Friday, October 3. 2008
Haven't had time to surf much less blog, and picked an inopportune time to do so, given that we're witnessing something like the collapse of the capitalist system. The following are some pieces that piqued my interest, although they're becoming eclipsed by events almost as fast as they're filed. I'm sure there's much more of interest, but I haven't had time to dig, and ultimately decided I should post this now because I'm traveling tomorrow and prospects of adding to it are slim and slimmer.
As of this writing, the bailout bill has been passed by Congress and signed into law by Bush. Paulson got his $700 billion, but not as free a hand as he wanted. I can't say that there's no good reason to help the bankers, but they're hardly the only ones in need, and I also don't blame anyone who feels resentful that only when bankers bully their way to the front of the soup line. Unfortunately, the US has delegated so much of its financial infrastructure to the private sector that their failure can extend way beyond their own limited liability corporate interests. A better solution might be to shore up public sector finances while letting the nonproductive bubbles deflate, but we haven't covered that conceptual distance yet. I'm not a person who holds any hope for revolution, so I can't take any joy in watching the capitalist system collapse. But at least some lessons should be obvious from this debacle, starting with the fact that the push to deregulate and the Reaganesque glorification of greed should by now be completely discredited. (This, by the way, pretty much explains the Republicans who fought the bailout bill: its passage acknowledges the failure of the Reagan Revolution, as such their only excuse for hanging on to power. Having committed themselves so thoroughly to myth, they have little choice now but to stick their heads so snugly up their arses that they lose all sense of reality.)
On the other hand, I've never bought into the Reagan myth. Even at the time I frequently argued that the only boom industry left in 1980s America was fraud. What we saw through a series of asset bubbles was a gross inflation of increasingly imaginary values. In some ways this just looked like old-fashioned rich-get-richer, but it became increasingly rarefied as more money broke loose to chase its own tail. In reality, the chasm widened less than both sides thought, not least becuase the rich wound up holding bags of debt from the increasingly impoverished poor: default on that debt, which we are seeing primarily in the mortgage area right now, is one way of settling the books. But there's a lot more of that in the pipeline -- credit card debt is an obvious case -- so I expect a lot more leveling in the future, even with bailouts for the politically well-connected.
Paul Krugman: Financial Russian Roulette [09-14]. Published 9/14, 14 days ago (and then some), ancient history, at least far enough back that the Paulson bailout plan was still just a future possibility. Reasons to be nervous, part 1.
Final sentence: "Yikes."
Paul Krugman: Cash for Trash [09-22]. More on the bailout plan. Sketches out a four-stage analysis of the crisis. Notes that this only deals with the fourth stage, and that even so it only promises to help things (err, bankers' bottom lines) if the taxpayers significantly overpay for the finance industry's toxic waste. Krugman isn't opposed so much as he feels that any such bailout should be in exchange for equity. Otherwise, the people who caused this problem would simply be imdemnified against their own recklessness.
Krugman's blog has been a good source on this period. He accepts the need to do something like the bailout, largely because he fears the consequences of not acting, but he doesn't like the details of Paulson's proposal, and the whole thing is getting to him. One later post [08-02] he commented that "Joe Stiglitz seems to have the same view on the bailout I have: lousy plan, better to pass it tomorrow than not." More emotionally but less concisely, on [08-01] he put it this way: "So am I for the bill? Yuk, phooey, I guess so. And I'm very angry at Paulson for putting us in this position."
Billmon: Things Become More Serious [09-22]. Not sure who Billmon is, but he claim in everyday life to be some sort of financial writer, and he's got this covered pretty well.
Andrew Leonard: A cry of rage from Wall Street [09-26]. Via Andrew Sullivan, quotes a "distraught e-mail from a money manager":
The Republicans are good at arguing that problems are matters of individual responsibility, not something the public should worry over or bother about. This line is comforting to people who don't actually share the problem. Unfortunately for the Republicans, people who find themselves beset by problems, especially those who can't identify the flaw of personal responsibility, start to lose faith with the doctrine. That's been happening steadily over the last decade, but in small and unobvious dribs and drabs.
James K Galbraith: How Much Will It Cost and Will It Come Soon Enough? [09-29]. Comments favoring passage of the Paulson-Pelosi deal, with reservations and sensible alternative ideas, starting with getting rid of the FDIC cap, which would provide an insured haven for cautious investors, and would help shore up consumer banks.
Glen Greenwald: Bailout follows the 10 normal principles for how our government functions [09-29]. Examples (first line quotes for each of the principles):
Andrew Leonard: Byron Dorgan's warning about risk [10-02]. Quotes Senator Dorgan (D-ND) from nine years ago, when he opposed the Phil Gramm-led repeal of Glass-Steagall's separation of commercial and investment banking. He said: "I think we will look back in ten years and say we should not have done this." Didn't even take ten years. Neither did the S&L deregulation -- the cleanup of which was only ten years earlier.
Leonard has also been superb throughout the crisis. His column is called "How the World Works," which he has a pretty good grasp on, giving him a big leg up on almost everyone else trying to catch up.
Update: Found this in the scratch file, never posted, don't know how old it is, but it seemed to fit in here:
Tom Engelhardt: The Fate of the Bear Market. Or, "The Little Administration That Couldn't." A quick rundown of the ongoing train wreck known as the Bush Administration. A few years back I figured this would be the theme of my book. Even then it was clear that nothing Bush did would work, and that everything they touched would have to be cleaned up and rebuilt by whoever came along after then -- assuming by then we hadn't lost all sense of living standards. My little value added was to be the aperçu that the disaster wasn't just a matter of incompetency, which was much in evidence, but was deeply engrained in their very mode and manner of thinking. That's still true, but even that's becoming a commonplace observance.