The Economy: Nothing Can Be Done? Wrong
People ask me all the time what can be done about this economy. Usually, they mean it rhetorically. That is, we fouled up so much, there isn't anything we can do, is there? Squeeze your hands in frustration. Wait it out.
But my answer is not rhetorical. In fact, there is plenty to be done. But the president and a lot of Congress refuse to do it. Republican presidential candidate John McCain remains in free-market oblivion. Somehow the markets will work it out. Above all, don't be chicken and bail out those who are responsible. Real men believe in moral hazard.
Fortunately, the Federal Reserve has done pretty well at treating the symptoms. It is up to the president and Congress to deal with the first cause. They are not.
Let me stress, nevertheless, that it is important to address symptoms in the economy, as in health, because they can make matters very much worse. Less credit available in the current subprime mortgage crisis means fewer loans and therefore less investing and consumer buying power. That can produce recession, lost jobs, lower wages and still less investment and consumption. Rising oil prices is a second shock making matters worse.
But the cause of the most serious danger is clear: it is the ongoing collapse in the housing market. It is not abating. The Fed can't handle this alone. Defaults keep growing, prices keep falling. As people get in trouble, they put their houses on the market. As they default, banks take over and put houses on the market. And prices of course keep falling. That means more defaults, more bank losses, fewer loans to business, less investment, and so on. Ed McMahon is now the Beverly Hills poster child for someone who is in default because he can't sell his house.
The Democrats in Congress led by Barney Frank knew they had to act promptly. They put up $300 billion to plug the dam early in the year. The rest of Congress and the president didn't go along. There may be problems with the Frank plan, but then come up with something else. There are good ideas out there.
At least Barack Obama is demanding action, as McCain falls back on the old personal responsibility nonsense. But I think Obama should be talking about this all the time, and coming up with bolder programs.
Here's the main point. America is not caught in a trap from which it cannot escape, though there will be injuries. Yes, there is something -- many things -- that can be done, practically speaking, to mitigate the damage. The small chorus of people who keep warning against bail outs that protect those who should have known better are either naïve or self-serving. Reducing moral hazard never kept economies in line -- there was life before the Federal Reserve in the 1800s and it was very painful.
Now is a good time for economic leadership. So far Obama has a big edge. But he should widen the lead. (As for oil prices and speculation, that's for a future post.)
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The Economy: Nothing Has Been Done? Right
Jeff - I am surprised by this article. I usually agree with you, but this time you are spouting the same old tired neo-liberal/supply side rationalizations for socializing the risks of big money investors
The main purpose of the Fed is to keep the wealthy from becoming less wealthy. You make light of the right's "moral hazard" argument, but it is valid - without the threat of the risk of loss there is nothing to prevent speculators from chasing and creating bubble after bubble. There is good reason most of our founding fathers abhorred the idea of a central bank.
Bear Stearns should have been alllowed to fail, it would have caused a short sharp recession, that acutlly may have had some postive benefits like cleaning up and deflating these bubbles and marginal operators, by bailing them out we are only perpetuating and prolonging the economic agony and setting ourselves up for an even bigger fall of great depression proportions.
What you are suggesting Jeff, is that we continue down the path of socialism for the wealthy investor class, and wild west capitalism for the rest of us
I think we should be giving a helping hand to those homeowners who genuinely need help because they got swindled by unscrupoulous lenders, but definitely not real estate speculators , or banks who made unwise loans
IF the admin can make this crisis go on just a little longer, it will give them the "good will" of the people to announce a ma$$ive bailout.
It will ostensibly be for the homeowners, but will with a little word-smithing, turn into another disguised give-away to wall street and the money elite, their puppet masters.
But the little people will benefit from this by getting worked over by the word-smith too. Look for an upside-down name for "wonderful financing.
We are not people anymore here, we are just "natural resources" to mine and reduce and deplete...
They are intent on breaking this country and leaving it in such deep debt that when the democrats take over they'll struggle uphill all the way.
the only thing that will save the economy and the world is massive development and use of solar/hydrogen technology.
You're kidding, right? In 2003 I remember every one and their mother telling of the coming housing crisis. No one listened. Their fault , not mine. And before someone wants to preach some morality hogwash (from the south, can you tell?), how is it moral to take from someone that earned something to give to someone who didn't? No bailouts, no handouts, no crying. If you wrote bad loans, tough. If you took a loan you couldn't pay, tough. The rest of us will sip sweet tea on the front porch and whistle dixie until the cows come home.
Lovely self centered thinking. Okay, you sip your sweet tea while all around you begin to implode.
Prettya soon you will have to plow over the destitute and homeless to get from your front porch to where your going. then, as in all such historical cases, there will be so many of those not sipping tea they will outnumber you and then what. Sorry but at that point your a gonna and the rest will ride over you. Can't build walls high enough to keep out the hungry masses.
Of course most of us don't needd that scenario to know what the humane and moral thing to do is - our neighbors problems are ours.
I, and many others, had the foresight not to make stupid choices. It is not our responsibility to take care of the people, mostly developers, who in hindsight should have made a different choice. We have an unemployment rate half that of western Europe, so I doubt homeless masses will be piling up on the lawn any time soon. No need for walls if they do, I own more guns than the average slum in Iraq.
McCain is set to make a speech on gas prices tomorrow, while Obama is essentially silent on the issue.
He's sure to bring up the fact that we have a federal ban on drilling offshore, while Cuba and China partner together to drill within sight of the Florida Keys.
Apparently the environmentalists think it's okay for Cuba and China (with their egregious track record on environmentalism) to pump oil out of these same fields, and then ship it half-way across the world to be used over there. Somehow that's better in their mind than allowing US companies to pump the exact same oil from the same fields with much better US environmental oversight and use it to benefit our own country.
If someone here actually thinks this makes sense, please explain.
The "story" about offshore drilling involving Cuba and China is just that: a story, a fantasy, with no basis in reality.
The Miami Herald reported in this piece on June 12, 2008.
Nice try.
And if you think we have what it takes to make a difference you had better look into your facts. Solving our problem has too many facets we are ignoring. It seems there are many who are convinced that just sinking new holes is the answer. Actually that's not a new view. We always have those who feel that they have the one and single answer to problems. Keeps them from having to face facts.
And he's equally sure to NOT bring up the point that out of the more than 10,000 leases that oilcos have to drill, they are not currently using more than 6,000!! Once they begin to exploit all of THOSE, then I can see us maybe giving them some more to play with!!
After propping up the prices of overpriced homes by having taxpayers assume the risk of more lending and after rewarding the "flippers" you will no doubt, a few years down the road, propose some huge government program to provide for "more afordable housing."
Actually, I think the Economy is intentionally being manipulated by the Bush administra
This way McCain can blast Obama for saying he'd roll back Bush tax cuts. Less money in your pocket doesn't sit well in times like these. Also, with Iraq saying "Screw You" to the McBush idea of staying there in perpetuity, Barack can't use that against McStain.
Remember before the last Presidential election? Gas prices were rising and rising when the GOP started taking hits for it...the prices dropped until the beginning of December 04. Watch for the price of gas to drop again shortly before Nov. Why, the Saudi's have said they'll increase output. This isn't really going to lower the price of gas of course because our refining capabilities haven't changed. It's just that Exxon/Mobil will maintain their profit margine.
The price of oil is the main driving force behind the price of gas going up. And if the price of oil drops significantly, gas will follow suit.
Refining capacity is a completely separate issue.
And the price of oil is being driven by smart wall street investors betting on futures and as in all of the stock market machinations this drives artificial pices. Again it's those with the money to spare manipulating markets everywhere.
Don't scoff, do some research.
And yet, there are two major points that you leave out:
1) the oilcos own the WHOLE process, from extraction, to transportation, to refining, to further transportation, to the retail gas station that you buy from. Therefore the high price of oil (which they are buying and selling from themselves!) has no real effect on the matter
2) the oilcos have been CUTTING BACK refining capacity, to allow an artificial shortage. In the last few years they have shut down some of the largest, most profitable refineries to ensure that they aren't making enough gasoline to sell to us, thus creating a bubble in the gas prices!
More taxes,gathered more equitably, to increase Federal revenues by $400 billion a year. Reduced increase in health benefit programs combined by increased premiums to limit growth to $100 billion annually for the next ten years. Increased spending by $300 billion annually for each of the next ten years on infrastruc
Gee, only 100 billion per year for the next 10 years?
That's still outrageous. What happened to the efficiency of the single payer system? Why can't the feds impose reasonable limits in the growth, when they're already paying for 50% of health care nationwide?
If that's what you call 'efficient', then everyone should be justifiably scared of Obama planning to a non-single payer monstrosity for the rest of us.
Because the federal govt of the United States is NOT paying more than 50% of all healthcare dollars. In fact, they are not even paying 25% of all healthcare dollars!! If we go to a single payer health insurance plan, we could ensure that everyone in America has decent health care, and we would spend around HALF of what we are spending currently on health care. If you add in an emphasis on preventative care, rather than reactive care, you could cut that by a further third to half!
First, you are wrong, we need to INCREASE what we are spending on health care, to allow for a single payer system, which will result in only 3 cents on the dollar being used for overhead, rather than anywhere from 15 (really good companies) to 35+(most companies) cents on the dollar.
Second, we need to GUT our military spending. Right now we are spending more than the rest of the world combined on our military, and that doesn't even include the off budget items such as the Iraq war! If we were to go down to no more than 2 times what the next largest military in the world spends, this would result in almost $1 TRILLION savings, EVERY YEAR!! We could pay off our debt, create single payer health care, fix our infrastructure, provide a free education through college for EVERY man, woman, and child, and STILL cut taxes!!!!!
We need to vastly revamp and reorganize our economy for the future and in order to compete in the global economy ..
We should be taking the best from every system and Nationalize those assets that are essential and part of our economic infrastruc
We must start thinking as futurists and stop being shackled to this 19th century model that is dragging us under and selling off our assets sacrificing our sovereignty and also Self Reliance..
I don't believe free market works in health care. It only creates a free-for-all environment for those whose primary aim is to profit themselves. These include physicians, hopspitals, insurance companies, equipment/supply manufacturers, malpractice lawyers and of-course, big pharma. The reason free market doesn't work is because medical practice is not a commodity as such. I mean, who wants to see the cheapest doctor in town or go to the cheapest hosptial ? As it is now, the insurance companies and the malpractice lawyers are the regulators and yet, they are also profit oriented. So, where is the competition ? How many of us would choose a cheaper insurance company or a cheaper lawyer ? The insurance companies are more interested in squeezing the payment to physicians and hospitals as well as all expenses to the detriment of the patients. In fact, they screen and exclude coverage as much as possible. The buyers of insurance have no choice or they will be without coverage. There is absolutely no free market competition between the big pharmas. They have patent protection for a long time and can charge as much as they like. Again, patients have no idea whether a cheaper medication is good for them. So, where is the competition ?
No, I don't believe free market works in health care !
You're right, emerywood.
Healthcare, energy and water should not be on the "Free Market", but should
be managed for the common good.
There's lots of stuff that is appropriate for the free market, but those
3 unavoidable necessities of life are not among them.
Otherwise, why don't a few companies just buy-up
Earth's Oxygen rights and charge the rest of us
to BREATHE?
Capitalism WILL go there, if it is permitted to.
It must NOT be permitted to.
Ya'll are serious, ain't ya. That's funny. Name one thing the government has done right in the last 50 years, besides waste money.Grea
And here's another question: How much of the oil, lumber, other minerals, cattle and sheep come from Public Lands--in other words, land owned for us in the name of the US Government? And what do those companies who get rich off our patronage pay to mine, deforest, drill or graze those lands of ours? And where is our cut?
The free market made $93,000,00
A single payer system would cut that $93 right off the top of our costs, just for starters. We could start getting real about a few things, here.
The "free market" doesn't work in ANY industry! There are ALWAYS regulations and limitations which cause the free market myth to be debunked! That's the whole point of govt, is to ensure that corporations (who are ALWAYS looking out for the short term bottom line!) take a LONG look at the world, and perform tasks which will help us ALL!!
McCain is an idiot and so are his advisers on economics. Even Steve Forbes and Forbes Magazine have come out recently and said that we need to look into re-regulating the airlines.
Armando Falcon, former director of the Office of Federal Housing Enterprise Oversight (OFHEO), issued a report warning of a systemic crisis in housing markets in 2003. Bush fired him the next day and replaced him likely with a crony yes man. http://www
The economic 'crisis' was the plan, not an 'effect'.
Bring back Keynes!
Bring back Keynes!
Bring back Keynes!
Bring back Keynes!
Bring back Keynes!
Bring back Keynes!
Bring back Keynes!
Bring back Keynes!
Before we pat anyone on the back- or push anyone under the bus- it is valuable to take a look at where the economy actually is. Not where we are told by officials it is.
http://www
Free Markets = Enslaved People
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