Whistling Past the Economic Graveyard: The Audacity of Misplaced Hope
Is it possible to have too much hope? To be too optimistic? Yes, if that hope keeps you from facing -- and dealing with -- unpleasant realities.
That seems to be what's happening regarding the financial institutions responsible for the economic meltdown.
Let's start with the banks' toxic assets. When Tim Geithner unveiled the Public Private Investment Program, he said that dealing with these assets was a "core" part of solving the financial crisis.
But the banks would much rather keep pretending that their toxic assets are not that toxic, and worth much more than they really are -- a risky charade the relaxed mark-to-market rules allow them to continue to pull off.
So, last week, the PPIP program was apparently scrapped. Does this mean that the toxic assets are no longer a "core" part of the problem? Or that hoping they're no longer part of the problem will somehow make them no longer part of the problem?
"Hope sustains life, but misplaced hope prolongs recessions." So says Jim Grant, publisher of the Grant's Interest Rate Observer newsletter, whom I interviewed last week on Squawk Box. Because of misplaced hope, Grant says, business people, homeowners -- and administrations -- often refuse to admit the truth and take the painful steps necessary to turn things around.
On Wednesday, President Obama will lay out the details of his administration's plan to remake the financial regulatory system. Geithner and Larry Summers offered a sneak peak at the plan in an op-ed in today's Washington Post, proclaiming, "we must begin today to build the foundation for a stronger and safer system."
Among the proposals: "raising capital and liquidity requirements for all institutions"; "consolidated supervision by the Federal Reserve"; "robust reporting requirements on the issuers of asset-backed securities" including "strong oversight of 'over the counter' derivatives"; and providing "a stronger framework for consumer and investor protection across the board."
The devil, of course, will be in the details. And on how much muscle Obama puts behind pushing these measures through and ensuring they become law without being watered down. Especially at a time when the latest stock market bubble has undermined the urgent push for reform, which seems to have given way to a push to move on to other things and leave that little financial kerfuffle behind us.
And investors seem anxious to do the same. Witness the "fierce rally" in the collateralized loan obligation market. CLOs are made up of sliced and diced assets (including high-risk and junk loans) -- and are kissing cousins to the collateralized-debt obligations (i.e. crap) at the heart of the financial meltdown. But according to analysts at Morgan Stanley there has recently been a "remarkable change" in investor sentiment towards these securities, including an "exuberance" for the lowest grade junk being sold.
In other words, we are right back to risky business as usual. No harm, no foul. Let's get back to the fun we were having before this whole worldwide economic collapse thing started happening.
It puts a whole other spin on the audacity of hope.
Too many in Washington -- and in the media continue to take the well-being of Wall Street as the proper gauge for the well-being of the rest of America. Yes, the Dow is up 33 percent since March. But another 345,000 jobs were lost in May, raising the number of the unemployed to 14.5 million, and the unemployment rate to 9.4 percent. Since the start of the recession in December 2007, unemployment has almost doubled.
What's more, as this chart shows, over the past two decades, the top one percent of Americans has done very well in terms of wage growth. Things have not been nearly as good for everybody else.
Are the reforms going to be sufficiently fundamental to avoid a repeat of the boom and bust cycles, in which only a select few enjoy the boom and everybody else pays for the bust?
Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff
We've now reached the point where the only people defending the administration's Wall Street policies are the people benefiting from them -- or their good friends, Tim Geithner and Larry Summers.
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I was motivated to send the below questions to an article I saw on the supreme court posted on Swamp politics.
http://www.swamppolitics.com/news/politics/blog/2009/06/supreme_court_voting_rights_ac.html
My questions:
Do white men have the legal ability to determine if minorities and women have or can keep the right to vote? Could the supreme court rule the voting rights act illegal, therefore eliminating the right to vote for the majority of Americans? If the court ruled against the right to vote for minorities would it mean our president could not vote in the next election? When the country is half minorities in 25 yrs will 25% of the population (white males) technically have the right to strip them of their right to vote? How can minorities say it is their country if their right to vote is conditional? Would white males fight and die for the country if their votes were conditional based on some minorities and how they felt?
Why should women and minorities care about Iranian's democracy problems if 70% of Americans cannot vote in the USA if a minority votes to repeal the voting rights act?
Business and the rich have made us all fall in love with money. We have to have it, it's the new drug that has us all HIGH. If you don't believe me ask the DEA. Living simply and living within our means is no longer what we want. We want to live more comfortably than necessary and we think the best schools will land us and our children the best jobs...only the very best for Americans. What ever happened to good being good enough? We are overcome by excess and in many cases greed. We don't have time to say good morning or check on our neighbor because of the drug...money! Money has made living difficult and people callous. Maybe if we stopped worshipping money, then money can fulfill its intended use... Just a thought..
The goal is not to make sure this kind of thing never happens again. The goal is to get Wall St. back to the wheeler dealer days as quickly as possible.
yes the government is spending trillions to re-establish the old bubbles..hoping that somehow they can avoid the same end results or maybe they can hold off the next explosion until after 2012
The truth is that wages have not grown sufficiently in the past 10-15 years to support the American lifestyle... a modest house, car, college tuition, health benefits and a retirement fund
Who can afford a 20K car, 150K house, daycare and 10-20K/yr college tuition, plus sock away 1000K for retirement while making 50K per year salary? That is even tough for a 75K-100K household
it is simple mathematics
Yes, the deficit is outrageous. But ... I don't remember alot of criticism when the gov. bailed out
Chrysler in the 90's. It came back without all employees losing their jobs. The gov. was repaid with interest. The financial institutions are already starting to pay back their bail out monies. GM will sink or swim, but a significant percentage of the employees retained their jobs along with the related businesses being able to stay open for the time being until they try to sort it all out. Things aren't like they were 20 years ago. If a business failed then, there were industries that could accomodate the people looking for work. Thanks to the trade agreements, most of the US industry went off shore because of cheaper labor & not having to pay benefits.
Let's give this President the respect his office deserves, some patience to allow his efforts to work (he advised at the time that it would take a year or two for the stimulus to take full effect), and give him credit for the EFFORT, which is more than we can say for the last Administration.
It doesn't make sense to consider the US system of health care to care about our health. Congress just bought $80 billion worth of drugs from the petro-chemical-pharmaceutical monopolies. Hey, the insurance companies are getting their cut too.
We need socialism for the poor, but the corporates make money off drug addicted America.
And the red tape is too big to get rid of, because the drug makers and insurance peddlers won't make easy money for their short term fix. Besides the private corporations will have to fire worthless paper shufflersif we create an efficient and just health system for everyone.
Would that be the same one that sold pills to Canada for 3cents each, that we wanted to buy back for a dime each?
I believe that Obama himself is a good man with a good heart and a smart mind, but I also think he didn't quite know what he was getting into with the monied investors and power brokers. I'm hoping that Obama does eventually bring real change to America in as much as that is possible for him to do. Things can change, but we can't rely on Obama alone to change things. We have to do our part in creating the new Economy beyond money, as money is not a sufficient reason to do or not do anything, and since we are making it up anyway, we might as well make it up in a way that helps everyone live better, if not just survive. We are going to continue to hope that the leaders assist us in creating the necessary changes for our nation to continue existing in the long-term, while we are doing what we can to create the conditions on the ground that will allow America to flourish.
Is this what is happening? Source: A Friend on MarketWatch!
1. We have companies and industries that cannot be managed by democratic institutions as presently constructed.
2. We cannot discipline Wall Street because we are afraid of damaging the growth-based Ponzi system that generated wealth for ITS betting participants.
3. We cannot balance our budget because we need debt to get back to growth, for without economic growth we cannot have the materialism to which we are addicted.
4. We cannot maintain good health as a nation because we habitually seek to gratify our senses, regardless of the costs. We cannot even afford to die because we’ve invested ourselves in selfish pursuits rather than positive achievements.
When a nation can no longer afford to fix its problems it pursues Gimmick Solutions until the gig is up.
Well the "GIG is UP" and someone better tell Geithner and Summers! They are taking Obama down the same UNPRODUCTIVE PATH to NON-WEALTH BUILDING GREED!
Time for DIRECT INFUSION of CASH and CREDIT into REAL MAIN STREET Wealth Producing Industries and Jobs!
Time to remove the DEBT GENERATING FED Reserve System that has taken America from the #1 Creditor Nation to the #1 Debtor Nation! Jackson, Lincoln, Kennedy, and even Wilson (in retrospect) saw the danger of the Bankster run FED!
Gambling (derivitives) and Usury (Excessive) are supporting Power, Control, Ego, and GREED. Now we have a return of Debit Accounts of the 30's. We can buy Super Market Debit Cards in Church. They get a percentage, Is this a private currency system, the card is cash? We are now able to pay in advance for Tolls and Transportation. Strangers have our money and pay nothing for it. Great system
My God Bush had 8 years to screw things up, and Obama have not been in office 8 months and yet some are worse on him than they were on Bush. It seems like a lot of Dems are more critical towards the President than Repubs.
God Bless His people!
God Bless our country!
Yes all Bush's fault, not the Democrats in the House at all. I have to give huge credit to Arianna, she has been a fairly lone voice (on the left) on little Timmy's troubles the whole time.
In Harpers july, 2009 issue Devin Baker's essay "Barach Hoover Obama" provides more evidence for Arianna's conclusions.
Arianna please write about the return of the Parthenon marbles!
Nice... Parthenon point.
The green-shoots may lead to green-jobs but unfortunately your green-back is already on
the green-mile.
Americans are intimidated by the Wall Street "MAGIC TRICKS" and the power of the Banking ELITES!
So they go about their daily routine knowing deep in their hearts that "things are terribly wrong" but saying
"what can I do? Nothing!"
To counter this complacency and intimidation we all must continue to make what Wall Street did MORE CLEAR and LESS INTIMIDATING!
That means making the people on Wall Street more like us, they have to put their shoes on one at a time just like us. They eat, sleep, work, live in houses, and other than their ill-gotten LOOT are exactly like all Americans! They simply live in an evolved Culture of GREED and TRICKERY but other than that have NO Special Capabilities other than what we allow them to have!
It is time for a FACE OFF between us and them!
Also lets make everything about these PEOPLE well known and therefore Demystified! We must not accept their "pecking order" TRICKS or we all lose! The idea the IVY League, Wall Street, and Banking represent a privileged Class must NOT Stand or they will NOT be making 400 times what the average worker makes but 4,000 times in ten years!
Arianna, many of us worked hard to get this administration installed and it certainly is a welcome change from the dark reaches of Bush / Cheney; however daddy Bush I would've been a welcome respite, even Nixon or Reagan did not thread in rarified outlands of Bush / Cheney - frankly being better that the last administration is no great feat.
What we are witnessing from Obama is a very dangerous dalliance with the same ol’ same ol’. Yes, we have retreated from the craziness however we have made extremely little progress towards the promised change.
So the markets are revving their engines and the crap is still being traded – this is neither moderation nor pragmatism; it is sheer insanity and no good will come of it.
Without a majority of voter support W set out to completely transform the nation and he did. With an overwhelming mandate of the people Obama seems to be engaged in maintaining the status quo.
The Democratic Party is paving the road for the creation of a new progressive organization that will heed the will of the people and bring about the change we desperately need.
If Obama is doing this in order to not antagonize the opposition, he is gravely mistaken. Fox news and the right wing propaganda machine has already labeled Obama a traitor hell bent on destroying the nation. Obama could profit from the understanding that “Your friends do not need an explanation; your enemies will never accept one if
Part 2: The rest is easy math. Now why in God's creation any 900 top economists can't see these elements contributing to the collapse, I can only point to the fact that they never set feet on Main Street America to observe the forces at work in real time. They relied on dated economic models and for a truth still do. So they CAN'T find solutions. It's not possible. And to be honest, Obama needed Alvin Toffler a whole lot more than Geithner or Summers to get a fix on what to do about the mess, because Toffler predicted these changing times decades ago in his books. Aside from that, how is it that corporate America couldn't figure out that turning traitor and betraying the American worker by outsourcing EVERYTHING POSSIBLE would come back to bite them in the bottom line? The largest consumer economy in the world is that because of its workers. DUH!!!!!!! So from my perspective, from the Internet Bubble pop of the late nineties to the housing bubble collapse of 2007-8-9, what I see is the failure of the educational system, Congress, economists, the Federal Reserve, The SEC, the investment bankers, the mega-bankers and a whole host of others who for decades collected our tax dollars, or deposits and our investments with not a clue about how to REALLY run profitable and sustainable business models They should be rounded up to a person and sent to Siberia. Every single one of them.
Unfortunately, many of these people are not taking responsiblity for their actions and would NEVER admit to having been wrong. Are bank rating companies being regulated or restricted for their complete ethical breakdowns? No. Have corporations quit outsourcing american jobs? No. In fact, many former GM jobs are going to China and Mexico with President Obamas blessing. Have banking CEO's taken paycuts or changed their behaviors for their malfeasance? Has President Obama asked for actual systemic changes to the financial system? Well, I think his promotion of the Federal Reserve - our central bank to have even more responsibilites answers that question.
WE needed a real leader and didn't get it.
Okay...tell us exactly how you would handle the problems.
Blind optimism is just as dangerous as any other overly exaggerated feeling, desire, or emotion.
Moreover, when it's being marketed so heavily, as 'Hope' was during the election, and then passed off as true, and right, and will-happen. Sadly, Obama's tenure, thus far, has been a lot of bark, without much bite... along with some truly horrible decisions made during his 5 months. Those were not what my vote was cast for.
But, I contend that our 'system' is broke beyond repair in any case, so does that leave any room for Hope? Indeed it does. I Hope for a complete reboot of the political and economic system(s) in throwing out the bathwater (almost all currently elected officials, and most CEO's from large corporations) but keeping the baby (the constitution and the bill of rights) and starting from scratch.
No more fiat currency (bye bye Fed), no more elitist, holier-than-thou nonsense from the fat-cat club, no more Capitalism run amok at the expense of EVERYONE besides 0.5% of the population, and no more glow-in-the-dark democracy, that's become so turned on its head that it's now just a hypocritical joke.
Boy, that's a lot to Hope for, and is probably, in the end, more blind optimism of my own flavor. Oh, and I also Hope for the grand return of, Common Sense. Oh Common Sense, where have you gone... you're country needs you.
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