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View Diary: WHY WE’RE SCREWED (232 comments)

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  •  Great idea but...Who is going to do that?n/t (5+ / 0-)

    Force is the midwife of every old society pregnant with a new one. Marx

    by Marihilda on Wed Jul 25, 2012 at 06:03:19 AM PDT

    [ Parent ]

    •  Nationalization temptation (7+ / 0-)

      always exists. But I don't think you ever get anything from it, except a new set of bureaucrats. As Blueside points out, the links between finance and politics is already pretty strong, and what we'd probably get would be that some of those fine folk from Goldman Sachs already working in the Obama administration would be put in charge of running the nationalized institutions. Which does not, to me, look like progress.

      •  I would agree that Nationalization (10+ / 0-)

        may not be the answer, however, it is certian that the quid pro quo for TARP should have been breaking up these institutions into firms that we could afford to have fail. The very idea that we would allow financial institutions to grow (through aquisition, not natural growth) to a size where they threaten the national ecomomy is lunacy. We have anti-trust laws for a reason.

        Bust em up.

        “Rats and roaches live by competition under the laws of supply and demand; it is the privilege of human beings to live under the laws of justice and mercy.” ― Wendell Berry

        by epc3 on Wed Jul 25, 2012 at 06:53:35 AM PDT

        [ Parent ]

      •  You can't get away from Bureaucracy by (2+ / 0-)
        Recommended by:
        doingbusinessas, mrkvica

        nationalizing. But you can get away from the Executives looting the system to the tune of Trillions of millions of dollars in the space of a decade, since public employees generally speaking won't make more than a few hundred thousand dollars per year, barring bribery.

        •  Public salaries (4+ / 0-)

          "Michael Williams, chief executive of Fannie Mae, received $5.259 million in total pay last year, and Charles Haldeman, chief executive of Freddie Mac, earned $3.799 million, according to the FHFA."

          Prior to (10%) pay cuts, of course. So gov't. service isn't exactly a vow poverty.

          •  Not Gov't (5+ / 0-)

            Fannie and Freddie are not 100% Government agencies.  They're a "Public/Private" hybrid.

            I didn't actually read that article you linked to though because it's HuffingtonPost and it also started playing video automatically so I closed it quickly.

            [Terrorists] are a dime a dozen, they are all over the world and for every one we lock up there will be three to take his place. --Digby

            by rabel on Wed Jul 25, 2012 at 09:47:32 AM PDT

            [ Parent ]

          •  There sure is a lot of right wing ideology (4+ / 0-)
            Recommended by:
            TimmyB, Pescadero Bill, mrkvica, adigal

            embedded in your commentary.

            Government regulators are just bureaucrats, let "free markets" solve the problem (because freeing the markets has worked so well so far), and blaming politicians for needing to borrow money to build things the people want and need like "parks and senior centers".

            Let's go ahead and add schools and hospitals back into the equation shall we. Evil politicians.

            Meanwhile, your commentary is completely devoid of the fraud, usury and yes, thievery explicated in this article.

            It's as though all the evidence, which is overwhelming and incontrovertible at this point,  of the bankster cartel's looting and pillaging doesn't even register for you.

            Or perhaps you just want to change the subject.

            •  Economics is economics (2+ / 0-)
              Recommended by:
              mcc777c2, left of center

              If it's right- or left-wing, then it's ideology. I hope what I had to say is more economics than ideology.

              Any gov't. can put up senior centers and schools—all it needs to do is to make expenditure meet income. But that often means raising taxes, and I take it as basic political common sense that neither the politicians nor the citizenry is anxious to do that. Instead, both sides love to finesse the tax issue via bonds, and they love to think that there are ways that they can borrow even more than would otherwise be possible—hence the ready market for more complex instruments, for selling off various revenue streams (Chicago parking meters, anyone?) and, in general, making the costs someone else's problem. When local citizens can't be bothered to take enough of an interest in their democratically-elected government to keep a keen watch on how the pols spend their money, then they share in the blame for the consequences, right along with the pols and bankers. Once again, none of this ought to have been a surprise.

              As for fraud and thievery (usury laws have mostly disappeared, I believe), I'm anxiously awaiting the indictments and prosecutions. Waiting... Still waiting. If I didn't mention that, it's only because the request was for a way forward, and prosecutions will only close barn doors following equine exits.

              Finally, yes, I think the only mechanism that will clear up the interminable slow-motion depression we're living through is a very basic kind of market, one that permits the losers to lose.  But I think that anyone would be hard-pressed to call anything about the banking or financial systems we have or have had in recent memory, free markets—more like "the fix is in" cartels. We were foolish to try to save the banks in the way that we did. IMO, ordinary textbook economics teaches that the only serious option at this point is to force them to swallow their poisonous loans and, in many cases, to die. Better to get it over with sooner than later.

              •  The attempt to de-couple economics from politics (3+ / 0-)

                is like trying to decouple psychology from human behavior. It doesn't fly.

                My use of psychology for my simile was not whimsical. Like psychology, economics is, to a large degree, a study of human behavior. Behavior manifest through political process. And while one would like to imagine economics a hard science, like physics, it is clearly not.

                That aside, what are we really taking about when we call something "right wing"? These labels are just codes of convenience. Their ascription to some fundamental, quantifiable reality is more often than not subjective and variable from one person to the next. And, indeed, from one generation to the next.

                My use of the term is, in the context of this website, intended as a vernacular reference to a commonly understood set of policies, along with an underlying philosophy, that most here, at least 30 years ago, would have recognized as belonging to those who self identify as right wing conservatives.

                This includes a hostility to "the state", the placing of individualism over the common interests, and a general disdain for government intervention.

                The term "right wing" used to be attributable to the ideological belief in the  powers of markets to self regulate, even govern. But unfortunately,  four decades and billions of dollars of propaganda dissemination have moved the Overton window sufficiently to where even people who frequent left-wing blogs subscribe to this bullshit.

                For example, you assert that we should have just allowed the losers to lose. But in doing so, you failed to clearly identify who exactly these losers are.

                Just the bankers? Or the millions of retired people who's 401k's were tied to those banks?

                Failure to articulate, or even demonstrate recognition of, the interdependency the broader economic system shares with too big to fail banks suggests a libertarian bent that I've seen before.

                Maybe I'm unjustly projecting. But  it seems to me you have an ideological bias that may have prevented you from thinking through the real ramification of just letting the FIRE sector collapse. And that is what you're prescribing. Because the collapse of any big bank at this point would be the collapse of all of them.

                Do not assume that I am defending the remedy of Obama, Geithner, and Bernanke, however. Their prescription merely kicked the can down the road while simultaneously wiping out the wealth of our entire country. It's unforgivable.

                But just letting the whole thing collapse was never an option. But, then again, the real solution was not an option either. Our entire system is far too corrupt to have taken the necessary action of monetary reform, banking reform, and, yes, nationalization of the commercial banking sector. They couldn't even undo the repeal of Glass–Steagall.

                The fix for our problem has to occur in stages, the first being a constitutional amendment to prohibit bribing politicians with money.

                Absolutely not a goddamn thing will matter until we first make it a crime to give politician's money.

                •  Science of economics (1+ / 0-)
                  Recommended by:
                  left of center

                  I suppose the larger question is, to what extent is economics like physics, and to what extent is it an ideologically constructed view of markets. If the latter is the case, then discussion remains confined to those who agree with each other, and there will only be things called socialist economics, liberal economics, conservative economics, but no such thing as "plain" economics and, in reality, literally nothing to discuss. IMO, that point of view needs a great deal of rethinking.

                  On the specifics, if you read my posts, you should have seen that I did say who the losers would be—pretty much everyone. As I wrote, I presume that following my (unpalatable) suggestions would "accelerate foreclosures, decimate pensions, and throw the overall economy into a tailspin." It will be entirely awful. But what we have now is, as I believe, already disaster, merely a slow-moving one. I move that we pull the plug on a moribund economy in order to (somewhat like Iceland, I suppose) get the nastiest bits out of the way sooner rather than later.

                  I am unconvinced that there is any way at this late date to provide a "soft landing." Is that right or just? Of course not. However, in my opinion, barring exceedingly unlikely events (e.g., the advent of world government and the abolition of private property) it is the inescapable consequence (and I mean that literally) of a great many really bad decisions over many years at every level of society. And no matter how desirable it might be to remove money from politics, even if enacted yesterday, such legislation would not change one whit our situation today.

                  •  Have no clue what you're talking about concerning (0+ / 0-)

                    Iceland.  And I live in Iceland.

                  •  Economics is very ideological. So is sociology, (1+ / 0-)
                    Recommended by:
                    left of center

                    polisci, anthropology and every other social science. Examine the history of these discplines. And economics has become not a way of studying human behavior, but rather as a tool for policy makers. Free market ideology dictates a certain policy path, Marxism another policy path. Economics, no matter how much certain economists would like to believe otherwise, is not a hard science.

                    Krugman and Stigletz both denounce the state of modern economic thinking as being too tied to the free market ideology. And very few economists have been as accurate as these two in forecasting the disaster we find ourselves in. Examine the role of the Black Scholes financial model on past disasters, like Long Term Capital Management. Lets face it, many economists suck at their jobs.

                    •  If it's all ideology (0+ / 0-)

                      there is no one who knows anything—which means that Krugman and Stigletz have to be ideologues as well. Too bad—ideologues are people who recast the facts to suit their beliefs.

                      I don't really know what they forecast when, but I know for sure that the relatively conservative magazine, one that advocates for free markets and free trade, The Economist, spent most of a decade discussing the potential for disaster in derivatives trading among the unwary, the housing bubble, and why what goes up must come down. So if Krugman, Stigletz, and the Economist can get to similar conclusions, it suggests that there might actually be something called a general study of economics whose truths are independent of dissimilar ideologies. Here's hoping

                      •  Well truth is not always objective in the social (0+ / 0-)

                        sciences. There is a big difference between reading a thermometer and reading a statistical survey of human activity. And even physics has an understanding that not everything is observable. The best model we have in physics is blindingly complex and uncertain.

                        There are a number of ways to study economics. One of them, a relatively new field, is to study the behavior of what people actually do. This is referred to as behavioral economics. It studies people's economic behavior with the understanding the people do not always make rational decisions.

                        Market economics on the other hand studies market behavior. And assumes that humans make rational economic decisions. This describes most economists. And most economists work for banks, investment houses, government, think tanks, etc. They are not involved in academic research.

                        Most social scientists work from a theoretical alignment that matches what they believe about the world. If you are interested in academia you have one perspective. If you are interested in making money you have another perspective.

                        Many mathematically talented engineering, economics, and physics graduates in the eighties until quite recently went to work for investment houses and hedge funds. They were interested in making some money. And for a while it worked. But they were in great part responsible for the collapse of the financial market. Look up Black Scholes and LTCM fro a good example of what theories can do tp a market place.

                        The first thing you learn in Anthropology 101 is that you have prejudices, you will never completely lose them, and you have to constantly question your prejudice as you do research. The same lessons are taught in most sociology and social psychology courses. It is called observer bias and can taint your results, Economics has the same problems but is often less inclined to recognize them.

              •  Bankers are going to jail.... (1+ / 0-)
                Recommended by:
                left of center

                In Ireland. Do not hold your breathe waiting for this to happen here through.

        •  Instead of giving the banks free money with (1+ / 0-)
          Recommended by:
          left of center

          no strings we should have used the TARP funds to buy out the banks, fire their executives and restore glass steagal. Then we would have a banking system with a different set of values, priorities, and incentives.

      •  Isn't Iceland doing pretty well? (2+ / 0-)
        Recommended by:
        Jim Domenico, FarWestGirl

        And didn't they nationalize the banks?

        Force is the midwife of every old society pregnant with a new one. Marx

        by Marihilda on Wed Jul 25, 2012 at 09:16:15 AM PDT

        [ Parent ]

        •  Sort of, and no. (2+ / 0-)
          Recommended by:
          hmi, FarWestGirl

          Iceland is recovering faster than most of Europe.  But it also fell a lot further, sooner, so it'd be hard for that not to be the case.  Iceland is a small fraction of its former economic strength.  The currency being cut in half means people have half the buying power they used to; it's like having salaries dramatically slashed.  On top of this you add in the decline in home values, compounded by the crazy foreign-currency mortgage disaster that was only partly undone, the complete collapse of the Icelandic stock market and the loss of values of all króna-indexed savings, etc, plus ~30% austerity, and well...   Oh, and we're still being sued in the EFTA, after taking on debt to pump money into the banks to restructure them so that they could be worth enough to sell off enough assets to pay off their debt obligations.  Thanks a bunch, UK and Netherlands.  :Þ

          No, the banks were not nationalized, any more than the US auto industry was - that is, they went into receivership, the government poured in a bunch of money and then got a stake, which they're working to sell off.  They're still private companies.

          •  Iceland is not part of the EU and not subject (0+ / 0-)

            to EU financial regulation. So Iceland had freedom to move that the EU nations do not have.

            •  Could you be more specific? (0+ / 0-)

              What "financial regulation" are you talking about?  It was Iceland's lack of financial regulation that caused this mess in the first place.  And if you mean "freedom to move" as in "freedom to have the currency collapse", that was devastating for people here.  It only sounds painless to people outside the country who don't have to deal with it.  It hits ordinary people, hard, like a massive across-the-board salary cut.

              •  Iceland was able to force foreign investors (0+ / 0-)

                to completely eat their losses. The Icelandic banks ran a series of investments paying high interests rates that were quite attractive to outsiders. But unlike other countries, like Ireland when these investments failed the government did not guarantee all the investors. If you were not in Iceland you lost everything you invested. Various governments tried to get Iceland to backstop these investors, like the British government. But because Iceland was not in the EU nothing could be done to protect these investors. the government of Iceland held a referendum to decide the issue and the people voted to not recompense any of the foreign investors.

                That is what I meant by "freedom to maneuver".

                •  False (0+ / 0-)
                  Iceland was able to force foreign investors to completely eat their losses
                  False.  Icesave was first off a program largely for retirement accounts and municipal accounts, not institutional investors.  Secondly, they were quickly bailed out by tbe British and Dutch governments.  And third, even said governments are getting paid back.

                  Please stop spreading myths about Iceland.

              •  Yes you guys are hurting but in Ireland we are (0+ / 0-)

                hurting also. And our government decided foolishly to guarentee the banks at the cost to the taxpayers. Ireland had a balanced budget before the financial collapse. It would have a balanced budget now if not for the financial collapse. Iceland did not issue a blanket guarantee the way that Ireland did. And that was a smart move. Iceland is on the way back. And hopefully so is Ireland. But we will be paying for this mess for a long time.

                Iceland's economic policy is not being dictated to by the British and the Germans. There is much to be said for not depending on others financially.

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