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Will Obama forfeit a second term because of Wall Street?

by NBBooks Fri May 15th, 2009 at 07:24:49 PM EST

Cross-posted from epluribusmedia.net

With the defeat of the bill allowing judges to force mortgage restructuring on reluctant creditors in the U.S. Congress, and now the defeat of Senator Bernie Sanders' (Vermont - Socialist) bill reintroducing limits on usury, the momentum toward real reform of the American financial system has clearly been stopped. There is now a rapidly growing danger that the lack of reform, coupled with the growing consensus in “the Village” that multiplying signs of economic “green shoots”signal that “the bottom is near” (see Arianna Huffington’s May 12, 2009 post, Wall Street, DC, and the New Financial Euphoria),  will leave the majority of Americans who are not rich, dealing with prolonged economic hardship.


About two weeks ago, Stirling Newberry warned "If the economic numbers are to be believed the plunge of this downturn is over," but all that has really happened is that "the financial system's willingness to do business with itself has been restored."


In other words, the banksters are now willing to renew their circle jerk -- and we're supposed to hail it as the possible beginning of an economic recovery.


Struggling heroically to keep economic reality before the public eye, DailyKos front pager Meteor Blades discussed the troubling trend of employment as a "lagging economic indicator." In Grim Times (Before the Tide Turns) for American Workers , he notes that the past few recessions in the United States have been characterized by a lengthening of the amount of time that passes before employment begins to recovery. In the first eight out of the first ten economic recoveries since World War II, it took an average of four and a half months from the time a recession ended, until the time the U.S. unemployment rate began to decline. But in the recovery from the 1991-92 recession, it took 16 months after the recession ended before the unemployment rate began to decline. And after 2001 recession ended, it took 21 months for the employment numbers to begin improving.

Meteor Blades writes:

The current recession has now begun its 17th month. It's already longer than any recession since the 1930s. If it were to end this month and the unemployment rate started dropping in line with the average timing of the two most recent recoveries, it would mean no relief for the jobless until Christmas 2011. And that would only mark the beginning of a drop in the unemployment rate.

Thirty-six percent of out-of-work Americans receive unemployment benefits, but without further government intervention, they will have long since exhausted them by 2011. The rest get nothing. And, of course, that bogus official rate of unemployment doesn't count either the underemployed or those so discouraged they've stop looking for a job.

What about the Obama stimulus package passed in February? The evidence is now coming in that critics such as Robert Reich and Paul Krugman were correct: the stimulus was not large enough. In the past two weeks, many states have begun laying off thousands of employees because the $135 billion portion of the stimulus package allocated for them just was not big enough to fill the hole left by rapidly collapsing revenues from sales and income taxes.

Not very many "main-stream" economists are pondering what the effects of prolonged unemployment for working Americans. One of the few looking at the problem,  Lawrence Mishel, president of the Economic Policy Institute, is warning that if the U.S. unemployment rate rises, as expected, to ten percent over the coming year, the poverty rate for children will likely increase from 18 percent in 2007, to a frightening 27.3 percent in 2010. For African-American children, the numbers are even worse: 34.5 percent in poverty in 2007 is likely to soar, EPI calculates, to 50 percent or higher.

Unlike the Villagers in Washington and Wall Street, the manufacturing and construction sectors of the U.S. economy are not seeing any "green shoots." Robert Kuttner relates his recent conversations  with executives in these sectors, in a posting on HuffPost:

I also recently spoke at a convention of industrial construction companies. These are the people who build and maintain factories, power plants, and do other heavy industrial construction. I asked a room full of hundreds of executives how many saw signs of improvement in their order books. Not a single hand went up. Then I asked how many had had projects deferred because of difficulty getting financing. About two thirds of the people in the room raised their hands.

My guess is that the Obama administration will be back next fall, asking Congress for the money and authority to do the bank rescue right, after the current policy proves inadequate to restore the banking system and the economy to health. That would mean taking the insolvent banks into receivership, deciding how much public capital was required and where to get it, and then returning the banks to private ownership. Better late than never, but it's a pity to waste six months.

Chatting with the bankers in attendance at the Fed conference, mostly bankers from the heartland of the Midwest, I encountered resentment bordering on fury at the double standard. The big Wall Street banks are getting propped up with literally trillions of dollars in aid from the Treasury and the Federal Reserve, while community bankers that stuck to their knitting and did not go in for the sub-prime swindle are suffering collateral damage.

And in case you're one of those who dismiss Kuttner as a crank, here's the latest editorial from the magazine Industry Week:

Kevin Kearns, president of the USBIC, has written an open letter to Pres. Obama, which you can read here. The best line in the letter, in my opinion, is this one: "To date, your economic team's approach seems to be trillions for banks, but hardly a dime for manufacturing. You save wrong-doing financial houses from failure, but send good-faith, if sometimes poorly run, manufacturing companies into bankruptcy -- a formula for disaster."

As we pointed out in our pre-election coverage last fall, neither of the major candidates for U.S. President had much, if anything, to say about what they'd do to help the manufacturing industry recover, so it should hardly come as a surprise that, 100 days in, Pres. Obama has yet to address the topic. The more I observe the current Administration's attitude toward U.S. manufacturing, the more I keep hearing the lines of that famous song from The Who: "Meet the new boss, same as the old boss."

A clear example of "same as the old boss" was provided by masaccio on Wednesday, who pointed to a post by Yves Smith detailing how General Motors is being driven into bankruptcy by the holders of credit default swaps on GM's debt. The financial predators are still fully in charge, and have as little regard as ever for the consequences of their actions on the real economy.<

These dismal policy results are going to be with us for a very long time – unless there is a radical change of course by the Obama adminsyration. Considering the comic absurdity of the bank "stress tests," Lambert on correntewire this past Friday was led to rant:

I'm a little exasperated by the lack of coverage* on financial issues by the left in general, and even some of my favorite blogs (the ones I still read). It's a lot easier to get a real, or even vehement discussion going on issues that are trivial by comparison to this one. Versailles has given two trillion dollars to the banksters with no accountability and no transparency at all, and without even so much as a Congressional hearing. That decision is going to structure all of our policy choices for a  very long time -- especially if it "fails," but even if it (by the bankster's standards) "succeeds." Whether your issue is Constitutional government and the rule of law, health care, patriarchy, the end of the empire, the media critique, global warming or anything else, following the money is central. Finance is not just another issue. For many -- and especially for the Versailles insiders -- it is the issue. In the finance blogosphere, there's a robust critique. In the left blogosphere -- let alone the "progressive" blogosphere -- there's no such thing. It's one thread among others. Why? This is exactly the kind of laziness and lack of curiousity that lets us sleepwalk into disaster.

A few days before, Newberry posted The Depression that Hayek Built in which he writes that over the past three decades:

the fight, in economic ideology, was over how much of the investment in the future should be handled by a very wealthy elite, and what fraction should be handled by the public through government. The ideology of the time was that the wealthy elite . . . was always right, and the public was always wrong.

This theory has been proven false. The economic destruction of the New Depression, and Depression is the correct word, will extend for years, and has wiped out the fictional gains of the last 30 years. We are now exactly where we would have been without this experiment in a dictatorship of the propertariat, and we have nothing to show for it but a surplus of posh apartments and private jets.

The debt is not in money. The numbers being thrown around represent real work by real people and real sacrifices, to pay back that pool of money. It, and only it, has been declared to be off-limits. The theory of the day is that the rich own the world, and governments only rent it from them.


Also on FireDogLake a few days ago, masaccio wrote in Learning from the Cramdown Fight: Progressive Ideas Need Help:

Even the current administration thinks financial issues are too hard to be dealt with in the public arena, which makes me wonder why so many people want us to handle our own investments to prepare for retirement and educating our kids. All of the financial people in this administration come out of Wall Street and giant banks. Public discourse on the economy is trivial: stock market cheerleading and CEO worship. The people who are sucking the life out of the nation are in charge.

Former FireDogLake editor Ian Walsh, one of the best bloggers on issues of finance, and who now posts on his own blogsite, posted this observation

When Diamond wrote his book on why societies collapse he came to the conclusion that it occurred when elites weren’t experiencing the same things as the majority of the society–when they were isolated from the problems and challenges the society was facing.

For 30 years ordinary Americans haven’t had a raise. And despite all the lies, Americans are beginning to get that. But for the people in charge the last thirty years have been absolutely wonderful. Seriously, things haven’t been this good since the 1890’s and the 1920’s. Everyone they know–their families, their mistresses and toyboys, their friends–is doing well. Wall Street paid even larger bonuses for 2007, the year they ran the ship into the shore, than they did in 2006 when their bonuses equalled the raises of 80 million Americans. Multiple CEOs walked away from companies they had bankrupted with golden parachutes in excess of 50 million. And if you can find a Senator who isn’t a millionaire (except maybe Bernie Sanders) you let me know.

Life has been great. The fact that America is physically unhealthy, falling behind technologically, hemorrhaging good jobs and that ordinary Americans are in debt up to their eyebrows, haven’t seen a raise in 30 years and live in mortal fear of getting ill–because even if they have insurance it doesn’t cover the necessary care–means nothing to the decision making part of America because it hasn’t experienced it. America’s elites are doing fine, thanks. All they can taste, or remember is the caviar and champagne they swill to celebrate how wonderful they are and how much they deserve all the money federal policy has given them.

This is the second insanity of the US–that the decision making apparatus in the US is disconnected from the results of their decisions.

So it was extremely interesting, and very instructive, to watch Charlie Rose interview Naomi Klein and William Greider earlier this week. What you must know, before you watch the interview, is that Rose married into the same family that Morgan Stanley CEO and Chairman of the Board John J. Mack married into. Rose has had Mack on his program at least twice the past few years, and calls Mack a close friend. So, pay close attention to Rose’s expressions and body language as he reacts to the true change -- a complete reformation of the banking and financial system -- advocated by Klein and Greider. Note especially when Rose explains why Klein and Greider have been invited onto his program:

But what I wanted to do is begin to make sure, as we heard from everybody, that we really heard from a critique. We know what Paul Krugman is. But I think yours is more severe.

Also noteworthy is when Grieder – twice – insists that the financial bailout is a moral question. Finally, note how Rose tries to force Klein and Greider to attack President Obama. Here is the video. Following are a few highlights.

CHARLIE ROSE: Yes, but what are you prepared to do to, in a sense, hold the president accountable for what was your belief in him and his intentions and his governing philosophy?

NAOMI KLEIN: But I also think it is a difference between, you know, Bill Greider and Barack Obama, but it’s also a difference between President Obama and candidate Obama, because he won this election and really started connecting with voters when he started talking about the ideology of deregulation that has gripped this country for eight years. We would argue that it was much longer than eight years, but you know, that was really -- that was the turning point, you know? I think it’s really worth remembering that before the financial crisis, Barack Obama was behind in the poles and McCain and Palin were moving ahead. And it was only when he -- when the crisis hit and when he started using this language of talking about the failure of trickle-down economics and needing to rebuild Main Street instead of Wall Street, that he started connecting with voters. . .

. . . . personally, I don’t feel any sense of betrayal about President Obama. I think this is all a question of whether there’s a grass-roots movement that is putting pressure on him from below. We know he’s under enormous pressure from above. And we just saw the defeat of a bill in the Senate that would have really helped home owners who are facing foreclosure. And it was Dick Durbin who said, you know, the banking industry owns Capitol Hill.

SNIP

CHARLIE ROSE: You wrote, I think, once that the populist rage could devour the Obama presidency.

NAOMI KLEIN: Well, I worry, because there is so much anger. And I think it’s deserved anger at corporate greed, at AIG bonuses, at the double standards for the bailouts for the banks versus the bailout, say, for Detroit. And I think that kind of rage is an asset. And if you look at what FDR did, he used that rage to get Glass-Steagall, to get key pieces of regulation. He turned it into something constructive. I think it’s a resource rage. I don’t just dismiss it and say, oh, it’s populist, it’s ugly. But the issue with rage is that it’s going to go somewhere. You know, so if it doesn’t get funneled into a project to build a more equitable society, to address these core issues that created the crisis, then it’s kind of free floating and anyone can use it. And I think we’re already seeing some -- a rise in really ugly rhetoric directed at immigrants, and even directing it at the president himself as the first African-American president.

WILLIAM GREIDER: Go back and read the history of the New Deal. As Naomi said, from 1932 to 1936 -- don’t hold me to these numbers, I’m sure they’re wrong -- there were 1,000 or 2,000 labor actions around the country. Sit-in strikes...

NAOMI KLEIN: Yes, 1934, 4,000 strikes in one year.

WILLIAM GREIDER: You had in California in the early ’30s a movement for what was called something different, but amounted to a Social Security for this country. Roosevelt was not for that. He was compelled to listen because this movement began spreading across the country. What I am predicting, somewhat recklessly, is that you are going to see something like that in this country, if, a big if, the cheerleaders are wrong, as I think they are. And the people -- let’s leave aside Goldman Sachs and J.P. Morgan Chase, because they say they’re OK and they don’t have any crisis -- but the rest of us are going to be in this crisis not for a quarter or two more, but for years more. And the economists will be able to explain that actually we have got a little bit of growth back and profits are coming up and so forth, but the fact is the crisis will endure in the way people’s lives are being changed by these circumstances, and out of that, I believe, I hope -- it’s what my book is about -- we will see a new politics. It will be a rejuvenation that is not anchored in this stale two-party rivalry, which you know, we’ve now got 39 percent of the country doesn’t want to be either a Democrat or a Republican.

In July 2004, I believe it was, Thomas Frank, author of What's The Matter With Kansas?, and more recently The Wrecking Crew: How Conservatives Rule, explained on the Bill Moyers Journal why the Democratic Party lost the votes of the so-called Reagan Democrats. Basically, neither the Republicans nor the Democrats agreed with the economic concerns of working Americans. Both Republicans and Democrats supported deregulation; both Republicans and Democrats supported free trade; both Republicans and Democrats abhorred the idea of an industrial policy. Given this political situation, in which their economic concerns were being ignored by both major American political parties, working Americans decided to support the party that at least mouthed support for their social concerns, such as law and order, and opposition to abortion and gay rights. The stupidity of Democrats in the 1980s, in turning their backs on the economic concerns of working Americans, helped usher in an entire era of conservative rule. My fear now is that President Obama’s apparent “regulatory capture” by the banksters will bring us a repeat performance of the Democratic disaster of the 1980s.

Maybe that’s the only warning Obama will understand.

Display:
NBBooks
Not very many "main-stream" economists are pondering what the effects of prolonged unemployment for working Americans.

Most American economists are employees of the financial sector, either directly, or as "trainers" in the minor leagues of academe, where they are conditioned to view employees as "factors of production" rather than as human beings.  But, one American economist is looking at the consequences of high unemployment for the overall economy:

Bruce McF

...obviously the economy is just a month or two away from passing below the "natural rate of unemployment" into the Inflation Accelerating Rate of Unemployment range.

Perhaps an Inflation Accelerating Rate of Unemployment will concentrate their minds.  

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 15th, 2009 at 10:17:25 PM EST
Depressed national economy + large current account deficit + need for imports --> Loss of status of $ as world currency?  + accelerating inflation due to unemployment + continued focus on saving Wall Street at all costs --->> massive dollar devaluation?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 15th, 2009 at 10:24:21 PM EST
[ Parent ]
Depressed national economy + large current account deficit + need for imports --> Loss of status of $ as world currency?

This is the malaise option for trying to thread the needle ... a depressed US national economy will reduce the US current account deficit ... in particular if the US lags behind the rest of the world in recovery ...

... indeed, that is quite like the Washington Consensus policy for low income nations with structural current account deficits, to throw the economy into permanent recession in order to balance the external accounts.

On the other hand, since the bulk of US$ foreign exchange transactions are in the capital account, if there is a US economy lagging behind the rest of the world, that could generate capital account outflows, and push the US$ into a downward spiral.

However, the remark regarding the economy being pushed onto the other side of the non-inflation accelerating rate of unemployment was bitter irony ... that is the Washington Consensus fear of an unemployment rate that is "too low", leading to an economy "overheating" ... and a variety of other scary sounding euphemisms for tight labor markets leading to a rising rather than falling wage share of national income ...

... and the idea that the US, with a broad unemployment rate of 15.8%, is in any danger of seeing demand-driven inflation anytime in the next two years at least, is quite absurd.

No, if the US is going to see an inflationary spike in the next few years, it will be the old fashioned way that any other "banana republic" sees inflation while its economy is in a depressed state ... either imported cost inflation from an oil price spike, or imported cost inflation from a collapse in the US$ exchange rate.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat May 16th, 2009 at 06:24:30 PM EST
[ Parent ]
BruceMcF:
the US, with a broad unemployment rate of 15.8%
Hey, that makes Spain's 17%+ (forecast to grow to 20%+ by the end of next year) look "not so bad".

The brainless should not be in banking. — Willem Buitler
by Migeru (migeru at eurotrib dot com) on Mon May 18th, 2009 at 07:04:16 AM EST
[ Parent ]
No, I think he will forfeit a second term because of Iraq/Afghanistan/Pakistan/Iran/Israel/Kuwait/Etc.

Just today I heard on the AM radio that deflation is great, because everything costs less! You can negotiate a lower phone bill! A lower mortgage payment! And less expensive groceries! Not mentioned was how to pay for the less expensive groceries with a $0 paycheck, but perhaps that's for the little people to worry about...

by asdf on Sat May 16th, 2009 at 01:00:00 AM EST
Could be either/or or both/and.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 01:31:58 AM EST
[ Parent ]
Likely to be both and.

I'm not sure if Obama has already lost his next term, but he's certainly lost any claim not to be an Amero-Blair.

As I've said before, when you have trillions to spend in so-called bail out money, it's not hard to buy yourself an election.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat May 16th, 2009 at 11:39:54 AM EST
[ Parent ]
Deflation should be a wonderful thing.

The problem is that it is death to a monetary system based on interest-bearing debt.

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

by ChrisCook (cojockathotmaildotcom) on Sat May 16th, 2009 at 06:07:09 AM EST
[ Parent ]
Deflation should be a wonderful thing.
It is for those with lots of cash.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 02:50:22 PM EST
[ Parent ]


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat May 16th, 2009 at 03:46:07 PM EST
[ Parent ]
I don't think Obama can forfeit a second term, because I don't think anyone can.  A second term, surely, has to be earned.

I don't think there's much point blaming the usual suspects for being venal and self-interested.  They are a fixture in the inherited political landscape.

Obama can either take them on, in which case he might succeed, or at least open up debate whilst going down fighting, or he can give in to them.  He can choose to do little or nothing about all the issues you've outlined above.

But, in that case, has he forfeited a second term, or does he just not deserve one?

by Sassafras on Sat May 16th, 2009 at 06:32:40 AM EST
Anyone who follows eight years of Bush looks like a combination of FDR and Abraham Lincoln.

So far I'm unimpressed with Obama.

Hey, Grandma Moses started late!

by LEP on Sat May 16th, 2009 at 06:36:47 AM EST
my first impression at the dem convention of him was wonderingly sceptical, he seemed like a poetry student reciting truisms, bouquets of rhetorical flowers, that never quite dug in to reality, skimming over its surface.
reading his first book and watching him on the campaign trail got me respecting him much more, i recognised a fineness of intellect and a thoughtful skill in writing, light years ahead of any other world political leader.

so i began to relax a bit when he was inaugurated without stopping a bullet.

now i'm watching a chess master, and daily reminded of my impatience and shallow sense of strategy. he has an close to impossible hand, and so far is playing it with dignity and style, with mercifully little rockstarring or airy speechifyin'.

looking at all the entrenched evil swirling around him, he's a bit like the calm at the centre of the storm. he certainly has an historic mission to fulfill, though how much events will master him, or vic-versa is quite the little cliff-hanger.

i don't admire his moral elasticity, but if it gets the job done...

(thinks of drones bombing innocent women and children in pakistan and throws up...)

'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 Sat May 16th, 2009 at 07:50:55 AM EST
[ Parent ]
I think he's picked the wrong people especially in finance. I thought that from the beginning. Right now he has high approval ratings from a public that has only begun to suffer from this depression but I think the suspicion that he's in bed with Wall Street is taking hold.
And he should be careful; costly foreign wars (especially for a country that's broke) have done in more than one president.

Hey, Grandma Moses started late!
by LEP on Sat May 16th, 2009 at 08:21:29 AM EST
[ Parent ]
LEP:
I think he's picked the wrong people especially in finance.

I don't think he had any choice, and I think he is giving them enough rope to hang themselves.

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

by ChrisCook (cojockathotmaildotcom) on Sat May 16th, 2009 at 09:27:49 AM EST
[ Parent ]
I don't buy that Chris. Obama may very well hang with them.

Hey, Grandma Moses started late!
by LEP on Sat May 16th, 2009 at 10:37:11 AM EST
[ Parent ]
Two more years and he would. But I can't see the Goldman boys making the end of 2009 after this current Wile-E-Coyote market...

....follows earnings off the cliff, and that would leave him free and clear of them.

He still has to sort out the problem, though!

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

by ChrisCook (cojockathotmaildotcom) on Sat May 16th, 2009 at 10:47:43 AM EST
[ Parent ]
Golem Sachs will just raid the Fed again.

They cannot lose. They've eaten the competition and bought themselves a pliant prostitute of a government.

They'll be the last people to go.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat May 16th, 2009 at 11:42:23 AM EST
[ Parent ]

COULD there be a better time to be a bank? If you have capital and courage, the markets are packed with opportunities--as they well understand at Goldman Sachs, which is once again filling its boots with risk. Governments are endorsing high leverage and guaranteeing huge parts of the financial system, so you get to keep the profits and palm off the losses on the taxpayer. The threat of nationalisation has receded, reinvigorating the banks' share prices. Money is cheap, deposits plentiful and borrowers desperate, so new lending promises handsome margins. Back before the crash, banks' profits just looked big; today they might even be real.

The bonanza is intentional. Governments and regulators want the banks to make profits so that they regain their health faster after roughly $3 trillion of write-downs. It is part of the monstrous bargain that bankers have extracted from the state (see our special report this week). Taxpayers have poured trillions of dollars into institutions that most never knew they were guaranteeing. In return, economies look as if they have been spared a collapse in payment systems and credit flows that would probably have caused a depression.

It's for our own good, you understand.

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

by Jerome a Paris (etg@eurotrib.com) on Sat May 16th, 2009 at 12:30:06 PM EST
[ Parent ]
Instead of nationalizing the big banks they have "nationalized" the pockets of the average taxpayers and even the "unborn."

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 02:57:07 PM EST
[ Parent ]
indeed...

Clusterfuck Nation by Jim Kunstler

The bizarre spectacle being played out right now by President Obama and his team only adds layers of mystery and mystification to this big question. On the one hand, you have Mr. Obama giving a graceful, thoughtful speech on a very difficult issue (abortion) at a very tough venue (the country's leading Catholic university), and presenting an excellent case for common ground. It was a bold deed, unshirking, even brave considering what have come to be the standard modes of pander or evasion in presidential politics. I suspect that Mr. Obama did it as much to demonstrate his willingness to face tough questions in general as to address abortion per se.
       All this is to say why it is so dispiriting to see Mr. Obama's White House mount a campaign to sustain the unsustainable in the economic realm. Everything they've done for four months involving money management and enterprise policy -- from backstopping hopeless banks, to gaming the bankruptcies of the big car companies, to the bungled efforts to prop up artificially-high house prices -- amounts to a gigantic exercise in futility. Worse, it gives off odors of dishonesty or stupidity, since the ominous tendings of our system are so starkly self-evident.
     Not least of the problems entailed in all this are the scary political consequences. It's one thing for a business such as a bank to fail; its another thing for the public to lose confidence in banking, or their own currency, or the credibility of all the people who work in banking, or the authority of those charged to regulate these activities, or the courts and their officers who are supposed to adjudicate misconduct in them. When faith in all these things starts to go, all bets are off for even larger social constructs like democracy, justice, and the destiny of a federal republic.
      The Obama White House has very quickly painted itself into a corner on these things. The so-called bank "stress test" couldn't have backfired more completely. Rather than bolster confidence in our money system and the people who run it, it only made the system appear more obviously corrupt. It made the Treasury Department (and the White House by extension) look idiotic for concocting it. Worse, the game of allowing the banks to audit themselves, and cook their books under newly jiggered accounting rules, only made them look less sound and trustworthy, and their executives more venal and mendacious. The stress test scam also virtually guaranteed that the banks will not get another dime out of congress -- even while it is common knowledge that they will desperately need quadrillions more dimes in the months ahead.
      Who knows what the point of this ludicrous exercise was?


'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 Mon May 18th, 2009 at 12:01:32 PM EST
[ Parent ]
The banks don't need a dime from Congress. They have access to gazillions through the Fed.
by vladimir on Mon May 18th, 2009 at 12:20:21 PM EST
[ Parent ]
Sorry, Chris. I've been sitting on the sidelines and studying every scrap of useful info in the hopes of discovering a plausible scenario in which your "enough rope" scenario could be right.
No soap. I also think you're wrong.
Sad to say.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Mon May 18th, 2009 at 03:31:49 PM EST
[ Parent ]
Well, as an optimist I only ever get unpleasant surprises, but I think it's at least six months too early to judge Obama on this.

I think we'll see the system completely and conclusively fucked within that time.

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

by ChrisCook (cojockathotmaildotcom) on Mon May 18th, 2009 at 04:22:42 PM EST
[ Parent ]
FDR started on day one. He didn't dither, and he sure didn't provide anybody any rope, nevermind enough to hang anybody with. That seems to have worked well enough.

Just sayin'.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 19th, 2009 at 03:36:23 AM EST
[ Parent ]
I think he is giving them enough rope to hang themselves.

I can't see any plausible rationale for that being his intent, although it may work out that way.  I wouldn't rule out his changing his position and acceding to the hanging, but I don't see him donning the hangman's hood himself. Even his changing his position seems unlikely and will only occur if he is under great pressure and there is no real alternative.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 18th, 2009 at 11:12:45 PM EST
[ Parent ]
Time will tell

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue May 19th, 2009 at 04:02:29 AM EST
[ Parent ]
Utter nonsense!  Who will dethrone him?  A Republican?  Are Americans so stupid that they think any of the Repubs can do better?  Or what?  A genuine Progressive opponent?  Bernie Sanders?  Obama is sitting pretty because he knows he has no competition.  BTW, if America is screwed, they deserve it.  They've earned it.  I should know.  I've observed these a-holes for over 50 years.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat May 16th, 2009 at 06:56:39 AM EST
You should go back and reread the last paragraph of the diary.

Hey, Grandma Moses started late!
by LEP on Sat May 16th, 2009 at 08:12:29 AM EST
[ Parent ]
Just reread the last paragraph.  What am I missing?  Please educate me.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat May 16th, 2009 at 09:12:38 AM EST
[ Parent ]
It's quite obvious. In the 1980's the Democrats did not take care of their base, working people, so the latter left for Reagan on peripheral issues and and didn't return until 8 years later. The same thing happened again in '94  when the Democrats lost Congress to Gingrich and crew, largely over the Dems support of NAFTA.
If in a year or two the working class is still suffering, as is quite possible, Obama could lose them too.

Hey, Grandma Moses started late!
by LEP on Sat May 16th, 2009 at 10:35:37 AM EST
[ Parent ]
And all those working class people will flock to the ??? party... I used to think it was going to be the Greens, but after going to a Green "convention," that idea evaporated.

Maybe Britain can loan us their Lib-Dem party for a few years; they don't seem to be using it...

by asdf on Sat May 16th, 2009 at 10:49:07 AM EST
[ Parent ]
asdf:
Maybe Britain can loan us their Lib-Dem party for a few years; they don't seem to be using it...

Too true.

A return to classic J S Mill liberalism is necessary, I think.

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

by ChrisCook (cojockathotmaildotcom) on Sat May 16th, 2009 at 10:50:59 AM EST
[ Parent ]
asdf:
And all those working class people will flock to the ??? party...

It doesn't look likely now, but in two years who knows, if a Republican with a little class shows up and there's 20% real unemployment.

Hey, Grandma Moses started late!

by LEP on Sat May 16th, 2009 at 11:01:40 AM EST
[ Parent ]
Noam Chomsky might not be a hit around here but his warning was to look out for the "honest demagogue".  If I get a chance in CA, I'm stepping up to the plate.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat May 16th, 2009 at 11:33:11 AM EST
[ Parent ]
"honest demagogue"

like huckabee?

or is that 'earnest bullshitter'?

folksy fascism

'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 Sat May 16th, 2009 at 06:49:54 PM EST
[ Parent ]
I make my living selling new and used books on old machinery and technology - farm tractors, steam engines, railroads, machine tools, blacksmithing, foundry work - at shows and exhibits around the U.S. The past month, I drove to and set up at shows in Toledo, Ohio; LeSueur, Minnesota (60 miles south of Minneapolis), and Pawnee, Oklahoma (midway between Ok. City and Tulsa). And from what I hear people saying - especially in the breakfast room of hotels which all seem to have Fox tuned in on the TV - is sour enough to curdle milk. I hear at the shows, also. Yesterday, at a show in Hickory, North Carolina (I've been home just under two weeks, and a two-hour drive is a "local" show) I had a 70-year old fellow who said he was originally from Scotland, who raved on and on about how the unions destroyed Great Britain, and there are all these blokes that don't want to work, but there are all these social programs that will give them money so they can avoid work. Such thinking, unfortunately, is shared by many Americans.

The Teabag parties were ridiculed on sites such as DailyKos, but the few video clips I saw showed rather large crowds. (See for example, see this video of the Saint Paul tea bag rally, shot by someone who is most definitely NOT a conservative: http://thecuckingstool.blogspot.com/2009/04/like-square-green-wildflowers.html)

In other words, if you think the American people are all lined up to back a progressive revolution for the next decade or two, I think you need to get out of your bubble and confront the hard reality that the incessant crap spewed by the wrong wing noise machine is having quite an effect.

While I was in Minnesota, I spent a few days working with Jonathon Larson (who lives in Minneapolis) to update his book, Elegant Technology: economic prosperity from an environmental blueprint and put it into film. http://www.elegant-technology.com/...

I'm hesitant to provide this link because I'd rather people preserve what ever image they have of me, but here is my fat, ugly mug yakking about economics at my discussion at the Drinking Liberally in Minneapolis last month.

http://thecuckingstool.blogspot.com/...

by NBBooks on Sun May 17th, 2009 at 09:30:19 AM EST
[ Parent ]
In other words, if you think the American people are all lined up to back a progressive revolution for the next decade or two, I think you need to get out of your bubble and confront the hard reality that the incessant crap spewed by the wrong wing noise machine is having quite an effect.

I'm not sure that this was directed at me but I'll take a shot.

  1. The geographic areas that you cite, the people who are probably interested in your books, I would expect to be pro-Repub to begin with.  I'm in CA.  Hopefully we can be a little more liberal Progressive.

  2. Things haven't even begun to get interesting yet, especially here in CA.  I'm expecting a cross between the Great Depression, the social upheaval of the '60s, all caught on cell phones.

Stay tuned.  the fun has just begun.

Bubble?

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Sun May 17th, 2009 at 09:48:52 AM EST
[ Parent ]
But NBBooks does have a point about the Republican (or should I say right wing) marketing machine being just so much more efficient than the liberal one - for 2 reasons:
> First, it has a larger share of voice... business controls media.
> Second, its messages focus on the positive (take your economic freedom into your own hands - you'll be happier).

There's really much work to be done by the Modern Progressive Movement to coin and disseminate an appealing message to the masses. Maybe ET is a place to start a brainstorming session on this topic?

by vladimir on Mon May 18th, 2009 at 06:00:44 AM EST
[ Parent ]
There's really much work to be done by the Modern Progressive Movement to coin and disseminate an appealing message to the masses. Maybe ET is a place to start a brainstorming session on this topic?

Sign me up, bad back and all.  I'll do what I can.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Mon May 18th, 2009 at 06:04:29 AM EST
[ Parent ]
It's much wider than that. A lot of US media culture, including so-called spirituality, is based on hawking the idea that you are personally responsible for your success.

Which is why 'Yes we can' was such a brilliant propaganda message - it not only reinforced that belief, it also linked it to Obama, implying that he would make it possible.

In practice of course it's nonsense. You'll succeed if you're lucky, born rich and well connected, unusually intelligent and ambitious, or an amoral son of a bitch - and ideally all of the above.

Otherwise you won't, and wishing won't make it so.

Nothing much will change as long as the population believes that they're masters of their own destiny, and not just disposable farm animals.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon May 18th, 2009 at 07:03:40 AM EST
[ Parent ]
ThatBritGuy:

You'll succeed if you're lucky, born rich and well connected, unusually intelligent and ambitious, or an amoral son of a bitch - and ideally all of the above.

Otherwise you won't, and wishing won't make it so.

no it won't economically, but wishing for a new president with intelligence wasn't enough, it came because many people were inspired by obama to get involved and make a change happen, by working their tushies off.

jeez i wish one politician in europe had the stones, political skills and (even hazy) ideals obama has. till we create one, or preferably more than one, we continue to try and feel motivated, yet with such weak choices, it's hard to see young people or minorities or the great unwashed rallying much.

yes we can....what?

until we address energy and climate change correctly, it's all just a tease anyway.

'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 Mon May 18th, 2009 at 12:11:56 PM EST
[ Parent ]
Obama talks the talk, but judging from the way he walks the walk he doesn't seem to have any more cojones than Paul "Ribus" Rasmussen.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 18th, 2009 at 02:54:30 PM EST
[ Parent ]
Thanks for the links...

You can't be me, I'm taken
by Sven Triloqvist on Mon May 18th, 2009 at 07:14:34 AM EST
[ Parent ]
Just say it's all the fault of those Mexican dekking-ur-jewbs and they'll vote republican* again. As Klein said, the rage must, and will, go somewhere.

* If the democrats screw up, but that's kinda axiomatic, aint it?

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

by Starvid on Sat May 16th, 2009 at 06:52:04 PM EST
[ Parent ]
Obama was voted in because he wasn't Bush. If it turns out that he actually is a more articulate Bush II, he's toast.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon May 18th, 2009 at 06:57:34 AM EST
[ Parent ]
Don't underestimate the appetite of the US electorate for that flavor of toast.  I fear what will come next, if Obama fails as badly as seems likely, will be real "shit on a shingle" WW II style toast.  I think he COULD turn things around by changing his economic team and doing what is needed with Wall Street, but I think his doing so is becoming less and less likely.  Sadly, I think that remains the best option available.  After that we are reduced to trying to get more progressive senators and representatives elected.  I fear the time is nigh for re-cultivating that old southern "shit eating grin."

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 18th, 2009 at 01:14:36 PM EST
[ Parent ]
Another good article shooting donw the "green shoots" theory:


Five Economic Storms Raging NOW!





In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat May 16th, 2009 at 10:56:46 AM EST
And the green shoots will not even save the banks, which were bankrupt even before the economic crisis hit, and will now have to deal with traditional economic failure in addition to the financial failure that brought them down...



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

by Jerome a Paris (etg@eurotrib.com) on Sat May 16th, 2009 at 10:59:02 AM EST
[ Parent ]
Where's Svenki? These graphics are alarming. I want an explanation.

Diversity is the key to economic and political evolution.
by Cat on Sat May 16th, 2009 at 02:45:39 PM EST
[ Parent ]
I see you follow Marty also.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 03:00:16 PM EST
[ Parent ]
by LEP on Sat May 16th, 2009 at 11:08:15 AM EST
Davidowitz sounds right to me.  He repeatedly says "The debt doesn't go away!"  I don't see that this is necessarily true, but that is now a political problem and possibly a legal problem more than anything.  Paulson had and Geithner has as the prime directive that the bogus gains of the last decades have to be made good for the big boys.  Given the scale of that debt that doesn't seem possible.  Trying to do so through QE seems likely to eventually make the debt, if not go away at least become more manageable, through inflation.  I don't think that is the goal here but what other result can there be if we continue to treat all of the counterfeit gains as real gains and try to make up the losses from the government?  Am I missing something?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 03:17:09 PM EST
[ Parent ]
One would have to explain the missing massive U.S.  inflation after the second world war.
by asdf on Sat May 16th, 2009 at 03:22:02 PM EST
[ Parent ]
Most of the savings from the war bonds and almost all of the money for the Marshall Plan went to productive uses--rebuilding West Europe, educating a generation of returning G.I.s, which increased productivity, building the interstate highway system, and, most significantly, the creation of a massive consumer society in the USA, with thousands of square miles of tract homes at the top of the consumption pyramid.

This time the vast majority of the money is just being created through QE and being flushed down black holes in the big banks' balance sheets.  Absent serious financial reforms, I don't see how this can end.  Bailouts forever. Bailouts aren't fixing anything.  They are only temporizing, or so it seems to me.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 03:34:37 PM EST
[ Parent ]
Sure, but there was still a huge pulse in the money supply. I thought that inflation was held in check by proportional growth in the post-war economy. If so, all we have to do in the next decade is engineer comparable growth in the current global economy.
by asdf on Sat May 16th, 2009 at 03:42:06 PM EST
[ Parent ]
Of course, after WWII, there were far more constraints on the lending by the banks ... which are the source, after all, of the bulk of the money supply.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat May 16th, 2009 at 03:53:59 PM EST
[ Parent ]
BruceMcF:
... which are the source, after all, of the bulk of the money supply.

Not sure what the ratio was post World War II but as I recall someone said recently that in the 60's some 30% of money in circulation was notes and coin. It's now less than 3%.

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

by ChrisCook (cojockathotmaildotcom) on Sat May 16th, 2009 at 07:13:53 PM EST
[ Parent ]
It varies by country, of course, but, yes, under 5% is not barely under 5% for the US ... nor I believe for the UK, but I haven't seen the figures for the UK as recently.

But over 10% is still common for many Eurozone countries.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat May 16th, 2009 at 07:58:48 PM EST
[ Parent ]
all we have to do in the next decade is engineer comparable growth in the current global economy

while dealing with significant resource constraints and internalizing costs that have heretofore been externalized and do this with a business and financial elite that remains largely in denial about these costs and constraints and who own the US Government.  We will also have to be able to exert control over the money supply that is at least as effective as it was from 1946 to 1965 while that same financial elite remains in control of the US Government.

Perhaps we should follow the dominant religious ethos in the USA and crucify Wall Street so that Main Street and all of the surrounding streets can know life in greater abundance.  Tell Wall Street that they must die to redeem us all from our sins.  Then our cultural pattern of worshiping great wealth would have a firmer base in economic reality.  It would also give financial elites a reason to try to maximize the time between crucifixions.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 04:17:28 PM EST
[ Parent ]
Find some new planets. Or depopulate Asia. There are options for continuing the resource expansion for a while ever and ever!

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon May 18th, 2009 at 07:37:34 AM EST
[ Parent ]
Depopulation could extend far beyond Asia.  As for other planets, beam me up!  I'd rather die in a spaceship en route to, at least, a different planet.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 18th, 2009 at 12:44:36 PM EST
[ Parent ]
... there will be a progressive populist uprising in his own party, since the way that the Republican party would have to tap resentment of abuse of the public good by the corporate elites perforce lies along the lines of fascism.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat May 16th, 2009 at 06:27:58 PM EST
We could end up with the Democrats being the "conservative" party in the USA.  The Republicans could continue down the purist path they are now on and become irrelevant; a new, more populist-progressive party could emerge from the Democratic Pary, and, in the misery of depression, preach the possibility of reform and of a more equitable society that takes on Wall Street yet still respects the private property of the citizens.  All they would have to do is to be willing to treat criminals as criminals as opposed to treating them as privileged beings who are too big to fail.  In this climate, if there were a party that took a more populist line towards big finance and the corporations and proposed sensible reforms it is not inconceivable that they might quickly become the dominant party.

Better to have the "bought and paid for" Congressmen and Senators replaced by someone a bit to the left who is sworn to campaign reform, reassertion of governmental control over corporations and appropriate taxation of the wealthy than to have a fascist demagogue from the rump of the Republican party.  This would have to be done through a bottom up approach from those who have become disgusted with the current approach and it would have to spread through the internet and person to person contact.  It would have to succeed in the face of the MSM and the existing establishment.  But that establishment is losing credibility.  Staying with that establishment is committing to going down with the ship.  

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 08:33:37 PM EST
[ Parent ]
~40% of respondents self identify as independents.
~20% of respondents self identify as Republicans.
~40% of respondents self identify as Democrats.

The Democrats just won overwhelmingly with very substantial support from independents.  Well over a majority of supporters, I would guess, expected the Democrats to reform the financial sector.  When it becomes transparently obvious that the bailouts and credit guarantees are not and will not work, either Obama has to marshal support for the needed reforms among his own party or there is an enormous opening for a new party.  

This could be like the demise of the American Whig party and the rise of the Republican Party.  The question is who would be the third party.  The conservative Democrats could join with the Republicans but would have trouble getting over 40%.  A new Progressive party could emerge as the dominant national party and the Democrats could disappear, or the Democrats could move to the left somewhat and become that more progressive party.  How it plays out could have to do with leadership in the parties.  But I don't see it happening absent a significant threat of a massive breakaway from the Democratic Party.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 16th, 2009 at 08:54:06 PM EST
[ Parent ]
Not going to happen. It's too damn easy to play the bait and switch game - as Obama just did.

And it would need much wider media coverage and support. That's starting to look like it might be possible online to a limited extent. But there won't be a revolution unless corporate TV collapses.

Which it might do. Corporate newsprint is already collapsing, and without ad revenue corporate TV could go the same way.

But I'd guess consolidation would be more likely, with a few of the bigger players eating the smaller ones, allied with a persistent push to regulate the internet for political reasons.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon May 18th, 2009 at 06:55:10 AM EST
[ Parent ]
(the overall scores for Obama and McCain) is nowhere near "overwhelming" after 8 years of Bush.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon May 18th, 2009 at 10:12:52 AM EST
[ Parent ]
You are correct about the vote percentages.  The extent of the swing was impressive though, especially in the Senate.  It was about as much as anyone could have hoped for this time last year.  To me what is truly "overwhelming" is the refusal to do anything useful with the margin.  Ameri-Blair indeed!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 18th, 2009 at 12:42:06 PM EST
[ Parent ]


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