President Obama hit the nail on the head when he called the economic crisis "a great opportunity," yet so far it is one that America is wasting. Eighteen months ago, Lehman Brothers went bust and trillions of dollars of taxpayers' money was used to save the banking system. It seemed obvious then that a massive overhaul of the economy and the capitalist system that drove it was needed to get us out of the worst mess since the 1930s. We wrote The Road From Ruin because we had long believed that although capitalism was the best tool we had to build a prosperous world, it had serious flaws -- and we wanted to be part of the debate about how not just to rebuild the system but to build it back better. Today, we are shocked by how little real debate there has been, and even less real change.
True, the President pledged support for the Volcker Plan to separate everyday banking from risky investment banking -- although we doubt that alone would prevent another financial collapse, and anyway it is not likely to be passed by this bipartisan, infighting Congress. Obama called for innovation and that's what it will take to fix this broken system, so where are the big new ideas about building a financial sector that can support real job and wealth creation rather than the phantom growth, inflated stock prices and real estate bubbles of the last decade? Even after a systemic meltdown of the financial system, we still have the Fed, the Treasury, the SEC and the CFTC all supposedly watching over the system, but none of them really seeing the full picture or feeling fully responsible. We need regulation that is both more muscular and smarter than the feeble oversight of the past 25 years. Where is the political courage to take on the vested interests in Congress (i.e., campaign dollars) that preserve this fragmented mess?
This lack of leadership extends to global issues, since the out-of-date rules of international finance helped to pump air into the bubble that burst in September 2008. We got into this mess because America couldn't stop borrowing and China wouldn't stop lending and, as a result, we have all lost out. There were some fine words about sticking together and reforming the International Monetary Fund at the first meeting of the G20 in April of last year, but since then nothing. The global economy is being run by institutions created back in 1944 at the Bretton Woods conference when America was the world's lender. Now it is the biggest debtor. Does anyone really think that this system can carry on as it is?
As for Wall Street's bankers, they are too busy wallowing in their bonuses to realize that there is no going back to 2006 and business as usual -- that simplistic idea that setting financial markets free would make society better off will no longer wash. The little progress we have made in cleaning up the toxic assets on the balance sheets of the banks is still way ahead of where we have got to in dealing with the toxic ideas that got us into this mess. Most economists seem to think there are only two possibilities -- big government or unregulated free market. It's time to come up with new ways to look at how an economy can function.
Change will happen only if we, the people, demand it -- from our politicians, our economists, our financial institutions and our businesses. The future of our economy is simply too important a question to leave to Washington or Wall Street. Main Street America has to take the lead in getting our economy in shape for the next fifty years.
One of the big ideas in The Road from Ruin is the need to create "popular capitalism" if we are going to build back our economic system stronger than it was before - popular in the sense that all of us must be active in making it work. So we were delighted when The Huffington Post took the lead by championing local banking -- if we don't want our savings gambled in the gazillion-dollar global capital-market casino then it is up to us to "move our money" to the banks that will invest it back in our communities.
The next step is to demand a better deal from the pension funds and mutual funds that are supposedly working to ensure we have a decent income to retire on. But instead of investing for the long-term -- in the way that Warren Buffett does, with great success for those who trust him with their money -- too often they acted like short-term speculators, chasing every rising share price and giving bonuses to their staff for beating the market over a year, rather than for delivering their customers a good pension over 20 or 30 years. It was they who invested our money in all those failed banks, and did nothing to stop pay and bonuses getting out of control on the back of insanely risky strategies. We should be demanding that legislators rewrite the rules to give shareholders real power to stop executives doing whatever they like when it comes to their own salaries and their risky investments, and to vote them out when they do a lousy job.
This crisis is a wake up call to all of us that we need to do better in our economic decision making. We could all have been smarter about money. We're not just talking about the poor people who signed up to unaffordable mortgages. Cheered on by a too-often unquestioning media, we all enjoyed the bubble while it lasted and failed to ask some pretty basic questions
about why we were getting so much richer without really working any harder.
Our politicians and business leaders seem to think they can ignore this wake up call, so it is going to be up to the rest of us to demand real, far-reaching change, now -- and, where we can, through what we do with our own money, to make the change happen ourselves. In our next blog post we will launch our Road From Ruin action plan for every citizen to take back
control of our economic system. This economic catastrophe has proven that there are fundamental flaws in the way we do capitalism. Yet all of these flaws can be fixed. Let's get to work.
What Senator Chris Dodd has put on the table will barely scratch the surface, given the changes that are needed to build a regulatory system that actually works.
Daley: Day of reckoning for financial crisis
Tim Geithner and Larry Summers constantly defend worthless derivatives and credit-default swaps by calling them 'innovative financial products' like Hank Paulson said.
Geithner was also asked bluntly in Congress - "....will a derivative or credit-default swap today be bailed out tomorrow?" Geithner's reponse - "...I will not be irresponsible and answer that".
So these guys are not serious and there's no reason hoping that anything will get better because our government right now works for Goldman Sachs and JP Morgan - PERIOD.
The Volcker rule was a compromise, for they dare not go back to the original Glass-Steagall act of completely separting commercial banking from speculative gambling casinos like Goldman Sachs.
They want those casinos to keep tapping taxpayer guaranteed funds at 0.0% so they can fund trades of yet more worthless derivatives and credit-default swaps and when they lose they dump the losses on the taxpayer and get bailed out every time.
We have to admit that the Obama administration does not want 'change' but the status quo.
I call it Nationalize them for a period of say 1-3 years, 5 tops and reform them top to bottom...then reprivatize them...
Interesting. It's been about thirty years since I followed compensation philosophy, seriously, but I recall a serious discussion taking place in the late seventies-early eighties about how we were going to have to redefined how and why we worked. How we might have to reconsider who we really are and not just revert to defining ourselves by what we do for a living. I recall that the question was asked,
" what happens if there are way to many people, one day, over and above the number of real jobs that have to be filled?" Thanks for reminding us all of a serious discussion that needs to take place before we enter into another kind of economy.
Second, I already know why the US is screwed up.
Third, if you don't know why the US is screwed up you should go to your library and learn something by reading books about economics, personal finance, financial accounting and investment management.
You should stop gambling in casinos, gambling ( some call it speculating ) in the stock market and buying junk made in China. Invest in good companies that pay dividends.
Finally, if your three members of Congress do not know why the US is screwed up ( or are doing nothing to fix things ) vote them out of office...and keep doing it until they fix things.
And do not make the same mistake twice!
No doubt, this book is not for us, necessarily, but for the tens of millions of people who are either clueless and want to know more, or for those who are on the fence that Glenn Beck and others like him have erected, but want to jump off and figure things out for themselves using more reasonable resources.
http://eye-on-washington.blogspot.com
But here goes; there are around 44.4 million activate mortgages in America, they average $136K. Multiplying these numbers leads to about $604 billion. That's less than the TARP funds! We could have paid off every mortgage in America with the money we loaned to the big banks! That money would have made its way into the banks almost immediately and migrated to the top almost as fast. It would have totally solved the housing bubble problem that we're mired in even now. This was the real opportunity for the Bush administration to create a real "ownership society."
Renters might complain that it isn't fair to pay off all those mortgages with their tax money, but wouldn't they rather have retained their jobs? That action would have left money in the lower and middle classes in this country where business begins. We'd have a much stronger economy for that.
OK, that's it. You can go back into your box now.
That is 6.038 Trillion dollars.
You might want to rethink your argument based on correct math.
Thank you for the correction.
am i the only poor person that cheers for rich people because they actually made something of themselves? they work harder, invest smarter, and have better ideas. when you regulate, you eliminate 'survival of the fittest', cripple innovation, and promote mediocrity.
There's another word for social darwinism.
Evil.
Pretty much everything you said is the product not of observation of people, human nature, social systems of any kind, or the "real world," in general, but of cultural mythology.
Cultural mythology perpetuated specifically by the rich.
But hey, deregulation got us this far, right?.
Let's just keep riding this horse straight into the ground.
That's the sad state of some blogs at times - always an "us vs. them" mentality.
"how about we as Americans leave the pity party and actually make something we can sell?"
I'm with you there, although we may not be as successful in making things to sell because our labor costs and corporate taxes tend to price us out of the market.
"am i the only poor person that cheers for rich people because they actually made something of themselves?"
That is a very commendable attitude - seriously. Don't let anyone try to change your mind.
"they work harder, invest smarter, and have better ideas."
For the most part I agree. But there are enough out there who have "gamed" the system to the point where many of us have gotten the shaft and have to pay for their mistakes through taxpayer bailouts. The "gamers" are politicians, business executives at some of the largest corporations and special interest groups. They run the gamut on ideology from the far left to the far right, but their common thread is "what's in it for me".
"when you regulate, you eliminate 'survival of the fittest', cripple innovation, and promote mediocrity."
I'll agree that when you over-regulate that happens. Today total market freedom might be chaos. But you essentially have it right.
The remedies according to Trump: a 50% tariff on foreign goods entering the US, mandatory solar on new housing construction and more nuclear power. This would get the job done, so why hasn’t it been done? Even the Donald, is fearful of specifically identifying the culprits who are selling out the people of the US. Trump says that the Chinese and OPEC must think that we have the dumbest political leaders in the world. On that I disagree; unfortunately, the truth is that the country is being savaged by a subversive corporate class and a corrupted political class.
Slapping a 50% tariff on imports will hit every American household, who will find that their dollars buy a lot less (we buy things from China that they make more cheaply than we do). Add to that the impact of shrinking export markets as the world slides into a trade war and it starts to look like a nightmare scenario.
This is what happened in the 1930s, when the Smoot-Hawley Act lengthened and deepened the Great Depression. Could we really make the same catastrophic blunder today?
Something does need to change. But that has to be fundamental reform of the global monetary system - a Bretton Woods 2.0 - not unilateral protectionism that would surely be the road to ruin.
To the degree I understand it, which is not much, reform of global monetary system might be what I mean in part.
Congress should be scared to death. If their is another economic collapse because of their inaction then all hell will break loose.
Hidden behind the lack of answers to simple questions, maybe?
Q: Where exactly does the “profit” “created” by share dealing come from?
A1: it droppeth as the gentle rain from heaven upon the group beneath. Twice blessed, though transaction commissions and yearly bonuses.
A2: From someone else’s losses?
“This lack of leadership”
Q: How is it possible to lead, without knowledge of where you are attempting to get to?
“Change will happen only if we, the people, demand it”
and, we operate as a democracy?
“banks that will invest it back in our communities”
To ensure the creation and continuity of our essential requirements?
“delivering their customers a good pension over 20 or 30 years”
Governments need to find funds to function. Citizens need a safe option for their savings. Why encourage banks to feather-bed-down in between the two?
“ask some pretty basic questions”
God, I wish I’d thought of that.
“Let's get to work.”
It needs only a "magnetic striped" Social Security Card like "Debit Cards" to show the person is working, doubling as their means of purchasing and photo ID (it could carry a thumb as another ID security). Everything they need would be obtainable only by running it through the scanner causing the consuming to keep the population working. Another such card could be designed for international travelers coming into the US and United Statesman visiting aboard, if needed. Anyone not willing to live by social standards would have to live outside of the nation.
That is the prelude to the Mark of the Beast, which does not happen until the USA is destroyed. All WE THE PEOPLE have to do is say we want a united nation of a single class of man and peace. The means is for WE THE PEOPLE to vote for the abolition of the present Capitalistic-Military -Regime.
That last statement is the real cause for all world conflict, we go against ourselves to please others while hurting inside. That inner hurt, due to compromising what we feel for our authority, causes one to strike out to inflict hurt on others.
If we became self conscious, i.e., pay attention to our own senses and correctly interpret their messages, we would not even want most of the things man make to sell, they hurt us more that than they help. That way, class would be eliminated, but since it's in place already, my suggestion above will correct it.