they should pay those costs directly.

  3. The CPI is the most reliable indicator of disposable income. Disposable income drives the economy - without it, there's a credit bust. (And everyone knows the deflator index is massaged anyway.)
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 29th, 2008 at 07:42:28 AM EST
[ Parent ]
There is some discussion with links here.

If those links don't work, here is a link to a draft of the 106 page bill.

A bomb, H bomb, Minuteman / The names get more attractive / The decisions are made by NATO / The press call it British opinion -- The Three Johns

by Alexander on Sun Sep 28th, 2008 at 06:04:49 PM EST
Jerome, I agree in the main with your bullet points, but the question you ask is a crucial one. Here's my current view.

They will not leave without a fight, even if reality is overwhelmingly against them, and I expect obfuscation, distraction and worse to be used to deny or avoid that reality. Quite frankly, the alternative now, just like in the 30s, is either a full break from the past (a new "New Deal") or a move towards fascism and war - the latter being our current elites' only chance of holding onto power.

I've worked this seam before.
I think the pistol wavers would really like to gin up a war, but
1) Their cred is so low these days that all the likely candidates are more likely to become martyrs instead of villains, so it may take a while.
Hugo? Ivo Morales?
2) Whoever the next victim is, -even if they just stick to losing their ass in Iraq and Afghanistan, they need dough.

We've discussed a bit the question of where the next infusion of money for the "Hard Power" empire might come from. Now we know.
To my recollection, no one ever thought of this.
Fucking genius-level con?

Think of the economy as a vast puzzle of plumbing pipes with money flowing in them. The Hard Power players have a thousand petcocks, drains, taps on the pipes, but for the dough to keep flowing, the system has to be reasonably full and pumping. It was getting awfully leaky, and low.

They just filled it up again!

The wall street boys just won their battle,---if my reading of the "plan" is even close.

-They get bailed out, and "regulation" was hardly mentioned.
-Equity ownership has become warrants--in some cases. A right to buy or sell shares at an agreed-upon price aint much. Poof. Shares you MIGHT buy don't give you a seat on the board, a dime of income or much influence.
-Congressional "oversight" board is balanced by another oversight board that can probably neuter  or checkmate the first, and with administration participation. "Oversight" looks thin at best.
-Main street?  Mom and Pop mortgage holder can just eat cake.
It goes on. The real needs were mostly bargained away, it seems.

In other words: nothing short of a revolution will do. Can it still be a peaceful, democratic one?

There will be no revolution, democratic or otherwise, against the amporphous, ill-defined financial plunder artists. Not yet.
Revolution against--who? Harvey Wall Street? Where's he live?
Another problem with revolution today is that the values of the financial predators that just ripped off main street --are the values of main street. As long as shared values say that greed is just human nature, that life is a zero-sum game, --why, the boyz from Wall street (or chicago) just acted the way we would,--they just got theirs first.
Nope. Gotta get a lot worse if any action is to happen.
Echoes of the Marxian "Necessary Preconditions" idea here.

--the main argument to give financial markets a free hand - that they have created so much growth and prosperity - needs to be called for what it is: a lie. Not only the so-called prosperity of the past years was highy unequally shared (see the next point), but it was not even real,---

You know that. I know that. But those whose reality is shaped by the MSM would passionately disagree, I think. When I tell people that the U.S. working man's real hourly wage peaked around 1974, and has slipped almost 50% since then, they think I'm nuts. I suspect Marx never had Rupert Murdoch or Foxwits to deal with.

Angst, editorial froth and recriminations, scapegoating and posturing, pompous academic pronouncements--but no action yet.
Best thing that could happen (if you want real change)would be a crash of cosmic proportions.

But what does this mean in the real world? Most of us have no idea.

Studs Terkel wrote a wonderful book called "Hard Times", filled with interviews from people who lived through the crash of '29 and the subsequent decade- everyone from several members of Roosevelt's brain trust, to mothers who scratched to feed their kids, community street meals with whatever you had to contribute in the pot, fathers who ran away and rode the rails to hide their shame because they could not provide even shelter and food. A sometimes heartbreaking document, yet one filled with a strange light- the light of hope.
The theme that recurs over and over is the theme of a return of the ability to stand in the shoes of others--and share whatever you had as a result.

The guys who engineered the "New Deal" made it plain, in this book and in others, that their success in that incredible endeavor was in large part due to their ability to ride this sense of -- community, of solidarity born of shared misery, of a resurgence of compassion, of the resolve to PERSONALLY do whatever you could for others, without waiting for government to act.

Then the government could act.

Government reflects the people. Not perfectly, not exactly, but in the central values that exist at the heart. This government -all of it,- reflects the people.

It has so far acted accordingly.

When we change, ---it will follow.  

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Mon Sep 29th, 2008 at 04:36:26 AM EST
 "The lesson is that the financial world cannot behave responsibly, if left to its own devices and thus should not be left to its own devices;"

  Please see: Jacques Généreux,

 Économie politique (3 vol.)
Coll. Les Fondamentaux, Hachette.

  • Économie politique. 1. Introduction à l'analyse économique. 4e éd., 2004.
  • Économie politique. 2. Microéconomie. 4e ed., 2004.
  • Économie politique. 3. Macroéconomie. 4e ed., 2004.

Introduction à l'économie
Coll. Points-économie, Seuil, 3e éd., 2001.

Introduction à la politique économique
Coll. Points-économie, Seuil, 3e éd., 1999.

Chiffres clés de l'économie mondiale
Coll. Points-économie, Seuil, 1993.

Chiffres clés de l'économie française
Coll. Points-économie, Seuil, 1993.

Droite, Gauche, Droite
Plon, 1995, épuisé.

L'économie politique. Analyse économique des choix publics et de la vie politique
Larousse, 1996, épuisé.

Les politiques économiques
Coll. Mémo, Seuil, 1996.

Une raison d'espérer. L'horreur n'est pas économique, elle est politique
Plon, 1997, Pocket, 2000, épuisé.

Les Vraies Lois de l'économie, tome 1
Seuil-France Culture, 2001.

Les Vraies Lois de l'économie, tome 2
Seuil-France Culture, 2002.

Quel Renouveau socialiste?
Entretien avec Philippe Petit, coll. Conversations pour demain, Textuel, 2003.

Chroniques d'un autre monde
Seuil, 2003.

Manuel critique du parfait Européen. Les bonnes raisons de dire "non" à la Constitution
Seuil, mars 2005.

  --- passim.

  Briefly, the "financial world" is always under the more-or-less competent (these days, it's the obscenely incompetent) control of the politico-economic élite.  Therefore, what you urge constitutes a nonsense, non sequitur, a thing outside the realm of human possibility at this point (there being, as yet, no such thing as a meaningfully functioning "democratically-run" society).

   The markets are in turmoil, yes.  But it isn't because they've been "left to their own devices."  It's because, rather, they're under the control of the class of director-managers which always runs them---and that happens to have been doing a supremely stupid and inept job of it for since Reagan's and Thatcher's reign.

  A "débat" including Jacques Généreux ran in the pages of Libération in the past two weeks; don't recall the exact date.  Try his books. A healthy tonic for the prevailing idiocy.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Wed Oct 1st, 2008 at 01:11:03 PM EST
You're back!!!

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 Wed Oct 1st, 2008 at 01:19:51 PM EST
[ Parent ]


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