It’s those Harvard boys again mucking the thing up if they are again on team Obama? He’s Harvard Law after all. But his Chicago roots might constrain the Harvard guys who love Shock Therapy….like Russia? I am with Krugman, Reich and Galbraith on the drastic need for a hefty Stimulus for the middle class. Demand side economics needs to be reinstated. The average consumer is so strapped I see negative growth in spending for manufactured goods to a massive degree next year. I look at myself even with a windfall…I want it only for investment and savings…not spending. I am driving my old car into the ground. We can’t have an economy based on massive unemployment, high health care profits, oil company profits and little else. Incomes have to rise for the middle class or this countries going to stagnate big time.

My Question: Is Obama the new Hoover or the new FDR? Hopefully better than either…but with those Harvard advisors…he could end up a Yeltsin!

One has to wonder how Obama could trumpet change and bring to the table such a collection, if reports are accurate. It is telling that yet again we have a group of Goldman Sachs executives; as if the firm has proven anything other than they are no different from anyone else. Foreign Policy magazine has a list of dream teams for the incoming administration and there are some interesting perspectives. But the easy bet is that we end up with these retreads, including Rubin. Rubin at least demonstrated some mindfulness of long term interest rate woes, deficits and the challenging structural issues facing the US (http://query.nytimes.com/gst/fullpage.html?res=9404E2DC173DF933A0575AC0A9679C8B63). But he also acted in the interest of the financial complex where he threw in his lot – just like Paulson. I would being willing to wager both still think the US is the world leader in financial innovation – to include central banking.

Along the same lines CNBC reported this AM that Rubin was interviewed on CNN over the weekend in his capacity as a spokesperson for Obama and was very much opposed to another major stimulus, likely because of his worry over the interest rates blowing out at some point and the bond market being lost.

What will the new team come up with to try and retard the seemingly inevitable freight train in the form of a growing chorus from FCBs demanding an end to abusive dollar hegemony and the resulting rate implications? Or will he reverse and opt for the devaluation path?

How will Rubin reverse this psychology and build a renewed consensus behind a strong dollar policy (even though his admonitions heretofore suggest he knows such wishes defy gravity)? Virtually the entire premise of the Rubin engineered strong dollar policy has turned out to be a mirage, one that enabled the US to over consume and exploit its capital/corporate advantage (as the dollar was rising through the 90s). Rubin engineered the growth of the financial services segment (the bet that a capital account surplus was a sustainable solution – perhaps was the real new economy he envisioned) at the expense of the necessary investment for real sustainable growth over the longer horizon. Now we get structurally lower growth rates.

So as the world forecloses on the dollar what options are left for the the incoming administration? Strong dollar has 0 merits. Deficit spending on top of bailouts will reach its market imposed ceiling – as GDP needs incrementally more debt to grow. Is the only real option a long period of stagnation as the total debt (350% GDP) gets worked down to a sustainable level? Or will Rubin and team try and re-invent innovation in a manner that disguises the inflation/devaluation regime that is really looking like the only feasible alternative. What might such a program look like? And will the world be fooled again?

The PUC’s across the nation have become an example of crony capitalism. Do some research on who sits on your PUC and never ask why these guys consistently get double digit increases each year. Someday this war will end.

If so, it’s an instance of the dangers of trying to blend public control and private markets (worst case is Enron like).

But…even for a cartel, there is a breaking point where too-high prices backfire badly.

Each industry, insurance, utilities, communication, healthcare and finance each pushed as hard as they could to charge as much as they could. Legislation deregulating many industries led to each industry trying to get a larger share of the consumers paycheck. Wages stay stagnant but cost of living goes up every year. The credit bubble hid this until the bubble popped and now we all are reaping a meager harvest.

I wonder if the current system which has been perverted completely by special interest money can fix the overwhelming problems. My opinion formed from watching the governments bailout process is no.

Plus the insensivity of higher income spokesmen from Wall Street towards what is happening with people having ordinary incomes in the $20K to $40K a year is nauseating….(with an occasional exception of someone like Ben Stein.. who actually noted middle class consumer shocks awhiles back….who woulda thought?)

The enormous chunks paid to higher management in declining employment-centers (big business) also is turning off the majority of people towards the oligarchy of insiders on Boards of Directors who dictate huge increases of pay for a small chunk of mostly useless ’suits’. (my theory: if we just gave B-school keyboards and shovels the picks and left management to technical people who worked real innovation from the ground up ala Google types we’d have a better economy. B-school is like Econ.Indoctrination cadre training. Ideology trumps all from the business class.)

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