Bernanke says the problem at the heart of our recent economic problems was lack of regulation, not (heaven forfend!) Fed monetary policy. Interest rates, he says, were not too low.
Perhaps it wasn't interest rates — and, certainly, I'm not one to argue against greater regulation. The problem is that the financial instruments that brought on the crisis could not have been regulated because nobody knew what the hell they consisted of, or what they conceivably might have been worth. It's pretty clear that the ratings agencies that gave those instruments their AAA ratings didn't have a clue.
In other words, the crisis arose from a straightforward case of market failure, based on lack of information, and what really is needed is vastly more transparency. All securities should be sold on public exchanges, so that all buyers know what others are paying. Buyers should be fully informed of the content of the tranches of securitized debt they purchase, and not have to depend on the seller's optimistic evaluations of risk and reward. When banks hold such vehicles on their books, they should be valued according to real market prices, not imaginary projections of what they might be worth some day — and all of a bank's holdings should be on the books, not hidden away in SIVs.
If a regulator — the Fed, or anybody else — is going to make sure that banks no longer can become so grossly overleveraged that they threaten the world's financial structure, it is necessary to know all about their assets and liabilities. Secrecy (and creative bookkeeping) made the recent crisis possible, and only openness can prevent it from happening again.
And what can we expect from Congress?
My prediction: a little lip service to consumer protection, and a lot of kissing Wall Street's ass.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Tuesday, January 5, 2010
Monday, December 28, 2009
The Naughts
Everybody seems to agree that the past decade has been pretty crappy. Some like to blame the Bush administration, but I don't. Granted, Bush and his cronies were incompetent and corrupt, but they were just the culmination (I hope) of a process that started with Reagan in 1981.
How anybody ever managed to believe in supply-side economics and monetarism is beyond me, but when you consider how many people believe the world is less than 6,000 years old, I guess making the jump to supply-side is not that difficult. Anyway, I don't think that political leaders ever bothered to believe any economic theory at all. Starting with Reagan, they were just corporatists — dancing at the ends of strings in the hands of lobbyists and bankers.
The result is our current plutocracy — a system that neither the Obama administration nor any significant portion of Congress seems at all inclined to unwind. The fact that the events of the past 10 years have demonstrated, over and over, that the "magic of the market" is entirely mythical makes no difference to those in power. They feel obliged to keep spouting the same anti-regulatory, anti-tax nonsense — and for good reason.
They're bought and paid for.
Don't expect much to change. Health reform won't be allowed to infringe on the profit margins of hospitals, insurance companies, or pharmaceutical manufacturers. If our troops ever are withdrawn from Afghanistan (or even Iraq), there will be new places to invade for the benefit of military contractors. Somewhere on Wall Street, the next bubble is taking shape, and nothing will be done to break up the banks that are "too big to fail."
I'm guessing the "naughts" will go on a while longer. There's nothing in sight to bring them to an end.
How anybody ever managed to believe in supply-side economics and monetarism is beyond me, but when you consider how many people believe the world is less than 6,000 years old, I guess making the jump to supply-side is not that difficult. Anyway, I don't think that political leaders ever bothered to believe any economic theory at all. Starting with Reagan, they were just corporatists — dancing at the ends of strings in the hands of lobbyists and bankers.
The result is our current plutocracy — a system that neither the Obama administration nor any significant portion of Congress seems at all inclined to unwind. The fact that the events of the past 10 years have demonstrated, over and over, that the "magic of the market" is entirely mythical makes no difference to those in power. They feel obliged to keep spouting the same anti-regulatory, anti-tax nonsense — and for good reason.
They're bought and paid for.
Don't expect much to change. Health reform won't be allowed to infringe on the profit margins of hospitals, insurance companies, or pharmaceutical manufacturers. If our troops ever are withdrawn from Afghanistan (or even Iraq), there will be new places to invade for the benefit of military contractors. Somewhere on Wall Street, the next bubble is taking shape, and nothing will be done to break up the banks that are "too big to fail."
I'm guessing the "naughts" will go on a while longer. There's nothing in sight to bring them to an end.
Friday, August 29, 2008
Nailed it!
Obama's acceptance speech, in my opinion, was as perfect as it could have been -- hell, even the introductory video was extraordinary. If any significant portion of the American public was watching, it should re-open some space between Obama and McCain.
Obama succinctly countered the Republican line about how he would raise taxes on the middle class, and he delivered a solidly populist economic message. McCain, in Obama's construction, is a well-intentioned patriot, admirable in many ways, who just happens to be wrong about virtually everything.
Obama went on to deftly skirt the social issues so important to the religious right, pussyfooting around same-sex marriage and abortion. Gays, for example, should never be restrained from visiting their loved ones in the hospital. Hooray. Women should have access to family planning services, so they don't need so many abortions. (Yes, polling shows that American Catholics are okay with birth control these days.) For me, this was the weakest section of the speech, but it was over in under a minute.
I'm sure the Republican convention will be brilliantly choreographed, but clearly, McCain will never rise to Obama's standard of oratory. Prepare yourself for what may be hours of videos.
(Tangential reference #1: So, today was the anniversary of MLK's "I have a dream" speech. I was there, at the march on Washington, but not close enough to the podium to actually hear the speech -- it was very hot, I'd had a few beers, and I was probably wading in the reflecting pool at the time. The people around me were splashing, conversing, and playing their ubiquitous guitars, and the scheduled speakers were just a crackling electronic noise in the background with an occasional chorus of "We Shall Overcome." There were a lot of us on the periphery of history that day -- I wonder how many now believe they actually heard King's speech.)
(Tangential reference #2: Why did they decide not to mention Lyndon Johnson's 100th birthday yesterday? He contributed at least as much to Obama's current ascendence as MLK. Oh, yeah -- Hillary got in trouble for mentioning that a little while back.)
(Very tangential reference: Vladimir Putin, who we understand is not to be trusted, says the Georgians who killed his "peacekeepers" included somebody in possession of an American passport. He suggests that the Georgian incursion into South Ossetia was an attempt to bait Russia in order to gain advantage for "one of the parties" in the current American election. If Putin's claim, by some odd chance, is true, it's not hard to guess which of the parties that would have been -- and they can't be trusted any more than Putin. I guess we'll never actually know the truth.)
Obama succinctly countered the Republican line about how he would raise taxes on the middle class, and he delivered a solidly populist economic message. McCain, in Obama's construction, is a well-intentioned patriot, admirable in many ways, who just happens to be wrong about virtually everything.
Obama went on to deftly skirt the social issues so important to the religious right, pussyfooting around same-sex marriage and abortion. Gays, for example, should never be restrained from visiting their loved ones in the hospital. Hooray. Women should have access to family planning services, so they don't need so many abortions. (Yes, polling shows that American Catholics are okay with birth control these days.) For me, this was the weakest section of the speech, but it was over in under a minute.
I'm sure the Republican convention will be brilliantly choreographed, but clearly, McCain will never rise to Obama's standard of oratory. Prepare yourself for what may be hours of videos.
(Tangential reference #1: So, today was the anniversary of MLK's "I have a dream" speech. I was there, at the march on Washington, but not close enough to the podium to actually hear the speech -- it was very hot, I'd had a few beers, and I was probably wading in the reflecting pool at the time. The people around me were splashing, conversing, and playing their ubiquitous guitars, and the scheduled speakers were just a crackling electronic noise in the background with an occasional chorus of "We Shall Overcome." There were a lot of us on the periphery of history that day -- I wonder how many now believe they actually heard King's speech.)
(Tangential reference #2: Why did they decide not to mention Lyndon Johnson's 100th birthday yesterday? He contributed at least as much to Obama's current ascendence as MLK. Oh, yeah -- Hillary got in trouble for mentioning that a little while back.)
(Very tangential reference: Vladimir Putin, who we understand is not to be trusted, says the Georgians who killed his "peacekeepers" included somebody in possession of an American passport. He suggests that the Georgian incursion into South Ossetia was an attempt to bait Russia in order to gain advantage for "one of the parties" in the current American election. If Putin's claim, by some odd chance, is true, it's not hard to guess which of the parties that would have been -- and they can't be trusted any more than Putin. I guess we'll never actually know the truth.)
Monday, August 25, 2008
Obamanomics?
Lately there's been a lot of pressure on Obama to stop dealing in airy-fairy generalities and visions of sugarplums and start laying out some specifics. Previously, I've observed tht every time he got specific about something (FISA, faith based initiatives, offshore drilling) I just got more and more pissed off.
Then, in yesterday's New York Times Magazine, I read David Leonhardt's article on Obama's approach to economics. If Leonhardt's take is accurate (and he's usually quite dependable), Obama might be more in line with my thinking than I previously suspected.
He certainly agrees that Reaganomics went entirely overboard in the area of deregulation, and that government needs to assert more control over the private sector (especially if government is expected to come to the rescue when it screws up.) His tax plan is designed to redistribute the wealth -- maybe not as fast or as far as an old pinko like me might like, but way beyond anything either Clinton proposed.
His proposed health care plan puts government into direct competition with private insurers, and counts on market forces to bring the private companies into line. Personally, I don't see why he thinks it's necessary to create a whole new agency when it would be so much easier to let employers and individuals buy into Medicare, but if he manages to get his plan past the hoards of lobbyists lined up against it, it will be an enormous step forward.
In short, I'm feeling encouraged -- but I'm wondering how much of the above will be clarified at the convention, starting later today. As little as I care to watch infomercials, I suppose I feel obligated to catch as much of it as I can stand -- although I wish the published schedule were more precise regarding time slots for various speakers and superfluous bullshit. I'm sure they have it planned out to the minute, if not the second -- but I guess admitting that would make the proceedings seem less [insert gagging sounds] "spontaneous."
Naturally, I'm pleased by the choice of Biden for the number two spot -- especially since I would have happily supported him in a run for the number one spot. I sincerely hope his role in an Obama administration will be equal to Cheney's role in the Bush administration -- just minus the evil.
On a totally different subject, and completely off-topic for this blog:
I'm with those college presidents -- by all means, lower the legal drinking age to 18. Young people old enough to die for their country in the military should be old enough to legally get liquored up before they head down to the recruiting office to enlist! If the MADD ladies are truly serious about reducing traffic fatalities, they should agitate to raise the driving age to twenty-one -- or maybe twenty-eight or thirty for males. Then again, a young person old enough to drive a tank through Baghdad probably should be allowed to drive a Chevy through Jersey City.
Seriously, though -- I'm old enough so that I was allowed to drink (and be drafted) at 18, but couldn't vote until I was 21. From what I recall of the time the laws were changed, the traffic fatalities were greater in the states that limited boozing to 21-year-olds than in the states with lower age restrictions. The reason was that the youth from the former states were driving long distances to the latter states to get drunk, and then crashing their cars on the way home. It wasn't raising the drinking age that made the difference, it was making it uniform across state lines.
Then, in yesterday's New York Times Magazine, I read David Leonhardt's article on Obama's approach to economics. If Leonhardt's take is accurate (and he's usually quite dependable), Obama might be more in line with my thinking than I previously suspected.
He certainly agrees that Reaganomics went entirely overboard in the area of deregulation, and that government needs to assert more control over the private sector (especially if government is expected to come to the rescue when it screws up.) His tax plan is designed to redistribute the wealth -- maybe not as fast or as far as an old pinko like me might like, but way beyond anything either Clinton proposed.
His proposed health care plan puts government into direct competition with private insurers, and counts on market forces to bring the private companies into line. Personally, I don't see why he thinks it's necessary to create a whole new agency when it would be so much easier to let employers and individuals buy into Medicare, but if he manages to get his plan past the hoards of lobbyists lined up against it, it will be an enormous step forward.
In short, I'm feeling encouraged -- but I'm wondering how much of the above will be clarified at the convention, starting later today. As little as I care to watch infomercials, I suppose I feel obligated to catch as much of it as I can stand -- although I wish the published schedule were more precise regarding time slots for various speakers and superfluous bullshit. I'm sure they have it planned out to the minute, if not the second -- but I guess admitting that would make the proceedings seem less [insert gagging sounds] "spontaneous."
Naturally, I'm pleased by the choice of Biden for the number two spot -- especially since I would have happily supported him in a run for the number one spot. I sincerely hope his role in an Obama administration will be equal to Cheney's role in the Bush administration -- just minus the evil.
On a totally different subject, and completely off-topic for this blog:
I'm with those college presidents -- by all means, lower the legal drinking age to 18. Young people old enough to die for their country in the military should be old enough to legally get liquored up before they head down to the recruiting office to enlist! If the MADD ladies are truly serious about reducing traffic fatalities, they should agitate to raise the driving age to twenty-one -- or maybe twenty-eight or thirty for males. Then again, a young person old enough to drive a tank through Baghdad probably should be allowed to drive a Chevy through Jersey City.
Seriously, though -- I'm old enough so that I was allowed to drink (and be drafted) at 18, but couldn't vote until I was 21. From what I recall of the time the laws were changed, the traffic fatalities were greater in the states that limited boozing to 21-year-olds than in the states with lower age restrictions. The reason was that the youth from the former states were driving long distances to the latter states to get drunk, and then crashing their cars on the way home. It wasn't raising the drinking age that made the difference, it was making it uniform across state lines.
Saturday, May 31, 2008
To Barack Obama from an old white guy
A little while ago, I posted the video you can watch above to YouTube, as a response to a video from the Obama campaign which you can watch here. If you don't find my video in the "video responses" section, it means the Obama campaign didn't "accept" it -- that is, decided they'd rather not have it associated with their video.
If you didn't have the patience to listen to me go on for close to ten minutes, here's the gist of it -- I tell Obama that what I really want him to do is undo the Reagan Revolution. I tell him he should significantly raise taxation of the very rich, re-regulate a lot of what's been deregulated over the past quarter-century, and run a government that's actively pro-union. Beyond that, I want him to put government workers back on the payroll to do most of the work that's been contracted out, and I assert that the Iraq War was started specifically so the private sector could loot the Treasury.
Yes, it's one of my usual diatribes, and if it actually appears on YouTube as a response to Obama's video, I'll be flabbergasted -- but there's at least a chance that somebody in the Obama campaign will have looked at it.
The truth is that I don't expect Obama could accomplish what I think needs accomplishment even if he wanted to. The biggest problem I see with an Obama presidency has nothing to do with Obama. Rather, it has to do with the fractious nature of the Democratic Party. Will Democrats in Congress unite behind Obama if he wins? I'm guessing they'll give him all the stunning support they gave, say, Jimmy Carter. Thanks in part to Clinton pulling the party to the right, there are quite a few powerful Democrats who are quite conservative -- and the fact that Congress becomes more and more of a millionaire's club with each election cycle won't much help either.
By the way, I tried to make the video more visually interesting than just my talking head by adding a bunch of stills and animations, some of which are moderately amusing. If you haven't watched it yet, please give it a try.
Tuesday, April 1, 2008
Milton Friedman is dead...
...and it actually may be, at long last, time to bury him.
This recession will be around for a while. Badly burned by its criminally lax lending practices in recent years, the financial services industry is making credit hard to get, for both individuals and businesses. Giving investment banks access to the discount window may help a little, but the simple fact is that those who make policy for the industry have had a bad scare, and are likely to be overcautious for quite a while. Individual and institutional investors have seen their net worth nosedive, and some who might have been willing to take a few chances have their "liquid" assets tied up in auction-rate securities.
Consumer confidence has crashed, and shows no sign of picking up again. Combine that with the very high debt loads of so many families, and it becomes clear that America won't be spending itself out of recession any time soon. Small businesses that can't get the credit they need are failing, and larger businesses are cutting personnel. The picture is bleak.
I'm beginning to feel just a little bit optimistic.
Given the catastrophic consequences of the Bush binge of deregulation (and failure to exercise those regulatory powers that remain), the laissez-faire ideologues are struggling to hide the egg smeared all over their faces. Typically timid Democrats are starting to feel comfortable calling for government intervention in the economy -- an idea that would have brought waves of public mockery from all the "economic experts" just a year or two ago.
Treasury Secretary Henry Paulson has offered a plan for reforming our regulatory agencies. Needless to say, the plan of a Bush administration official and Wall Street insider wouldn't especially strengthen government's regulatory powers, but the very fact that he felt it was necessary to offer a plan is encouraging. The Paulson plan is recognition of the growing understanding that a failure to regulate was the cause of our current market failure.
Even though most Americans are economic illiterates, and have only the vaguest notion of what has gone wrong and what might be done about it, they know something is wrong. As the recession deepens, and the faces of TV commentators look more and more grim, America will become more and more receptive to populist appeals. If the Democrats have the guts to climb out from under the thumbs of their big contributors from the financial services industry (granted, a big if), they can start reconstructing the economic safeguards that were established during Roosevelt's New Deal and steadily eroded since the advent of "Reaganomics" in 1981.
It would help a lot, of course, if Clinton and Obama could start competing to see who can draw the most blood from John McCain rather than from each other. While a McCain presidency could make our economy so much worse that the eventual reaction to his neo-con policies would move America much further to the left, a genuine depression would be a heavy price to pay -- and we certainly can't afford to add any more rabid rightists to the Supreme Court.
Right now, we have the best opportunity in many years to restore the economic justice and stability we sacrificed for the sake of unrestricted economic growth. Now is the best time to begin narrowing the gap between the super-rich and the rest of us; create a climate favorable to organized labor; roll back the wave of overpriced, exploitative privatization.
Milton Friedman is dead, and now is our best chance to exorcise his ghost.
This recession will be around for a while. Badly burned by its criminally lax lending practices in recent years, the financial services industry is making credit hard to get, for both individuals and businesses. Giving investment banks access to the discount window may help a little, but the simple fact is that those who make policy for the industry have had a bad scare, and are likely to be overcautious for quite a while. Individual and institutional investors have seen their net worth nosedive, and some who might have been willing to take a few chances have their "liquid" assets tied up in auction-rate securities.
Consumer confidence has crashed, and shows no sign of picking up again. Combine that with the very high debt loads of so many families, and it becomes clear that America won't be spending itself out of recession any time soon. Small businesses that can't get the credit they need are failing, and larger businesses are cutting personnel. The picture is bleak.
I'm beginning to feel just a little bit optimistic.
Given the catastrophic consequences of the Bush binge of deregulation (and failure to exercise those regulatory powers that remain), the laissez-faire ideologues are struggling to hide the egg smeared all over their faces. Typically timid Democrats are starting to feel comfortable calling for government intervention in the economy -- an idea that would have brought waves of public mockery from all the "economic experts" just a year or two ago.
Treasury Secretary Henry Paulson has offered a plan for reforming our regulatory agencies. Needless to say, the plan of a Bush administration official and Wall Street insider wouldn't especially strengthen government's regulatory powers, but the very fact that he felt it was necessary to offer a plan is encouraging. The Paulson plan is recognition of the growing understanding that a failure to regulate was the cause of our current market failure.
Even though most Americans are economic illiterates, and have only the vaguest notion of what has gone wrong and what might be done about it, they know something is wrong. As the recession deepens, and the faces of TV commentators look more and more grim, America will become more and more receptive to populist appeals. If the Democrats have the guts to climb out from under the thumbs of their big contributors from the financial services industry (granted, a big if), they can start reconstructing the economic safeguards that were established during Roosevelt's New Deal and steadily eroded since the advent of "Reaganomics" in 1981.
It would help a lot, of course, if Clinton and Obama could start competing to see who can draw the most blood from John McCain rather than from each other. While a McCain presidency could make our economy so much worse that the eventual reaction to his neo-con policies would move America much further to the left, a genuine depression would be a heavy price to pay -- and we certainly can't afford to add any more rabid rightists to the Supreme Court.
Right now, we have the best opportunity in many years to restore the economic justice and stability we sacrificed for the sake of unrestricted economic growth. Now is the best time to begin narrowing the gap between the super-rich and the rest of us; create a climate favorable to organized labor; roll back the wave of overpriced, exploitative privatization.
Milton Friedman is dead, and now is our best chance to exorcise his ghost.
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