Sep 21 2008

Level with us

(8 am. – promoted by ek hornbeck)

I’ve been reading alot today trying to understand the proposed bailout. And I have to admit that I still don’t know what to think about it all.

I don’t really give a shit if these individual companies fail or even if the stock market fails. But if we’re talking about a global economic collapse, that’s not something I think we can risk.

What I can say with confidence is that, once again, this country has waited until the peak of crisis to take action. We seem to not have the capacity to evaluate risk and take preventative action…no matter what the issue.

Perhaps the best analysis on all this that I found today is Bill Moyer’s interview last night with Kevin Phillips (link to the 20 minute video).

Phillips emphasizes that we need to understand the root causes of our current situation. At one point, he identifies the seven sharks in the water.

There are seven sharks in the tank with the economy.

And the first is financialization because we’re so dependent on this industry that’s sort of half lost its marbles. The second is that you have this huge buildup of debt, absolutely unprecedented anywhere in the world. The third is you’ve now got home prices collapsing. The fourth is you’ve got global commodity inflation building up.

The fifth is you’ve got flawed and deceptive government economics statistics. The sixth is that you’ve got what they call peak oil where the world is, to some extent, running out of oil. So it’s not just commodity inflation, it’s a shortage of oil. And then the last thing is the collapsing dollar. Now, whenever you get this sort of package in one decade, you got a big one.

So what is Phillip’s prognosis?

KEVIN PHILLIPS: I wish I could say that there’s a blueprint that would get us back on the right track. But my sense of histories previous goes to the one or two percent leading world economic power is you don’t get back on the right track.

BILL MOYERS: So what happens?

KEVIN PHILLIPS: You go through a painful adjustment process. The British were absolutely top dog in the world in 1914. Two world wars and 35 years later, they were having, after World War II, they were having food rationing, the pound sterling crashed, dukes were giving guided tours of their castles because they couldn’t afford to maintain them otherwise. Doesn’t take long. And I’m afraid the United States is coming right into that period which marks a couple of decades coming up that are going to be very difficult for America.

At the end, Moyers asked Phillips what he might hear from Obama that would be convincing. Here’s part of his answer.

We’ve let this Las Vegas version of what used to be ordinary banks in our ordinary hometowns go berserk. Our currency is having enormous problems. People are losing their homes. We’ve got to face up to what our problems are and talk about how this happened. Who did it? Why? Who made the money?

Well, I think if he were to start talking about I’d take him seriously. But I think half of Washington would have a problem in their stomach needing quick relief, let me put it that way. Cause you don’t rock that boat. You pretend that it’s a sound economy. And if it’s not sound, it’s nothing that the old Democratic elixir can’t fix, you know? Old New Deal in a bottle. We’ll have a couple of swigs and you’ll be happy again. I don’t expect him to level.

Are we as a country ready for those in charge to level with us? Paul Rosenberg has a good analysis of the Moyers interview at Open Left and here’s what he has to say about that.

Maybe that’s something that progressive can and should organize around-“Level with us.  No more lies about where we stand.”

And here’s what Rosenberg says “leveling” might sound like.

My opponent has said a lot of things about me lately that aren’t true.  But he’s said one thing that is.  He’s said that I don’t have a solution.  He’s right. I don’t.  Nobody does.  But what I do have is questions-deep questions, fearless questions.  I am not afraid to ask those questions, because I know we can answer them, if we have the courage to ask them.

31 comments

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  1. no one has had the courage to level with the American people like that since President Jimmy Carter. Do you think we’re ready for it now?

    • Robyn on September 21, 2008 at 03:26
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    The economy should be more than a game of craps.  

  3. would require the candidate not only to tell us he has no answers, but that he’s been part of the problem.

    I can ‘hope.’  It would be a ‘change.’  I’ll be waiting a while, I think.

    • Edger on September 21, 2008 at 03:58
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    has a good short non-technical non-jargony explanatory post up…

    Understanding the Massive Bailout Plan

    [snip…]

    …this plan is modeled after the Resolution Trust Corporation of 1989, where the people essentially bought institutions that had been jeopardized by the Savings and Loan swindles of the late 80’s. But this plan is going to be painfully different than that one in several ways.

    One such point of contention, and the most glaring, is that we will not be buying up all of the institutions involved; all we will be doing, is taking their bad paper off their hands. With the first RTC, we bought the entire company and were able to recoup losses based on their eventual resale because of the fact that there was some solvency involved in the deal at the front end. Now, the troubled institutions will be allowed to move along on their own, and all we will do is eat their loss for them. So, as word of this plan is getting around, you can bet accountants and CEOs are busy bundling all of their bad and “iffy” investments into packages that they can pawn off on us. The end result of this will be to make it even harder to resell these debts; especially in this economy.

    [snip…]

    The Federal Reserve Bank is NOT a government agency; it is a collection of PRIVATE banks, with a Board of Governor’s appointed by the President, but they are all leaders of banking institutions themselves. Their interests will inevitably run contrary to those of the people of this country who are footing the bill. So what will happen is they will bundle “sweetheart” packages of some of the more salvageable paper, and then short-sell those to their own banks or institutions. This will, in effect, erase gains that this system will need to cover the inevitable losses that the people will accrue.

    Lastly, the timing of this couldn’t be worse. Let’s face it, they are not doing this to protect the American people. We have homeless shelters running at capacity and tent cities popping up all over the place that the Federal government and the Fed just simply don’t care about. They are shipping our jobs overseas at alarming rates and attacking trade unions, even government unions, as fast as they can. The intended outcome of all this is to reduce the median wage paid in this country, to make us “more competitive on the global market”. None of this is going to change. So they aren’t doing this to help the citizen of American; they are doing it to protect the World Banks and the Global Banking Industry. That’s why so many banks from over seas tried pumping money into our system yesterday.

    [snip…]

    The dems wont be able to refuse this, because it is almost impossible for them to explain to the average voter how this system is tilting against him in the first place. So, if they vote ‘no” then the republicans can use this as a rallying cry and make the collapse of the economic system the Dems fault right before the election.  And let’s face it, the Democrats on the Hill are just as responsible for all of this as the Republicans are, because they could have taken steps to stem this two years ago when they took control of the congress.

    [snip…]

    It will artificially prop-up Wall Street for a little while, if it goes through, but in the end, the character of this system will be it’s downfall and without addressing that leading factor, we will not be spared next time because we simply won’t have the money to cover it. Not that we do now.

  5. …I am a pessimistic crumudgeon, you all know that, but I think maybe America won’t be ready to even talk about this for a generation, or half a generation — ten or 15 years.  And during that time, some of those sharks will have taken bites, and thinking and screaming are hard to do at the same time.

    I find two things particularly disturbing (heh).  First, as a country the US can’t think it’s way out of a paper bag. We haven’t encouraged critical thinking as a skill or selfless character as a trait.  Now that there are real problems — real challenges — there is nothing to make me believe that will change, and every reason to believe that will get worse.

    Second, we seem to have finally committed all future tax revenue to the financial system.  We are not the first country to have done this, and those who have gone before have not had an easy time of it.  I don’t think the pattern is Britian in 1914, but maybe 1860; or Argentina after the financial collapse; or any other country where the powerful and poor have gotten a permanent divorce, and the powerful remain so by insuring that the country’s wealth flows outward to other rich people, the discussion is in terms of debt and credit ratings, and the poor are — utterly — an afterthought.   I don’t think we’re going to get an easy analysis.  It’s going to be damned interesting, to future historians in Svalabard anyway…

    • Edger on September 21, 2008 at 04:44
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    • Edger on September 21, 2008 at 05:01
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    No

    CR has posted the “bailout plan,” as it currently stands.

    Glenn Greenwald has an important response, as does gjohnsit over at DKos.

    But here’s all you need to know. Hank Paulson is asking for $700,000,000,000. That’s $2,333 from every man, woman, and child in the United States.

    In exchange for that money, Paulson is unwilling to accept any demands to make markets more transparent, limit executive compensation, or assist homeowners fighting foreclosure. The sole purpose of that $700,000,000,000 is to bail out Wall Street and only Wall Street, but not to fix it, or our larger economy.

    He is asking to be absolutely unbound by any law when he spends that money.

    [snip…]

    The only “string” attached is a semi-annual Congressional report–one in which they would have zero leverage to influence his choices.

    [snip…]

    Paulson didn’t even have the class to call this a “review”–which underscores the degree to which he wants to be unbound by any and all review, legal, congressional, or anything else.

    Hank Paulson–one of the CEOs who got us into this mess–is asking each and every American to give him $2,333 to do with as he sees fit, with absolutely no strings attached.

    Paul Krugman, also…

    No deal

    I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.

    As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?

    [snip]

    And there’s no quid pro quo here – nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

    • Edger on September 21, 2008 at 17:11
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    Greenwald saturday:

    What is more intrinsically corrupt than allowing people to engage in high-reward/no-risk capitalism — where they reap tens of millions of dollars and more every year while their reckless gambles are paying off only to then have the Government shift their losses to the citizenry at large once their schemes collapse? We’ve retroactively created a win-only system where the wealthiest corporations and their shareholders are free to gamble for as long as they win and then force others who have no upside to pay for their losses. Watching Wall St. erupt with an orgy of celebration on Friday after it became clear the Government (i.e., you) would pay for their disaster was literally nauseating, as the very people who wreaked this havoc are now being rewarded.

    More amazingly, they’re free to walk away without having to disgorge their gains; at worst, they’re just “forced” to walk away without any further stake in the gamble. How can these bailouts not at least be categorically conditioned on the disgorgement of ill-gotten gains from those who are responsible? The mere fact that shareholders might lose their stake going forward doesn’t resolve that concern; why should those who so fantastically profited from these schemes they couldn’t support walk away with their gains? This is “redistribution of wealth” and “government takeover of industry” on the grandest scale imaginable — the buzzphrases that have been thrown around for decades to represent all that is evil and bad in the world. That’s all this is; it’s not an “investment” by the Government in any real sense but just a magical transfer of losses away from those who are responsible for these losses to those who aren’t.

    [snip…]

    What’s most vital to underscore is that the beneficiaries of this week’s extraordinary Government schemes aren’t just the coincidental recipients of largesse due to some random stroke of good luck. The people on whose behalf these schemes are being implemented — the true beneficiaries — are the very same people who have been running and owning our Government — both parties — for decades, which is why they have been able to do what they’ve been doing without interference. They were able to gamble without limit because they control the Government, and now they’re having others bear the brunt of their collapse for the same reason — because the Government is largely run for their benefit.



    [snip…]

    …an injustice so grave and extreme that it defies words is taking place; that the greatest beneficiaries are those who are most culpable; and that the same hopelessly broken and deeply rotted institutions and elite class that gave rise to all of this (and so much more) are the very ones that are — yet again — being blindly entrusted to solve this.

    [snip…]

    Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

    That’s taxpayer money. Your money. Not the “government’s” money. Not money “printed” by the fed or magically created out of thin air.

    Taxpayer money.

    Your money.

  9. and unfortunately, the Crooks are still the ones in charge of the Govt. Having worked in govt. I can tell you that I’m not at all confident in any statistics released by govt. (“Lies, damn lies & statistics” about sums it up, especially govt. statistics).

    For the truth, we have to dig a bit deeper, and look to sources other than the propaganda released by the govt. or the BS being spewed by the same wall st. types that got us into this mess in the first place.  

    Blogs like:   Calculated risk and the Bondad Blog are just two blog sources that offer some non-tainted analysis.  And foreign news sources like Financial times often give a broader picture than the Wall St. affiliated reports from “news” sources here.

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