Bernard Schwartz, Laura Tyson, Martin Wolf, George Soros Mark Zandi and Others to Headline Major NAF Economic Policy Forum on London G-20 Meeting and What Will Replace US Consumer

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obama summers geithner.jpgRegrettably, the Obama administration seems to be fumbling the ball on an economic policy course that restores confidence in the American economy on both the optics level and also on a substantive front that reorganizes the “social contract” and design of the real economy in the U.S.
Obama, in his ‘loyalty’ to his current economic team and the mistakes they are making is the antithesis of Abraham Lincoln. Obama may have tried to mimic Lincoln’s “team of rivals” approach to politics — but he needs to read the chapters on the number of generals Lincoln fired during the Civil War to finally get things moved forward.
Obama may need to fire a number of his economic generals who have been trying to restore Wall Street to what it once was — not boldly and critically reorganize the financial sector in a way that the dysfunctional behavior that characterized its bubble success is dismantled and reshaped.
Civil society should not wait quietly while Obama’s team continues to fumble — and while its key economic policy chiefs play “point the finger” at their colleagues behind the scenes. It’s time for serious discussion about what needs to be done. . .and we need better benchmarks than we have for applauding, critiquing, and simply measuring the policy steps the administration is taking.
bernard_schwartzNAF.jpgPaul Krugman, James Galbraith, Joseph Stiglitz, Robert Reich, Robert Kuttner and others have been invaluable commentators and truth-tellers on the macro and micro dimensions of the economic policy steps and missteps the Obama team has been making.
Under the auspices of the New America Foundation Economic Growth Program, Next Social Contract Initiative, and Smart Globalization Initiative — my colleagues and I are organizing a set of economic policy forums that are going to raise questions about our economic policy course.
The first “Bernard L. Schwartz Economic Policy Symposium” will take place in Washington at the New America Foundation offices on Thursday, 26 March 2009. Attendance information is here.
Financier and former Loral CEO Bernard Schwartz has been trying to push the administration and Congress to realize that there are different kinds of deficits the nation has to struggle with — and the most important in his mind is leaving an “infrastruture deficit” to the next generation. He will be helping to open this important conference.
George Soros Steve Clemons TWN 2.jpgPhilanthropist and investor George Soros will also be speaking — and has been pushing a five point plan for the Obama team to consider. His new book is about to appear — but a short primer piece of his recently appeared on Huffington Post and outlined five key points of an economic recovery plan that the Obama team has flubbed up on for the most part:

1. A fiscal stimulus package
2. A thorough overhaul of the mortgage system
3. Recapitalization of the banking system
4. An innovative energy policy
5. Reform of the international financial system

martin wolf econ.jpgFormer National Economic Adviser to President Clinton, Laura D’Andrea Tyson, will also be engaging in a discussion with Chief Economics Commentator and Associate Editor of the Financial Times Martin Wolf. Wolf, who recently authored the book Fixing Global Finance thinks that there is very little that can be done at present time to respond to the collapse of consumption by American consumers that have been the essential driver of global growth. Tyson has been very focused on the question of what America needs to do to rewire a “new social contract” with middle class American workers who have been left behind by the patterns of economic growth in the past.
laura tyson econ.jpgI have been suggesting for some time that “Tysonomics” — which recognizes a need for government prioritizing of certain strategic sectors and of regulation — is very different than the Rubinomics that dominated the Clinton administration (even when Laura Tyson worked for it) and which arguably were at the root of much of the deregulatory, neoliberal mania that helped hatch the economic disaster the nation and world find themselves in today.
Others in this conference will be Mark Zandi, Chief Economist and Co-Founder, Moody’s Economy.com as well as author of Financial Shock: Global Panic and Government Bailouts — How We Got Here and What Must Be Done to Fix It; Tom Gallagher, Senior Managing Director, International Strategy and Investment (ISI) Group; Richard Vague, Chairman and CEO, Energy Plus and Founder and Former Chairman & CEO, First USA Bank; Leo Hindery, Managing Partner, Inter-Media Partners and former CEO, AT&T Broadband Network as well as Former CEO, Yankee Entertainment and Sports Network — who has been writing recently on the “Obama job creation deficit”; Jeff Madrick, Director of Policy Research, Schwartz Center for Economic Policy Analysis, The New School and author most recently of The Case for Big Government.
Also. . .Sherle R. Schwenninger, Director, Economic Growth Program, New America Foundation; William Gerrity, Chairman and CEO, Gerrity International; Clyde V. Prestowitz, Jr., President and Founder, Economic Strategy Institute; Nicholas Lardy who recently co-authored China’s Rise: Challenges and Opportunities and is Senior Fellow, Peterson Institute for International Economics; and finally one of the most prescient forecasters of today’s major economic crisis — Desmond Lachman, Resident Fellow, American Enterprise Institute.
I will be moderating the meeting along with my colleague Sherle Schwenninger and New America Foundation President and New Yorker staff writer Steve Coll.
Bernard Schwartz. . .George Soros. . .Laura Tyson. . .Martin Wolf. . .Clyde Prestowitz. . .Desmond Lachman. . .Tom Gallagher. . .Steve Coll. . .Mark Zandi. . .William Gerrity. . .Leo Hindery. . .Richard Vague. . .Nicholas Lardy. . .Jeff Madrick. . .Sherle Schwenninger. . .and others make up quite a line up for a great meeting.
For those who are deeply interested in these issues, I should note that George Soros’ revised book (in paperback) will be released next week on March 30th and is titled The Crash of 2008 and What it Means: The New Paradigm for Financial Markets. Soros will also have a major economic policy critique/op-ed in tomorrow’s (Monday, 23 March) Financial Times and another economic policy op-ed in Tuesday’s (24 March) Wall Street Journal. Leo Hindery will have a front cover featured article on the Obama administration’s job creation deficit in the April 1 edition of The Nation which should be online early this next week.
This entire conference will STREAM LIVE on this blog, The Washington Note between approximately 8:30 am and 1:00 pm EST on Thursday, 26 March 2009.
If you would like to attend, RSVP information is here.
The purpose we have in organizing this meeting is to try and position some of the key issues that should be considered at the London G-20 meeting and to begin to emphasize that the fumbling on economic policy needs to stop.
It’s time to begin organizing a Team B economic policy effort — even if it is organized by a network of concerned civil society leaders.
— Steve Clemons

Comments

38 comments on “Bernard Schwartz, Laura Tyson, Martin Wolf, George Soros Mark Zandi and Others to Headline Major NAF Economic Policy Forum on London G-20 Meeting and What Will Replace US Consumer

  1. TonyForesta says:

    I apologize if the commentary was a little hot, or offended your sensibilities, Dan Kervick – but the discussion did not involve taxes, or psychology. The point being made, is that “Someone is certain to pay for the excesses and abuses of the last decade. Should it be the abused, or the abusers Dan Kervick?
    I support Obama and struggle hardily with this issue, because it seems like a betrayal. Bailing out FAILED corporations and FAILED managements bruting FAILED models is certain to FAIL!!!
    Simply printing money, hoping China, the House of Saud, or Japan will finance the debt, heaping crippling financial liabilities and burdens on our children, and walking away with obscene bonuses for the failure is conduct unbecoming.
    How much abuse do we have to tolerate, before we stand up and shout NO!!!
    How does propping up insolvent banks and insurance enterprizes, with debt sold (hopefully) to China, the House of Saud and Japan benefit the American poor and middle class?
    It doesn’t. These policies are luxurious gifts to the predator class mastersoftheuniverse who are responsible for conjuring, profiting wantonly from, cloaking, and exacerbating the most severe economic crisis since the great depression. These luxurious gifts from the government are paid for by an already stressed poor and middle class American taxpayer.
    Look past the unsustainable, unsound, deceptive economics, – morally this behavior is disturbed and wrong. Rewarding this behavior is equally disturbed and wrong.

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  2. PissedOffAmerican says:

    “Economic activity depends in large part on exchanges of confidence. If we just fill people with despair, then we only get the despair we spread, and things get even worse”
    Well, Dan, we just saw eight years of these posturing pieces of shit in Washington assuring us that the economy was fine and “robust”.
    Uh, gee, Dan, how’d that work out for us?
    Perhaps touchy feely ain’t the way to go, anymore than a “the sky is falling” approach is. Can’t we, for once, just get the truth out of this criminal elitist garbage acting like they know WTF to do??
    If the Washington body politik really thinks that we are too fuckin’ ignorant, or so ridiculously naive, to digest the truth, than they obviously don’t think highly enough of us to act in our best interests.
    Maybe I’m just a bit old fashioned and set in my ways, but I’d have a hell of sight more confidence in these people’s motives and competence if they’d give people like Dodd a swift public kick in the ass when his ilk stands before us, looks us straight in the eye, and lies unabashedly.
    I don’t trust these pricks any further than I can throw them. Anyone that thinks these people give a rat’s ass for the truth, the rule of law, or the best interests of the peon classes, which you and I are a member of, is an idiot. We didn’t get here by Washington acting in our best interests. So what has changed? Why should we, think that all the sudden they all grew halos?
    These people are 99% Bernie Maddoff, and 1% Mother Theresa. Now just which personality do you think is gonna exercise the upper hand?

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  3. Dan Kervick says:

    I’m definitely not filled with glee, POA. I’m stressed out too. I worry every day about my job and my family’s future. But if the boat is truly in danger of sinking, then I think we need to bail furiously, and not just stand around yelling, “It’s going down! We’re all doomed! Let’s kill the crew!”. To get people to continue bailing, no matter how bad things get, we need to maintain a can-do attitude where criticism is constructive and leads to better approaches. Economic activity depends in large part on exchanges of confidence. If we just fill people with despair, then we only get the despair we spread, and things get even worse.
    The Treasury plan that was released today was leaked in part over the weekend. And in their haste to play their mechanical roles of gadfly-pundits, and be first off the mark with their attention-grabbing criticisms, several commentators got a number of important details wrong.
    Some of those critics, I would note, appear to face almost no personal risk from the economic decline. But I feel like my job and future are on the line, so I would appreciate it if people would at least look for the whites of their opponents’ eyes before blasting away wildly in their self-indulgent efforts to demonstrate how smart they are.

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  4. PissedOffAmerican says:

    I have a few unemployed nieghbors that will be thrilled to digest Dan’s optimistic glee at the unemployment stats.
    Its always great to see people be mere “digits” until thier numbers have risen sufficiently enough to lend them a bit of human worth.

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  5. ... says:

    yea sure – blow more bubbles and get into the same position of over confidence leading to mania, which is what the market has been in since the early 80’s anyway…

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  6. Dan Kervick says:

    “People are scared with good reason. They are hoarding their cash. With good reason. This will, and is, leading to more unemployment, which in turn leads to more fear, and more hoarding, and so on.”
    So then, since part of the problem is a self-reinforcing cycle of fear, it would seem like a worthy public policy goal to try to build confidence and disrupt the cycle, instead of saying “Be afraid! Be very afraid!”
    So, let’s examine the loan tapes Dan and we can see where we stand.
    That’s an excellent idea. We need a clearer picture of how much these assets are actually worth.

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  7. jonst says:

    Dan,
    Anyone who thinks “…. that unemployment is still only in single digits” is either a fool, grossly uninformed, or really does not get out of the house very much.
    Using the government’s measure of unemployment, the L-3 perhaps the rate is ‘in single digits’. In some places. Not in California. But the L-3 counts every single ‘consultant’ out of work, but still seeking it and calling themselves employed. It counts every carpenter who works 2 hours a week. Or bartender who works two weekends a month. You want to go that route, fine.
    But employing the more accurate measurement, or, shall we say, more realistic measurement, L5-6 the number is above single digits and skyrocketing.
    See link below to see how this game is played.
    http://www.mindfully.org/Reform/2008/Pollyanna-Creep-Economy1may08.htm
    People are scared about losing their jobs. You say that some people are tightening “irrationally”? Honestly, and with all due respect (but no more)what F’n planet do you live on because I want to live there too.
    People are scared with good reason. They are hoarding their cash. With good reason. This will, and is, leading to more unemployment, which in turn leads to more fear, and more hoarding, and so on.
    One has to be willfully blind not to see this and all the pep talks in the world can’t change that. I mean I understand where, perhaps, your coming with this Babbitt like hucksterism. The best I can say about it is, paraphrasing Nietzsche ‘were I to believe in nonsense yours is the kind of nonsense I would believe in’.
    Now, as to other stats you demand.
    You say the banking crisis is “serious but fixable banking problem”. Sure it is…if one of of the following things happens. The banks, and you, are right, and just as people pushed the bubble up irrationally, they are pushing it down the same way. That is one to fix it. The tax payers take the fall and bail the banks out. That is another way
    The we declare the backs insolvent. The shareholders and bond holders take the fall Without doing all the necessary research lets say this:
    Here is a quote from James Galbraith:
    “he central Treasury assumption, at least for public consumption, seems to be that the underlying mortgage loans will largely pay off, so that if the PPIP buys and holds, at an above-present-market price governed by auction, the government’s loan to finance the purchase will not go bad.
    Recovery rates on sub-prime residential mortgage-backed securities (RMBS) so far appear to belie this assumption. IndyMac lost $10.8 bn on a $15bn portfolio (and if you count the wipeout of equity, the total loss is about $12bn). That’s an 80 percent loss. It’s possible that recovery rates at other banks will be better, but how can we know? No one is examining the loan tapes.”
    So, let’s examine the loan tapes Dan and we can see where we stand.

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  8. ... says:

    dan kervick “By Jacobinism, I mean the tendency of some to tolerate the suffering of many in order to vent their rage and act out their vengeance on the few.” isn’t that what defines capitalism? those who aren’t suffering are just working harder to earn their position according to this same ideology.. the problem i see dan is that this is exactly what we have had for the past 20 to 30 years in particular…

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  9. Dan Kervick says:

    I agree that the Obama is not receiving a diverse enough body of economic advice. He needs more voices.
    But I do not believe we are in a depression given that unemployment is still only in single digits.
    And I think it is not responsible to promote Jacobin “let it crash” strategies in the present climate. I don’t approve of Jacobinism, whether in Iraq or on Wall Street. By Jacobinism, I mean the tendency of some to tolerate the suffering of many in order to vent their rage and act out their vengeance on the few.
    Economic collapse is no fun. When people lose their jobs, their spouses hate them, their kids hate them and they hate themselves. They lose their houses, and they lose their savings. Life sucks. We should do whatever we can to avoid that sort of massive individual social disruption, without regard to our pre-existing ideological preferences. Promoting slitting the throat of the national economy, or blowing it up, just to make a few hundred fat cats suffer, is reckless.
    Jonst, if you think a depression is unavoidable, then put up or shut up. Give us some actual numbers that show the current decline in economic activity *cannot* be turned around through fiscal and monetary policy, and a toxic asset plan. Show us the numbers that demonstrate this is not just a deep recession with a serious but fixable banking problem. If you can’t, then you are fear-mongering.
    The banks are not just gangs of fat cats. They are mostly filled with regular people, making five figure salaries, working in accounts payable, customer service, sales and marketing, accounting etc., who already know the business of running a lending institution. We need to scrape away the bad managers and bad management practices, clear the problem of bad assets, and then use the institutional tools and knowledge bases that already exist.
    Now, if somebody thinks that banks should be nationalized because we can restore healthy lending and more normal economic activity more quickly and less painfully with a direct government takeover, then I want to hear the plan. But if they don’t really know, but just like the idea of wiping out people who make more money than they do, and doing something that sounds vaguely “bold” and takes revenge on the capitalist class, whether or not this is the most effective path to restoring normal economic activity, then I have no reason to listen to them.
    If the economy is going to go down, at least it can go down with a fight. Sure, some people have tightened up their spending because they are in debt. But a whole bunch of people have tightened up irrationally because all they hear are fear-mongers preaching apocalypse. What we need is constructive criticism, practical plans and a can-do spirit. How exactly does it help to preach the end of the world as we know it? If the world as we know it is ending no matter what we do, it does no good to prophesy it. On the other hand, if the end of the world as we know it is avoidable, then these preachers of doom are a public menace who undermine social morale ina way that risks making their prophesies self-fulfilling.
    A state of permanent outrage is self-indulgent. I’m losing my patience with people who have no ideas other than to stand around and say, “This boat is sinking, and I’m so fucking smart and righteous to point it out over and over, and to rail against the evil doers.”

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  10. Linda says:

    Discussion on this thread has me agreeing a lot with just about everybody above.
    I hope that people high up in Obama Administration are reading TWN and taking this very seriously–so that they soon find a way to reconcile all of this and make changes before it is too late.
    Several things are missing right now from Obama Administration’s thinking:
    The Obama team of rivals needs to be created in his economic team, i.e., bring in the Galbraiths, Stiglitz, Krugmans, and many of those Steve will have speaking on Thursday.
    It is not an economic team of rivals nor very wise thinking to get advisors from and think recent history only back to 1992 and the Clintons– and not to understand as questions wrote:
    “Look what’s happening to universities and baseball teams in the bidding wars.” It goes back to 1981 and Reaganomics.
    Similar changes have occurred in health care. Bidding wars are highest among medical school faculties where salaries are obscene and supplemented very nicely by Big Pharma and patents are more valued than patients.
    For those who are too young to recall, in 1980 prescription drugs couldn’t be advertised on television, and universities couldn’t hold drug patents. These were bipartisan efforts when passed, but then Congress let them run amok and did not revisit or revise them, as they were abused.
    The real challenge for Obams is the ethical and philosophical debate above and how to deal with it in communicating with the public.
    I don’t have the time or inclination to do the research on-line but from Watergate to today–all the major weekly (though some aren’t weekly any more) magazines have had many cover stories on ethics–after Watergate, Iran-Contra, every economic and political scandal. Then we quickly forgot and moved on after weak fixes.
    Bill Gates is a good example, i.e., around 2000-2002, he was not a hero in the media and looked very bad having not only the big antitrust suit against him but also an ERISA one where even while Microsoft was prospering, many of his workers were outsourced independent contractors who didn’t get even health insurance, stock options, or the recreational and other treats that “real employees” at Redmond got. There were two classes of employees, an “in” group and an “out” one— like the worst of adolescent high school. And this was in the biggest and most prestigious corporation in the U.S.
    Eight-ten years ago Bill Gates had amassed incredible wealth and was not giving it away. That started only after his public image was badly tarnished, and he wisely and ethically decided to change course and become the model citizen he is today.
    Clinton’s triangulation in his second term gave us TANF (welfare reform) that caused people like Peter Edelman to resign from high positions in HHS and leave–as had Robert Reich. It worked only to get people off the welfare roles but just created more working poor–working two minimum wage jobs to survive at poverty level–and never getting the child care, job training and educational benefits promised to enable them to advance.
    There are dozens of examples including Sarbanes-Oxley and other feeble attempts to do something about corporate governance to give shareholders more say, etc. Nell Minnow and others have been talking and writing about these issues for many years. Also for many years there have been small and totally unsuccessful shareholder proposals at drug and other companies to deal with ethical issues, executive pay, etc.
    The majority of the populist rage today needs to be dealt with by understanding that while most people don’t quote Locke or other social philosophers, they recognize the gross unfairness and inequality.
    Indeed the perfect metaphor for what happened at Microsoft and for the situation today is in Dr. Seuess’ in “The Sneeches” and “The Zax.” For those who don’t have or read to kids: Just google “The Sneeches” to get Wiki summaries of both stories. They are a lot more fun to read than Locke, Bentham, Kant, etc.
    So I think Obama needs to find a way to capture all this and perhaps look more to Harry Truman. So far he has only been good at saying the buck stops with him. He needs a good slogan to capture it all, like Harry Truman’s “Fair Deal.”–maybe a “Renewed Fair Deal.”

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  11. jonst says:

    Dan,
    So even having a discussion about the possibility that we are in/heading to an event like the Great Depression is “reckless”? “Promotes mass hysteria”?
    Somebody should quickly tell Judge Richard Posner:
    “The government has decided to impose a $500,000 ceiling on the senior executives of banks and other financial institutions that accept bailout money. This is a bad idea, though politically inevitable because of public indignation at financiers, thus illustrating a point I make in my forthcoming book about the depression–for I insist that it is a depression, and not a mere recession, that the country is in–that a depression is a political rather than just an economic event. (The book is entitled A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression, and will be published early in April by the Harvard University Press.)
    http://www.becker-posner-blog.com/archives/2009/02/
    Your language Dan reminds me of those talking heads on CNBC that use to shout down anyone who came on their shows and said the real estate market was a giant bubble waiting to happen. As the ‘cool guys’ advised us all to go get adjustable mortgages. The CNBC heads used to say there was no bubble but you bring one about by talking about it. That is you, somewhat, sound like to me.

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  12. Edward Lane says:

    I’m not competent to comment on the wisdom of the Administration’s economic plan, nor am I competent to comment on the political realities of implementing change.
    But I do have a sense that it would be wise to give the Administration more than 2 months to succeed or fail before writing off their efforts.

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  13. questions says:

    Dan Kervick,
    We can’t just have a law restricting income because… well, because it isn’t American or something. The property relation, the freedom thing, the don’t tread on me feeling, the incentive issue (as in I’d never be motivated to invent exotic mortgage products if I couldn’t earn millions) — all of this is going to stop us from limiting income to a reasonable multiple of the lowest paid or whatever. And sad.y, lower paid people often seem to agree not to limit upper salaries because many seem to operate under the delusion that they, too, will one day be raking in the bucks.
    In terms of managerial talent, we should know by know that there’s a lot more talent than there are jobs to take that talent. Let companies raid each other, let some people go to higher paid firms. Look what’s happening to universities and baseball teams in the bidding wars. Suddenly there isn’t money to pay the talent, and frequently, students and fans are happier with cheaper talent. The “bidding wars” meme is fake.
    In fact, there’s no reason to pay people so much excess that they can’t even use the excess. Locke hits on this, feels he’s solved the problem with the introduction of coinage, but even coinage, it turns out, can be so amassed as to go to waste. It doesn’t mold, but it also doesn’t produce.

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  14. Dan Kervick says:

    Personally, I have always thought it was inefficient to allow firms to award massive compensation to their top employees, and then to tax it away. Why not just limit extravagant compensation by law to begin with, and set up new rules of the game whereby the firms’ managers are required to plow more of their earnings back into productive investment, or distribute them throughout the company in compensation for all employees, rather than extract massive amounts of extravagant wealth for the benefit of the lucky few?
    The way to deal with the problem of managerial talent who threaten to walk out and go elsewhere if they are not given their precious multi-million dollar compensation packages is to write laws that assure those packages don’t exist *anywhere*, so that the managers have nowhere to go. Their jobs can be performed anyway by people willing to work for a lot less.
    I do not at all believe another Great Depression is inevitable. However, one might happen if people continue to promote mass hysteria and fear in such a reckless fashion, and continue to distract themselves with visions of social vengeance from the task of rebuilding prosperity and taking care of the next generation.

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  15. jonst says:

    Dan K wrote: “How do you plan to accomplish the transition without leaving the nation bereft of a financial sector for a sustained period of time and plunging it into a depression”?
    I think it is too late to accomplish that Dan. We are gonna be plunged in something like the Great Depression. By definition, I would argue, a Depression is for a “sustained period of time”. So the challenge seems two fold to me:
    1. How do we best keep our citizens’ heads above water
    2. While we, similar to the Great Depression, rebuild the financial system, and restructure the ‘social contract’ for Americans.
    And my suggested way of starting to do this is to stop listening, or soliciting advice, from those who got us in to this mess. Those that have vested interests, both tangible and intangible, in covering up their roles in this mess, and protecting a status quo…..as if it still exists. And I mean this on the economic front, on the political front, and on the national security front. i.e. It is time for the Empire to declare itself ‘redundant’.

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  16. questions says:

    Seems to me you should have a stockpile of social theorist/philosopher/Marxists running about as well. It seems to me a fundamental problem that we have held that it is okay for people to amass unbelievably huge fortunes, to separate their own good from that of the rest of the nation, and then to expect public aid when things collapse. Use value falls while exchange value rises as a goal. Exchange is more pleasurable than use.
    And yet, there’s a 60 month limit on welfare (TANF), hardly any help with housing or health care or childcare. In short, lose a few million to Bernard Madoff, a few billion to a market collapse, WE WILL HELP YOU, but lose $650 to a car repair bill from a pot hole and so what if you can’t pay your heat bill. Go freeze after April 1. Kid is sick — well you shouldn’t have had a kid til you could AFFORD a kid…. So, lose your job.
    Until we all feel, once again, that we are all signatories to the social contract, that we all GIVE UP even as we get (that’s what it’s really all about), we will repeat these disasters again and again. We have created a Leviathan with a much larger number of sovereigns than Hobbes would have had — sovereigns who would seem not to be signatories, but on whose well-being and power we are all stuck depending.
    For Rawls, it’s the original position/veil of ignorance construct that helps us think this way. One could also make use of simple empathy, tax rates high enough to weaken the wealthiest, social programs designed to make pot holes, sick children and life’s other small disasters from becoming epic. We have to feel connected so that when we game out a scenario, the calculations are broad and social rather than personalized and narrow.
    Economists would seem to have failed at all of this because of constructs like “moral hazard”, “free market”, and “rational choice/homo economicus”. Time for a new academic field to get involved? Kant reminds us to let philosophers speak instead of feeding them hemlock. Not a bad idea!

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  17. billjanes says:

    “We need them [meaning banks and financial institutions] to
    lend like crazy…” declared Chairman of Obama’s Council of
    Economic Advisors, Christina Romer, on CNN State of the Union.
    Lend to borrowers, I assume, but who are the ‘borrowers’ to
    whom she referred? Businesses, such as the incompetent auto
    companies? Failed retail stores, such as Circuit City, Linens and
    Things or scores of others now out-of-business? The housing
    industry? How about GE? In order to pay back their loans,
    companies have to sell their products and services to
    consumers. Who’s going to buy them? Consumers are in debt
    (last year spending more than they made); based on the
    usurious rates currently charged, consumers will take years to
    erase the loans they currently have; and middle class consumers
    will have to carry the bailout burden in the form of future taxes
    (to raise taxes on those who got rich gambling with middle class
    retirement funds would be ‘socialism’).
    So, I would ask Ms Romer (and others in the administration who
    pretend to understand this ‘very complicated situation’) why
    trillions are not spent on taxpayers and consumers, to enable
    them to work, earn decent wages, payoff existing loans and
    purchase new products and services? Then, the financial system
    could ‘lend like crazy’ with the realistic expectation of being paid
    back by those same individuals who borrowed (as opposed to
    being paid back by tax payers).
    The Council of Economic Advisors has it backwards: Until
    taxpayers and consumers are made whole, there will be no
    purchasing, and no reason for companies to borrow, and no
    ‘lending like crazy’. But there will be a bailed out financial
    system and those who created the mess will have been made
    whole. That’s some economic advising you got there, Barak.

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  18. TonyForesta says:

    Here is the problem my brother, – I do NOT think that (“the government should just print all the money it needs to satisfy the demand for capital? Don’t you see a downside from such a rapid expansion of the money supply?”) Obviously, any cursory examination of any economic theory or metrics points to severe inflationairy forces, and currency devaluation. Yet this is exactly what the FED is doing NOW. Bernaki admitted this on 60 Minutes last Sunday. The FED is simply printing money. The difference is that NOW this printed money, (which the taxpayer, {NOT THE SWINDLERS AND THIEVES ON WALLSTREET WHO CONJURED THIS MESS} are accountable, and on the hook for radical increases in interests rates, taxes, radical reduction in services, or some combination thereof going forward).
    Someone is certain to pay for the excesses and abuses of the last decade. Should it be the abused, or the abusers Dan Kervick?

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  19. ... says:

    for the record, i thought this same way a long time ago, but sometimes one has to wait for an opening where it becomes apparent to more of the need for radical change from the routine that has gone on too long…

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  20. Dan Kervick says:

    Tony, I am impressed with your outrage, but not convinced that you have a feasible alternative plan.
    Do you really think, for example, the government should just print all the money it needs to satisfy the demand for capital? Don’t you see a downside from such a rapid expansion of the money supply?
    And yes, if it weren’t for Paulson, Geithner, Bernanke et al, it is probably true that most of the old banks would be gone, and the financial system would be in ruins. As a result, we might now have unemployment in the 20% to 30% range, rather than just in the high single numbers.
    I agree that there is a problem with financial institutions growing too large. But blowing everything up and starting from scratch isn’t, it seems to me, a responsible option.

    Reply

  21. ... says:

    dan kervick, i like your imput as always, but i am reminded of what johnh said up above aboout “…privatizing profit and socializing risk.”
    one idea would be to abolish the federal reserve and its cartel.. the us gov’t could make dollars backed by the government with no interest having to be paid to the federal reserve for doing so.. that is just one of the many corruptions of the federal reserve and they are the organization that is front and center in being responsible for the disaster staring everyone in the face at present.. of course they are going to scream the loudest over the idea i am putting forth here, but aside from a few lone wolfs like ron paul, this is definitely the way to go… money and war go hand in hand, with a huge military complex being an important part of it all.. i think we are headed in a dramatic direction that brings this to some sort of crisis, and hopefully greed will not be the cause of more death and mayhem around the planet…
    usually when something breaks down one has a choice to try a makeshift fix, or start over from scratch… i think the movement right now is for the makeshift fix, but i think we are headed fr a complete breakdown where a complete overhaul will be mandatory…
    all the financial/eco gurus didn’t foresee this and they are unable to foresee a way out either… a new mindset is necessary and requires a complete break with the past…

    Reply

  22. TonyForesta says:

    The plan Dan Kervick is to QUIT pouring trillions of borrowed taxpayer FED printed dollars into a futile attempt to propup or bailout FAILED institutions, managements, and models who are responsible for the worst economic crisis since the great depression – methodically managing the demolition of those FAILED insitutions, managements, and models, – and erecting a new more legal, economically sound, more fiercely regulated and monitored, more ethical, and more equitable financial system. “Any institution that is tobigtofail, is to big to exist”! Tobigtofail institutions must be intelligently dimantled, and prohibited from ever existing again.
    ‘Tobigtofail’ is 21stcentury speak for MONOPOLY!!! Didn’t we already go through the horrors, abuses, and depravities of MONOPOLISTIC rule and predator class influence and connection to the government, and recognize that this kinds of enterprizes, (especially the PONZI scheme enterprized) are incestuous, harmful to society, and so illegal illegal? Yeah we did. Because these kinds of tobigtofail enterprizes are incestuous, harmful to society, and so illegal!!!
    The banks would already be gone were it not for Paulson, Geithner, Bernake, Volker, Greenspan, bush, Obama, – and of course the AMERICAN TAXPAYER!!! The government is the lender of last resort and can simply print money to lend through facilities of a new “government sponsored enterprize”. All the current management are sent packing. Your mastersoftheuniverse services are no longer required. We are lookiing at new ideas, and new teams, and new strategies that are certain to be fiercely regulated and monitored, and that are rooted in genuine concern for the greater good, and for the least amongst us. None of the predator sociopaths, swindlers, and thieve in the current panjandrum can image such a world, and that is why the predator class must be retired. Those who are culpable for criminal conduct, mut pay the terrible price for their crimes. Others can quietly recede into the shadows and the fantastical comforts of imponderable wealth. Others will join the goodfight and recognize that, – if one child in America goes hungry, or has no access to decent health care, or is deprived of a highstandard education, or is disatvantaged because of race, color, creed, class, or sexual pursuasion – we – America have FAILED!
    Greed is never good! Greed leads to domination, which leads to obdurance, which lead to heartlessness, which leads to abuses, which leads to crimes, which leads to collapse and violent reprecussions.
    Greed is bad! We are our sisters and brothers keepers or we are savage predators!

    Reply

  23. Dan Kervick says:

    We should be viewing this moment as a wonderful opportunity to overturn the existing financial superstructure, rather than flailing about trying to fix it.
    Well, what’s your plan for doing that, Gizmo? An economy needs a financial sector, so how do you propose to accomplish the overturning? What do you plan to put in the place of the institutions that have been eliminated? How do you plan to accomplish the transition without leaving the nation bereft of a financial sector for a sustained period of time and plunging it into a depression.

    Reply

  24. PissedOffAmerican says:

    Watching one well established contractor after another laying off crews and scrounging for work doesn’t exactly instill confidence. The contractor I work with still has work, as he caters to the high end. But I am seeing a shift from new home building to remodeling in the high end market.
    Most housing/construction slumps have the beneficial effect of weeding out the fly-by-nighters and the contractors/tradesmen that produce a less than quality product. But this time around it seems even the well established companies with good names are feeling a severe crunch. If this doesn’t turn around its doubtful that many of these companies can stay in business. And it doesn’t seem likely its gonna turn around anytime soon.
    Theft is way up on jobsites, with both tools and materials being targeted. A wary eye on your work truck while going into material outlets or restaraunts has become an essential practice. When people get hungry, it seems anything goes.
    A local attorney/investor just bought a major KB Homes tract site for 1.4 million. It is rumored KB had over seventeen million in it. While we peons go without, some people are going to get even more obscenely wealthy than they already are. It will be intersting to see if we come out of this with a middle class still intact. One thing is for sure, the shrewd fat cats won’t be hurtin’, nor will these posturing pieces of shit in Washington.
    But don’t worry, they’ll be sure to tell us how they feel our pain.

    Reply

  25. Dan Kervick says:

    “We simply CANNOT keep going the way we have been going the last couple of decades…. it is not sustainable.”
    True Susan. But that is a different problem from the problem of ending the current recession. If we don’t restore basic economic health, we can kiss the environmental restoration dreams and the energy system overhaul dreams goodbye.

    Reply

  26. gizmo says:

    Most of the discussion about the Obama/Geithner approach is
    centered around the question of how best to bring Wall St. and the
    big banks back to economic health. But hardly anyone is asking
    the more important question– why on earth would we want those
    reckless, incompetent, and irresponsible institutions to survive? We
    should be viewing this moment as a wonderful opportunity to
    overturn the existing financial superstructure, rather than flailing
    about trying to fix it.

    Reply

  27. Dan Kervick says:

    Well, Steve, when it comes to dealing with the recession itself – and not with each and every long-term structural problem with the American economy – exactly what different course is needed? If you’re so convinced that the administration is going about it all wrong, what is it you personally think they should be doing instead? And again: I’m just asking what you would do to pull the country out of the recession, not how you would subsequently re-design the entire social contract.
    I’m getting a bit frustrated with with all the pandering to the mob. If someone wants to step up with some true left-wing, neo-socialist economics – devised by serious economists who really know what they are talking about – I am right there, and all for adding those serious proposals to the discussion. But instead what we are getting is a lot of dumbed-down, economically illiterate, pseudo-left, populist outrage about side issues, wasting precious time with a fractious fuss over fractions of funds. And we have pundits piling on with their ostentatious, demagogic efforts to convince the mob they are on their side.
    Personally, I have long advocated something like a 20 to 1 rules for salaries in this country. I think we ought to cap off salaries across the whole economy as a matter law, and that a whole host of social and economic benefits would result. But you know what? That idea, as excellent as it is, doesn’t have squat to do with ending the recession.
    I would also like the United States to have a much broader and more more comprehensive safety net, and to fund it with a higher savings rate. That excellent idea is a long-term ambition that also has diddly to do with ending the recession.
    I know Soros is plugging a book, but looking at his list of need-to-do bullet points, I don’t see a heck of a lot of difference between his suggestions and the things that are actually being done.
    Everybody hates the bankers right now, with good reason. But as a result people are putting themselves through all sorts of intellectual contortions in a futile effort to talk themselves into some magic solution that does not involve fixing the financial institutions’ balance-sheet problem with the “toxic assets”. But is there really any other way out?
    We know that those assets are not worthless, because we know that most people are not going to default on their mortgages. But we also know that the market for those assets is frozen and that lending can’t start to work normally again until we get some valuations on those assets. The government is going to have to buy them, or they are going to have to create incentives for private capital to buy them. Unfortunately for the would-be leaders of the mobocracy, our need to save our own asses means we will have to refrain from satisfying our profound and noble desire to wipe-out all the stakeholders in the banks and leave their blood on the streets. (Psssst…We ourselves are actually stakeholders in those institutions.)
    Geithner got his nuts caught in the wringer of the executive bonus flap. He also doesn’t appear to be much of a politician. So he is now facing a a run on confidence. And now he’s got to waste a day on Tuesday facing a bunch of grandstanding men of the people in Congress yammering about AIG. A whole bunch of people whose depth of knowledge goes no further than what George Will or Peggy Noonan or Keith Olbermann opined on the previous day are now dominating the national debate.
    So Steve, have your discussions. But as you are having them, could you please not contribute to the massive attention deficit problem that is afflicting this country, and avoid distracting people from the most urgent tasks at hand by proliferating yet more wish-lists for the Transformation of Absolutely Everything.

    Reply

  28. Susan says:

    I recommend inviting Krugman.
    As to the “freaked-out tone” on economic issues, I don’t think it is nearly freaked-out enough. We are not only facing an economic meltdown but also serious environmental problems and energy shortages. I am talking about the next 5 – 10 years. We simply CANNOT keep going the way we have been going the last couple of decades…. it is not sustainable.
    The US citizen has been consuming on debt and every year, producing less and less. That is a problem, but the major economic problem comes from the CDS and CDOs and the fact that these debts will cause a world wide crash. It is more debt than can be paid off, and borrowing from the future will not solve the problem. What is going on now will not ‘save’ those banks and financial institutions, it is only ‘saving’ the elites from going bust.
    Right now, it feels really similar to the run-up to the Iraq war….. it is clearly a pack of lies around what is going on in the economy, and it is clearly headed for a disaster. And seemingly, there is nothing the average person can do to stop it.
    On another topic, anyone out there really believe that Madoff ran a ponzi scheme of 50-60 billion all by himself without anyone one else figuring it out? More likely, he was doing money laundering.
    And finally, I have always felt the hysteria about Iran and the US/Israel attacking Iran was way overblown.

    Reply

  29. Steve Clemons says:

    Dan…thanks for the note. I don’t disagree with you on the fact that much has been discussed and a different course is needed. I get that — but also know that the administration is not yet changing course — so need to keep at this.
    all best, steve

    Reply

  30. Dan Kervick says:

    Steve writes:
    “It’s time for serious discussion about what needs to be done.”
    I’m sorry Steve. But we’ve already had more serious discussion that we can possibly process. I’m afraid you’re just adding to the Tower of Babel phenomenon that is going on right now. Enough with the gibbering financial gurus.
    Everybody and his brother-in-law has some plan. Most of these plans just seem to be the latest breathless response to the latest breathless financial headline or the latest breathless email blast. Or else they are distractions pertaining to long-term structural reform proposals that really have little to do with the immediate task at hand. That goes for plans for a new “social contract”, plans for a legal and regulatory overhaul of the financial sector, plans for the Great Green Infrastructure Project, etc. All of those are important challenges that we are going to be working on for the next several years. But most of them are separate challenges from the immediate task of pulling the global economy out of recession.
    Based on the current tenor of our national debate, I think we are in the middle of another great American freak-out, just like we saw after 9/11. One problem with the 9/11 attacks is that they happened in New York and Washington, right in the back yards of our governing and opinions elites. The elites panicked, and went stupid on us. And when New York and Washington piss their pants, the rest of the world has to sit in the puddle.
    The same thing is happening now with the economic debate. This wasn’t a bottom up recession affecting main street industries, or a bursting bubble in a single, containable business sector. In most recessions, the most powerful elites are somewhat insulated personally from the worst pain, so they keep an even keel. With this recession, the bubble that burst was in the financial sector itself, and the economic bomb went off right the heart of Wall Street and its subsidiaries on Capitol Hill. The masters of the universe who run global capitalism are the same ones who are in the most personal economic danger. Naturally, the result is elite-level hysteria. And since these global masters control the media messages, they are infecting the rest of the country with their hysteria.
    The financial system is in the middle of a contraction and restructuring after a period of over-expansion and Ponzi-like binging. There really aren’t that many different ways of handling the clearing of the losses, and for all the hysteria, most of the plans turn out to be some version of more-or-less the same thing. It’s time to just pick one and go ahead with it.
    Count me as a skeptic about the theory that that this recession represents some catastrophic displacement of the American Consumer or a long-term behavior modification administered to said consumer. Will the new equilibrium be one in which Americans save more than they did before and carry less debt? Probably. But I tend to doubt the change will be dramatic. As in most recessions, the economic debris will be cleared, capital will start to flow more freely, entrepreneurs will develop new goods and services to sell, employment will rise, confidence will be restored, and people will go back to buying things.
    I read all the gadflies too. Their freaked-out tone remains constant, but their diagnoses and prognoses change from day to day. They all wish they could be running things instead of the guys who are running things. That’s tough.

    Reply

  31. TonyForesta says:

    Illustious group Mr. Clemons. We all look very forward to this discussion and hopefully a consensus on a new way forward. JohhH’s excellent suggestion of including the “distinguished professor risk engineering” Nassim Nicholas Taleb, author of the prescient and haunting mustread “Black Swan” would be indeed be a welcome addition.
    This is exactly the kind of diverse and broadthinking assemblage of wetware that is necessary to actually redress the economic crisi, and eventually correct the flawed, failed models and perverse assumptions of financial system and the predator class who singularly manages and profits from the flawed, failed, and perverse models and assumptions.
    Obama is drowned out by supplyside voodoo economists with far too deep attachments to the thieves and swindlers on Wall Street and in the finance sector who conjured, profited wantonly from, cloaked, and are now exacerbating the worst economic crisis since the great depression. This singleminded batch of Wall Street insiders is bent on bailing out their oligarchs and cronies exclusively, and evidently has absolutely no concern for the best interests of the Ameican people. Until changes are made in the Obama economic team, voices like the gentlepeople the New American Foundation will assemble will not be heard. The old ways, the old managements, the old instititions, and the old models FAILED miserably. Real change means making the hard decisions to replace those FAILED institutions, managements and models, with new more legal, more economically sound, more equitable, more ethical and more fiercely regulated institutions, managements, and models.

    Reply

  32. PissedOffAmerican says:

    Steve….
    Apparently “Davinchi’s” website’s advertizing is handled by “adbrite”, a company out of San Francisco.
    Here is their contact info…
    http://www.adbrite.com/mb/contact_us.php
    Address….
    AdBrite
    731 Market St. 5th Floor
    San Francisco, CA 94103
    USA
    Their phone number is listed with directory assistance 411.

    Reply

  33. JamesL says:

    JohnH: “…privatizing profit and socializing risk.” Absolutely, beautifully spot on.
    The current financial situation is a national security issue and needs to be treated that way. That the rights of a few big stakes financial gamblers are being protected while the security of almost all Americans is being bludgeoned is absurd. No taxes, no military. It’s really simple. Why is it we need to protect the bonus contracts of those who have put this country in jeopardy, while someone who drove a taxi in Afghanistan rotted in Gitmo? As this is a national security issue, its time to take the kids gloves off.

    Reply

  34. PissedOffAmerican says:

    It seems Obama is beginning to be a disappointment in many different arenas. His failure to support Freeman, his silence during Israel’s incineration of Palestinian men, women, and children, his Justice Department’s support for many of the Bush detainee and torture issues, his refusal to pursue legal action against the KNOWN criminal acts of many connected to the Bush administration, and now his economic policies are drawing strong criticism from members of both sides of the aisle.
    One wonders, considering that Obama is little more than a media construct, what powers assisted his slither to the throne.
    Intelligence doesn’t always begat competence. In fact, some of the most disfunctional people I have known were those that were cursed with abnormally high IQs. Its interesting that this inability to function is usually exacerbated by a remarkably high opinion of themselves, based entirely on the very abnormal degree of intelligence that rendered them disfunctional in the first place.
    Its not that I’m branding Obama as “disfunctional”. Actually, I am just commenting that his obvious high intelligence does not automatically guarantee sound leadership, or even great powers of deduction or reasoning. I haven’t seen much in the way of policy or appointments that tell me his intelligence has been an asset thus far. In fact, as each passing week goes by I seem to be detecting the mannerisms of a man that is driven by ego far more than by reasoning.
    He best get his shit together, because something tells me it ain’t gonna get any easier. And these rabid racists coming into power in Israel will undoubtedly put him to the test when they decide to poor gasoline on what is already a wildfire.

    Reply

  35. JohnH says:

    It would have been really nice if you had invited Nassim Nicholas Taleb, distinguished professor risk engineering at New York University’s Stern School of Business. He addresses a key gap in the discussion–aligning the financial service industry’s incentive systems with the public interest.
    Obama and his staff of (Wall Street) financial wizards seem oblivious to the fact that most of the incentive are geared to privatizing profit and socializing risk. AIG is the most egregious example–paying massive bonuses for catastrophic failure. The public understands this, why doesn’t the administration? (Frank Rich elaborates on this very effectively.) http://www.nytimes.com/2009/03/22/opinion/22rich.html?_r=1&em
    Taleb writes, “the incentive scheme commonly in place does the exact opposite of what an “incentive” system should be about: it encourages a certain class of risk-hiding and deferred blow-up. It is the reason banks have never made money in the history of banking, losing the equivalent of all their past profits periodically – while bankers strike it rich. Furthermore, it is that incentive scheme that got us in the current mess.” http://www.ft.com/cms/s/0/fa89be08-02aa-11de-b58b-000077b07658.html
    NAF should recognize this fundamental aspect of the financial crisis and invite speakers who are prepared to address it constructively.

    Reply

  36. Steve Clemons says:

    Thanks POA — I’m trying to figure out a way to code his posts as spam. If I block his URL, many others will be blocked too. It’s irritating as the person doing it is doing so manually….

    Reply

  37. PissedOffAmerican says:

    Steve, perhaps you can find out who or what this Davinchi asshole is through one of his advertisers. If so, let us know. Perhaps overloading his switchboard and spamming his email might discourage the ignorant schmuck.

    Reply

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