Mostly, however, I believe the reason folks do nothing is because they don't understand the nature of the problems they face NOR the sorts of solutions that have been tried in similar situations in the past.
The Four Horsemen of the Teapocalypse
BY BRAD DELONG | DECEMBER 2010
John Maynard Keynes once famously observed, "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." During the crisis years of 2007, 2008, and 2009, it was the great British economist himself, along with three other dead men, who dictated the world's response from beyond the grave: Hyman Minsky, Walter Bagehot, and Milton Friedman.
Minsky, an economist at Washington University in St. Louis, for warning that times of financial calm and economic growth led banks to step further and further out onto the ice of leverage -- until finally they would step too far and fall through. Bagehot, the 19th-century Economist editor, for advising that when the bankers fell into the ice-cold lake it was essential that the government spare no expense to make sure that the network of banking survived, but needed to do so in a way that took the bankers' fortunes away. Friedman, the consummate monetarist, for seconding Bagehot's call for bank rescues in depressions -- and calling for central banks to keep the money flowing. And Keynes, for his gloomy fears that central banks would not prove powerful enough to do the job -- coupled with his overoptimistic hope that clever technocrats could then boost government spending to take up the slack.
But we are now into the "recovery," and 2010 has been a very different year. Its horsemen are of a different breed entirely. Where Keynes and his ilk were optimistic believers in the power of technocratic governments to do good, this year's horsemen are practitioners of more dismal sciences: believers that the market metes out judgments that we must suffer -- and that it is our own flawed nature that makes us believe so. In short, it has been a year for Austrian economists Friedrich von Hayek and Joseph Schumpeter, for plutocrat and Great Depression-era Treasury Secretary Andrew Mellon -- and, above all, for Friedrich Nietzsche. moreThe differences between the Republicans and Democrats isn't all the great.
The Financial Crisis and America's Political Duopoly
Charles FergusonDirector of the Wall Street documentary 'Inside Job'Posted: November 12, 2010 03:31 PM
What unites the midterm election results, the Federal Reserve's decision to spend another $600 billion to keep interest rates down, the failure to address the foreclosure crisis, and America's worsening relations with its G-20 partners? And, more generally, what explains the Obama Administration's toothless response to the financial crisis, in particular its reversion to status quo regulatory and economic policies, over the past two years?
In making my documentary on the financial crisis, Inside Job, I obsessed over these questions. Some argue that President Obama, as a matter of individual personality, is averse to confrontation; others say that, lacking financial experience while being forced to confront the most severe crisis since the Great Depression, he was hostage to his campaign advisers, who happened to be Clinton-era insiders who had helped cause the crisis. Gradually, however, I have come to a different conclusion, one based on a more fundamental, structural problem in American politics.
My answer is this: far from being in an era of brutal partisan warfare, as conventional wisdom holds and as watching the nightly television news might suggest, the United States is now in the grip of a political duopoly in which both parties are thoroughly complicit. They play a game: they agree to fight viciously over certain things to retain the allegiance of their respective bases, while agreeing not to fight about anything that seriously endangers the privileges of America's new financial elites. Whether this duopoly will endure, and what to do about it, are perhaps the most important questions facing Americans. The current arrangement all but guarantees the continuing decline of the United States as a nation, and of the welfare of the bottom 90% of its citizens. moreTaking to the streets might be an option if folks actually understood their plight.
When Will Oppressed Americans Take to the Streets
The Stench of US Economic Decay Grows Stronger
By PAUL CRAIG ROBERTS
On Thanksgiving eve the English-language China Daily and People’s Daily Online reported that Russia and China have concluded an agreement to abandon the use of the US dollar in their bilateral trade and to use their own currencies in its place. The Russians and Chinese said that they had taken this step in order to insulate their economies from the risks that have undermined their confidence in the US dollar as world reserve currency.
This is big news, especially for the news-dead Thanksgiving holiday period, but I did not see it reported on Bloomberg, CNN, New York Times or anywhere in the US print or TV media. The ostrich’s head remains in the sand.
Previously, China concluded the same agreement with Brazil.
As China has a large and growing supply of dollars from trade surpluses with which to conduct trade, China is signaling that she prefers Russian rubles and Brazilian reais to more US dollars.
The American financial press finds solace in the episodes when sovereign debt scares in the EU send the dollar up against the euro and UK pound. But these currency movements are just measures of financial players shorting troubled EU-denominated debt. They are not a measure of dollar strength. moreWhat is even more amazing is that in stodgy old Europe, their plutocrats actually worry about what happens when their populations get angry. Of course, I think it is already too late to hold off the radicals--assuming their radicals really ARE all that radical. Watching the self-destruction of the Swedish Social Democrats--a party that actually WAS radical at one time--is enough to make one wonder.
You've Got To Restructure The Eurozone Now, Before The Radicals Take Hold
Michael Pettis, China Financial Markets | Dec. 1, 2010, 6:06 AM
If Europe is going to “resolve” the current crisis in an orderly way, it is going to have to move very quickly – not just for the obvious financial reasons, but for much narrower political reasons. I am pretty sure that the evolution of European politics over the next few years will make an orderly solution progressively more difficult.
For ten years I have used mainly an economic argument to explain why I believed the euro would have great difficulty surviving more than a decade or two. It seemed to me that the lack or fiscal centrality and full labor mobility (and even some frictional limits on capital mobility) would create distortions among countries that could not be resolved except by unacceptably high levels of debt and unemployment or by abandoning the euro. My skepticism was strengthened by the historical argument – no fiscally fragmented currency union had ever survived a real global liquidity contraction.
I am now going to veer off into a very different realm, that of politics. I don’t in any sense pretend to be an expert on the subject, but one of the things that surprises me is that as far as I know (perhaps because I am looking in the wrong places) and in spite of very clear historical precedent, very few analysts, even the greatest euro-skeptics, are wondering about of the changes in electoral politics that are likely to take place in Europe over the next few years as a consequence of the euro adjustment. For example Wolfgang Munchau has an excellent article in the Financial Times in which he concludes, like I did in my post last week, that:
The eurozone is manoeuvring itself into a position where it confronts the choice between two alternatives considered “unimaginable”: fiscal union or break-up.
Obviously I think he is right, but I would add that the window for that choice is a small one. If Europe doesn’t move quickly, within two or three years it will probably be very difficult, if not impossible, to engineer fiscal union. By then domestic politics are likely to be too unstable for the European political elite simply to arrange union over the heads of the citizenry. moreAnd of course, there are those "little" problems associated with Peak Oil. The biggest one is that unless economic growth produces a DECLINE in oil consumption, that growth won't last very long. This is the BIG difference between the global economy now and in say, the 1930s.
Jobless America Can't Survive The Pressures Of $90 Oil
Gregor MacDonald | Dec. 3, 2010, 3:24 PM |
Oil is at 90 dollars a barrel. The governments of Europe, Japan, and the United States are saturated with debt. House prices in the US are falling again, and there’s no job growth in America. Put it all together, and for some reason, many are still imagining that we’re in an economic recovery.
Today’s horrid jobs report contained some shock value in the sense that it missed expectations. But the novelty of a 39K print misses the larger point that, for a large population like the US, even a print of 100K or 125K would still be very bad news. The US needs to create at least 150K jobs per month just to soak up population growth. Meanwhile, we now have a tranche of 15 million out of work people.
As you can see in the chart below, total employment falling back below 139 million to 138.88 million does nothing but maintain levels last seen in the early part of the previous decade. This is a huge hole. And now, three years after the start of the economic crisis, we can say resolutely that America has a structural unemployment problem. As other countries have discovered, that’s a hard problem to solve. more