There are three interesting stories--all interrelated and all concerning the administration's avoidance of people or news--simultaneously circulating around the MSM this evening. Taken together, they paint a picture of our nation's leadership engaged in the implementation of misdirected economic policies that may be summed as: a strategy that, lately, appears to go out of its way to obfuscate reality and simultaneously give short shrift to, arguably, the two greatest economic policy thinkers of our time, Nobel laureate economist Joseph Stiglitz and former Federal Reserve Board Chair Paul Volcker.
So, is ignoring Stiglitz, and Volcker, and reality a viable political strategy?
I don't think so. But, then again, it did work for George W. Bush for quite awhile...at least until it all blew up in his face.
JOSEPH STIGLITZ
In"Stiglitz Enabled Obama With Nobel Ideas to Scorn Them," tonight, we even have somewhat of hat tip going out to Daily Kos! But, at the same time, Stiglitz opens up his own can of whup-ass on Obama's economic point person, Larry Summers, once again.
Stiglitz Enabled Obama With Nobel Ideas to Scorn Them
By Matthew Benjamin
March 13 (Bloomberg) --
...Like fellow Nobel laureate Paul Krugman, who writes a column for the New York Times, Stiglitz has his own forum, contributing regularly to Vanity Fair magazine. His articles, with titles including "Capitalist Fools," are spread through the Internet via sites such as DemocraticUnderground.com and DailyKos.com.
As the article notes, there's been bad blood between the two since Larry Summers pushed for Stiglitz ouster when he was the head of the World Bank back in the late 90's.
...When Stiglitz last worked in Washington, as chief economist at the World Bank, he clashed with Summers at Treasury and with the lender's president, James Wolfensohn, by criticizing International Monetary Fund policies. Stiglitz said the IMF was hurting poor countries by demanding they cut budgets, raise interest rates and open capital markets.
When Stiglitz resigned from the bank in early 2000, his staff drew up a mock list of reasons for his departure. At the top: "Had Just Seen One Too Many Hot Summers in Washington." Another entry: "To Find a Vaccine for Foot-in-Mouth Disease.".
The article continues to note that Stiglitz has been very critical of Treasury Secretary Geithner's moves and lead economic advisor Summers' efforts to steer us out of our economic mess.
At one point a short while ago, the article mentions how Stiglitz referred to Secretary Geithner's ongoing TARP efforts as swapping taxpayers' "cash for trash."
The article also reminds us the several in the Obama administration, including budget director Peter Orszag, and Summers' deputy Jason Furman were mentored by Stiglitz.
Perhaps most interesting in this piece is the highlight where Stiglitz rips Summers' a new one:
It's "a real concern" that people such as Summers, "who have been openly on the side of deregulation," are back in positions of power, said Stiglitz. The presidential adviser helped secure passage of the 1999 Gramm-Leach-Bliley Act, which repealed longstanding banking regulations.
Perhaps two of Stiglitz' biggest fans in the current administration are Vice President Biden's chief economist, Jared Bernstein, and long-time Obama economics advisor Austan Goolsbie. The article mentions a comment by Bernstein:
"This is Joe's moment in time," said Jared Bernstein, chief economist for Vice President Joe Biden.
Bernstein, who calls himself a Stiglitz "disciple," said the economist "understood the tendency for markets to fail in ways that nobody else did. He was way ahead of the rest of us."
And, I actually received an email from none other than Austan Goolsbie--NOTE: folks, don't ever underestimate the power of your diaries!--this past Sunday (which I believe was in response to one or two of my diaries headlining his comments on unemployment last week), pointing me to this Newsweek article on the Nobel laureate from this past December: "Chasing Stiglitz." Subtitled: Obama's economic team is missing the one guy who's been right all along. Hey, if Mr. Goolsbie thinks I should revisit a December article on Joseph Stiglitz, maybe you should give it a few minutes, as well.
Looking two paragraphs up in this diary, Bernstein's comment is spot on, especially when you note a paragraph from the Newsweek piece brought to our attention by Goolsbie:
As far back as 1990, Stiglitz argued in a paper (it can be found on The Economist's Voice Web site at www.bepress.com) against securitizing mortgages and selling them because "when banks retained the mortgages which they issued, they had greater incentives to screen loan applicants." He asked, again with startling prescience: "Has securitization been a result of more efficient transactions technologies, or an unfounded reduction in concern about the importance of screening loan applicants?" None other than Milton Friedman, the founding father of the free-market era, told me in an interview before he died that Stiglitz also had been more correct than everyone else about how to transform Russia into a market economy when he argued that institution-building and creating regulatory authorities were an important preliminary step. "In the immediate aftermath of the fall of the Soviet Union, I kept being asked what the Russians should do," Friedman told me in 2002. "I said, 'Privatize, privatize, privatize. I was wrong. Joe was right. What we want is privatization, and the rule of law."
But, unfortunately, when it comes to making decisions about our country's direction with regard to our economy, it appears that Stiglitz' direct input is still missing in the middle of March.
PAUL VOLCKER
Also making the rounds tonight, originating from Bloomberg, we have: "Volcker Should Have `Real Authority' on Economy, Bradley Says."
Volcker Should Have `Real Authority' on Economy, Bradley Says
By Lorraine Woellert and Matthew Benjamin
March 13 (Bloomberg) -- Former Senator Bill Bradley urged President Barack Obama to grant former Federal Reserve Chairman Paul Volcker "real authority" as part of his economic team...
"...Larry Summers and Tim Geithner are great people, but a president needs to also have a balanced view from the outside," Bradley said during an interview on "Political Capital with Al Hunt" airing today on Bloomberg Television.
"The wise decision would be to invigorate that committee and give him real authority," Bradley said of Volcker. Obama would "have the best on the outside and the best on the inside."
But, up until today, at least, when Volcker did meet with President Obama and members of his economic team, the guy's had very little input into this process.
The article also makes a point of letting us know that:
Volcker also blamed Summers for slowing down the effort to organize the recovery advisory board. He has complained that Summers doesn't regularly invite Volcker to White House meetings and is unwilling to collaborate on policy ideas.
The article also reminds us that Volcker was vehemently against the (ultimately successful) repeal of the Glass-Steagall Act in 1999 (of which then Treasury Secretary Summers was an ardent supporter), which enabled commercial banks to get into the investment game.
Yes, it may be said that Volcker and Stiglitz are among the two most revered folks when it comes to the Progressive blogosphere. But, while their thoughts are placated by many in and around the White House now, some observers must be asking how much of Stiglitz' and Volcker's thinking is actually affecting the policy reality there?
REALITY
Just minutes after Volcker met with President Obama, Summers, and other members of the President's economic team, the answer to the question posed at the end of the previous paragraph would appear to be: Stiglitz' and Volcker's sentiments are having little or no bearing upon economic policy as it is being shaped and implemented by the White House now.
For all the lip service, it may be said that Stiglitz and Volcker are being all but ignored.
You see, despite the realities that:
--many economists are predicting that the housing market may not escape the depressed trough it's in now for anywhere from five to ten years, at best;
--most of our major banks are insolvent, despite claims over the last few days that Citi, BofA and Chase were "profitable" over the past two months (as long as you ignore the trillion dollars-plus in debt that they have yet to write down, not to mention the trillion dollars-plus that they're in the hole for, already);
--unemployment (that's the Bureau of Labor Statistics "U3" unemployment stats which are nothing short of fiction) may exceed 10% before year's end; and well over 20% in reality, based upon Austan Goolsbie's own analytics;
--the stock market has sold off at levels not seen since 1932;
--the other leading economies and debt holders in the world are now out-and-out questioning the financial stability and future of this country; and it's already impacting our plans (or at least our perceived ability) to sell government debt at record levels throughout the balance of 2009;
--the conventional wisdom is that the stock market is simply "bottom bouncing" in a "sucker's rally;"
--and plans are now being implemented to pour just about every last sent we can get our hands on--trillions more--into that black hole known as Wall Street, while every million dollars of Main Street's financial well-being is over-scrutinized and used as political fodder in what may be said is little more than a subordinated concern...
...then, according to his statements this afternoon, everything's just an emotional issue in our heads, according to Larry Summers, and it's all some intangible state-of-mind that's holding us back now: "Excess of fear' must be stopped, Summers says."
'Excess of fear' must be stopped, Summers says
MSNBC.com
WASHINGTON - First it was "an excess of greed." Now, it's an "excess of fear."
That's how the president's top economic adviser Larry Summers on Friday described the burden of worries about the shrinking jobs market, rising foreclosures and falling wages afflicting Americans. The cycle of fear must be broken, he said, before the recovery can begin.
"It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself," Summers said.
Official advice to consumers and business: 'Spend. Spend. Spend. The economy is just a frame of mind.'
"...What we need today is more optimism and more confidence," Summers said.
...He sidestepped a question on what the U.S. economy would look like in 10 years, saying he would follow the advice often given to economists who enter the government: "Name a number or name a date, but never name both."
Yes, Mr. Summers, it's all in our heads. Just ask the tens of millions of Americans that:
...don't have enough to eat
....that have just lost their homes to foreclosure
...that don't have a roof over their heads that they can count on
...that can't afford to go to school
...that can only wish for health insurance
...or, that have just lost their jobs.
Tell us about our reality, Mr. Summers.
Whisper sweet nothings in our ears and make it go away.