How Do You Make a DC Intellectual Look Less Articulate Than Sarah Palin Being Interviewed by Katie Couric?
That's easy. You ask them how failure to pass the bailout will give us a Great Depression.
The odds are that your favorite DC intellectual type has uttered some dire warning like that. After all, they all heard some authority like President Bush or a highly respected news reporter make such a claim. All right-thinking people know that we just have to give $700 billion to the Wall Street crew or the economy will collapse.
While all right-thinking people might know we need the bailout, just about all right-thinking people don't have a clue as to what they are talking about.
The Great Depression story is of course the most extreme case. No one has yet sketched out the sequence of events that will give us ten years of double-digit unemployment. But hey, if the scare story helps get the bailout passed -- and gets those uneducated skeptics in the hinterlands to buy it -- why not talk about the Great Depression?
I was on a talk show today in which one of the other guests (a representative of the security industry trade group) told listeners that you can't get a mortgage unless you put 30-40 percent down. This is of course total garbage (the interest rate on 30-year fixed rate mortgages is a very low 6.0 percent) and the vast majority of loans are being made with 10-20 percent down, but lying for Wall Street is no sin.
The host of the show was appalled to find that neither I, nor the other in-studio guest, supported the bailout. At one point he became exasperated and told me that because companies can't get access to credit they might have to lay off workers. He told me that United and GM may have to begin laying off workers next month if the credit squeeze doesn't ease.
Of course if United and GM actually do lay off workers, the credit squeeze will be a very small part of the story. The airline and auto industry face really big problems for reasons that have nothing to do with the credit squeeze, although paying higher interest rates on borrowing clearly does not help.
It is remarkable how the contemptuous comments that the elites have directed at the masses for opposing the bailout can be so much more accurately directed back at themselves. In fear and anger they have embraced a bailout that makes little sense in the context of the economic crisis facing the country. Rather than listening people who actually understand the economy (I doubt a single economist in the country believes that the bailout is the best way to help the economy) they have shouted down and shut out critics of the bailout and have been willing to spread all manner of outlandish scare stories to advance their case.
It was impressive to see the mass outrage over the bailout at least temporarily stop the bill. But, the full court press by Wall Street, the media and the entire political establishment is hard to counter. If the bill is not stopped, those who vote for it should at least be held accountable for the economic mess they create. Remember, these are the folks that couldn't see the housing bubble.
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The whole point of this post and other posts I have read from Dean Baker is that this crisis could have been averted without a 700 billion check to Wall Street. Even if in the Bill there were provisions to provide equity in return to picking up toxic mortgages, it would have been more palatable to the public. What made the bill so audacious as Paulson presented it was that "do this or we are all doomed". When the senators asked Paulson why the government couldn't take equity in the institutions that it was helping he responded by saying that if government demanded equity then the banks would not participate?!!! Would not participate and go bankrupt? No, the banks wanted a free ride and looks like they might have gotten it.
Now, everyone is talking about government assuming equity positions in the banks. Why wasn't that included in the original bill? It has been accurately told that Wall Street wants to privatize gains and socialize losses. They take the rest of us to be buffoons. I think the public has lost complete confidence in Wall Street and it will be years if ever, for that confidence to return. I believe we are in the midst of a revolution in our financial markets and things will change to a point that it will not look anything like it does today.
Too late. Obama is stuck with a bailout that doesn't address the problem. Obama voted Yes on it, better hope it succeeds otherwise he will be held partly responsible for selling this lemon to the American people. Silver lining of sorts----McSame also voted Yes. On second thought...nah, Obama is stuck.
The Bailout is all about the super rich making a super consolidation in the financial industry. It benefits them and mainly them. Little, if any will wind up helping the people who are having trouble paying the mortgages on their houses.
The big financial institutions i.e. Citicorp, JPMorgan, Chase etc. are gobbling up the weaker financial institutions and consolidating their control of the financial industry. When they are done with this process and have gotten as much as they can to line their own pockets from the bailout, things will return to "normal".
You can hold the politicians, who are bought and owned via campaign contributions from the super rich, responsible for the mess, but they are simply carrying out the wishes of these benefactors.
Think about the implications of this regarding McCain and Obama. They both voted for the bailout. What does this say about both of them? Were they stampeded into voting for it like the majority of Congress or were they just supporting their benefactors? Either way, neither one of them showed that they will do much to support the majority of Americans after the election. Obama may be the lesser evil, but as President he will be still be evil.. What is the solution to this problem? Boycott the election. That's right, sit it out voters and let the real powers of society know that they have lost the political confidence of the vast majority of our people.
1. Where were Barney Frank and Chris Dodd during the last two years? Wasn't it their responsibility to oversee the banking industry? Afterall, aren't they the CHAIRMEN of the banking, financial committees? How come THEY didn't see this coming? Asleep at the wheel AGAIN!! They MUST take the hit on this one.
2. It's about time citizens vote out everyone who is in office right now. Elect people with fresh ideas. Get rid of those who love lobbyists - Republicans and Democrats alike. I don't need my taxes to go up. And believe me, taxes will go up! If the government officials do NOT stop their excessive spending, our taxes will go through the roof. Why send billions of dollars to countries that don't like us? When are we going to collect the huge debt that China owes us? Take care of USA first for once. Remember the movie Dave?? Kevin Cline was acting as president and in a meeting he asked (I don't have the exact quote) "you want to spend $$$ to find out how someone feels about their car they just bought?" Great line in the movie. Everyone should take a lesson from that page of the script. We need our elected officials to pull in the reins on frivolous spending. Get rid of the old and in with the new. Purge Washington. Get rid of the clutter. LOL - I thought 65 was the retirement age??? Some are waaaay past that age. Another reason to clean
Please clear me up on this "huge debt" that China supposedly owes us because my information is that the U.S. has been borrowing around a billion dollars a DAY from China for years now. Wow it must be some really huge debt if that still doesn't cover it.
It's very difficult for the average person to discern what the truth is here. Many other economists, financial advisers and most of our own representatives, counsel otherwise.
I think of it much in the way that I think of global warming; global warming may be a man-made process and taking steps to amend what we've been doing may or may not stop the process but doing nothing leaves us no recourse but to learn the hard way. I'd prefer to err on the side of caution.
Mankind is fast-tracking global warming. It would have happened anyway (at a far slower pace), but excessive fossil fuel emissions have accelerated the warming trend beyond the biosphere's capacity to adjust.
Drill, baby, drill.
Also.
Obama/Biden '08
I just had a novel idea that might solve all of America's financial woes...it comes from the Bible....every 50 years all debts were forgiven and people started afresh. Hmmmmmm......
Fiat money is imaginary anyway, why not?
My suspicion is that the banks are using many reasons not to advance credit or to give loans; this is being done to scare the American people into a mild panic. Thus they will call their congressman and change their opinion from a No to the bailout to a Yes.
I think we are being manipulated by the banking system into supporting this bailout, regardless of what liquidity there is. The Fed Reserve is providing more than $300M worth of liquidity to banks worldwide right now, which amounts to appx 1/2 of the desired $700M; The Bank of Ireland, UK and other European Banks have also advanced liquidity in their lending systems as well.
Why does a bank remove a line of credit now when short and medium term advances from the Fed Reserve are flying out the bank vaults? The issue comes back to who is going to take the hit for the bad debt. The banks/mortgage companies want the taxpayer to do this. Why doesn't it go after the people the companies gave $20-100M for severance and golden parachute deals? That money was the assets of the companies, who are still able to provide these incredible severance packages to the people who ran the economy into the ditch. The people are taking the hit in many ways from an increased US debt burden to a decreasing value of the US dollar.
It has been well documented that the chief cause of this present "crisis" was Liberals such as Barney Frank and Maxine Waters putting pressure on lending agencies to make loans to people with little liklihood of being able to pay them back if the market tightened. This worked hand in glove with baloon notes to guarantee disaster. If the original underwriting rules had been followed, there would be no crisis.
Any opinion can be spun into a sound byte that will appeal to the ignorant bigots of America but the inescapable FACT remains the greed of Wall Street criminals and GOP driven deregulation have cause a majority of our economic woes.
While I don't pretend to know that much about the recent additions to our economy and banking practices, do remember....long ago....when I was in graduate school that economists were saying that we could never have a depression like the Great Depression because now there were regulations in effect and that borrowing to pay for stocks and bonds would never happen again. Well, along came Ronald Reagan and the concept that government controls were an anathema for a free market economy and a capitalistic one at that. They didn't all go away then but by the time we got to Bill Clinton many of them were, especially the ones regulating mortgages and loans for houses. Now we are paying for that deregulation. I agree Mr. Baker that whether this is a full blown depression of just another severe recession is a matter of where one is sitting, on Main St. or on Wall St., but think having the Market "correct" itself is bogus and there needs to be government control. We don't live in the simple economy of two centuries ago and socialism should be dusted off and given some consideration in today's world in the US. There are other countries which have already dealt with that ideology without surrendering their democratic principles.
in the words of Boehner (why that's mispronounced as Baynor I don't know - they're probably doing it to hide his name as a Boy From Brazil): "that's a load of crap."
"We don't live in the simple economy of two centuries ago and socialism should be dusted off and given some consideration in today's world in the US. "
You democrats keep attracting the best and the brightest. Along with this socialist I guess we could look forward to re-education camps, concentration camps for political dissidents [present company excluded of course] and a transfer of wealth at the discretion of "party" faithful.
Suggestion to democrats. Keep you enemies close and you friends closer.
There are many countries in Europe and provinces in Canada that have been and are governed by democratic socialist parties and they have not curtailed any civil or human rights. In some instances they have instituted policies that have made it easier for families to get daycare, parental leave after birth, you know, good old family values.
FirstShirt, Your answer is a complete non sequitur. How about discussing the issue at hand?
You also completely ignore the fact that we already have Socialism in this country. Socialism for the rich and well connected, dog eat dog 'free enterprise' for the rest of us.
As the current debacle proves beyond any doubt, profit is very much privatized while, for the right folks like Wall Street scammers and VIPs, risk is socialized. Sure, guys, take all the crazy risks you can think up to make millions in profit from your flaky deals. When they go South you can run to your buddies in government to make sure the taxpayers cover your losses.
I don't know if this "Bailout" is the right thing to do or not.....but are there any other solutions/proposals on the table? If so, why haven't we heard anything about them?
I can see where eventually everyone will support the bailout though....after the house rejected the proposal earlier this week, I watched my meager 401K tank. It's now where it was 12 years ago. I guess I can kiss any sort of retirement goodbye.
I think Baldwin has a good idea. give each taxpayer shares in stock. Then we get something for our money.
Barney Frank says that the section of the bill on mortgage relief is poorly written, but better than it looks. He compares it to Mark Twain's comment; Wagner's music is better than it sounds.
That's hilarious. It illustrates the difficulties of layperson and "specialist" journalist interpretation of economic and legislative information. Clearly "the failure of someone [including science reporters] to explain quantum mechanics [does not] mean that this theory is bogus." commenter Rog49Thomas
From commenter gregjones, "my biggest question for our Gov't.....if this economic crisis is so real....why have you not discussed the crisis with experts like. . . " Well I have my own list, and Nouriel Roubini has asked the same question. That they have not is a discrace, and deeply saddening; it says there is something terribly wrong with our policy making processes.
But I'll challenge Dean Baker to "ask [me, or Dr. Roubini] how failure to pass the bailout will give us a Great Depression." I have an answer for him, if he's interested. Unfortunately it is not at all clear thay buying $700 billion of bad paper is an adequate response, and it is clear that there are better ways to rescue the financial system.
But it is true, Dean Baker's informed opinion notwithstanding, that "The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever" http://www.rgemonitor.com/blog/roubini
Def.of EXPERT= Ex is a has been or usetobe. Spurt is a fluid leak under Pressure. Most of these guys are self proclaimed
I hate to disagree with Arianna but I have to. We seriously have a problem here. You think things are bad now? Wait until you need your credit card for an emergency and there is not credit to be given. It is already happening and will only get worse. Sure, it's easy for Arianna, ( who I love dearly ) to say "Don't do this", she's rich.
I know business owners who have already had their credit cut off for no reason. Do you have any idea how devestating that is, not only to them but the people that work for them too. Do you really think Obama is lying about this urgent problem we have. I believe the man. He has nothing to gain from lying to the American people and more than likely, he is way smarter than you and I are about the economy.
All the things you take for granted will be gone if this bill doesn't pass. There will be no food in grocery stores, crime everywhere, families will starve and freeze to their death(right here in America) Millions, not thousands of jobs will be lost. One of those jobs could be yours.
There is not a good answer but there is a chance we can pull out of this. I hate it but it has to be done.
"Do you really think Obama is lying about this urgent problem we have."
No. I think Obama is the wrong man at the wrong time. The world is a dangerous place and the world economy is in need of leadership.
We need someone with more credentials than community organizing.
A consistent capacity to undersell and overlook possibilities that don't fit squarely into a rigid and frankly, off-base, agenda is and will continue to be the basis for continual and accelerating decay in the credibility of the conservative platform.
Better government does NOT necessarily equal more government. Nor does more government necessarily mean erosion of capitalism or individual freedoms. Giving the vote to women did not erode the democratic system (as once believed), nor did equality to blacks equal the end of American society as we know it. Old ideas sometimes are just that - old ideas - in need of change.
I was once a conservative. Then came tax cuts for the wealthy (which make no sense), and deregulation of everything from energy to finance to healthcare at any cost (which has created chaos and fraud at every turn). It doesn't take George Orwell to fix it, it just takes a willingness to acknowledge mistakes and an open mindedness to new approaches that simply doesn't exist in today's GOP. Have you EVER heard Sean Hannity admit to being wrong about anything? How about George W. Bush? How about Brad from Pittsburgh?
It's not GOP ideals that have scr ewed us, it's the exec ution of the plan, and the voices that have become synonymous with the party that are burying us. The problem with comments like the above is that there never is "a right time" to the angry and close minded.
That would most definitely be Sara Palin. You betcha'!
Register them as a Democrat.
I watched Mr. Baker in a discussion on C-Span the other night and my biggest question for our Gov't.....if this economic crisis is so real....why have you not discussed the crisis with experts like Mr. Baker ? Could it be becuase you would then hear that this bailout is just a joke. This economic 'crisis' is an orchestrated con-game and I appreciate Mr. Baker's knowledge and honesty on the subject.
Greg Jones
B4B
there's that expert again..
Based on this article, the failure of someone to explain quantum mechanics means that this theory is bogus.
Widespread failure in the banking sector will not only cause a constriction in credit, but because banks create the bulk of our money supply, a fall in the money supply since the creation of credit (loans) drives expansion of the money supply.
A small constriction in bank activity will cause a small downturn. A larger one, a recession. An even larger one, a severe recession. And so on till one gets to a Great Depression.
What are the signs of constriction in credit and how large are they. Well, last week the overnight rate for US$ borrowing among banks (measured by Libor) was 10% p.a. versus the Fed Discount Rate of less than 2%. This week banks in Europe have the equivalent of US$100 billion on deposit with the European Central Bank because they are scared of lending to other banks.
The problem is that because of lax regulation (Thank you President Pan) the size of the bubble became too large and the interlinkages among firms too great. AIG was "saved" because it is linked in a major way into the CDS market.
Failure of Banks could be the lesser of the two Evils. (Be ye not a Borrower nor a lender)
Not sure I understand.
Is a Great Depression the lesser of two evils"?
US Auto sales are down 27%.
Unemployment is up.
Solid small and medium size businesses are having trouble getting loans.
Major companies are having problems raising funds in the commercial paper market.
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