Apologies for comparatively small number of posts tonight, but you will see from our up-shortly posts on AIG and the Fed that the quality hopefully makes up for quantity.
The Platypus Is Cute but Far From Harmless New York Times (hat tip reader Crocodile Chuck)
Slime Mold Beats Humans at Perfecting Traffic Networks Live Science (hat tip reader John D)
Plant loss ‘leads to fewer bees’ BBC
FDIC Chief Got Bank of America Loans While Working On Its Rescue Huffington Post Huffington Post (hat tip reader Nick R)
Read more: http://huffpostfund.org/stories/2010/01/fdic-chief-got-bank-america-loans-while-working-its-rescue#ixzz0dLDsYxw7
Under Creative Commons License: Attribution No Derivatives
Obama Bank Curbs May Not Leave U.S. Financial System Much Safer Bloomberg
Opposition To Bernanke Growing In Wake Of Mass. Vote: Sanders Huffington Post
Obama Is Seen as Anti-Business by 77% of U.S. Investors, Global Poll Says (hat tip reader John Bougearel) Huh?
Exclusive: Kucinich shreds Democrats for betraying the promise of change Raw Story (hat tip reader John D)
WHAT’S WRONG WITH AMERICA? WE’RE COWARDS 3 Quarks Daily (hat tip Michael T)
A Bomb Squad for Wall Street William D. Cohan, New York Times
Obama Puts Social Security on the Chopping Block Mother Jones (hat tip reader John D)
Tories propose to increase green taxes Telegraph
Treasury Weighs Fixes to a Program to Fend Off Foreclosures Bloomberg
Christmas sales figures worse than expected Guardian
Insurers Now Focus of Democrats’ Health Talks Wall Street Journal. As one annoyed Massachusetts voter pointed out in comments, the charges that the protest vote for Scott Brown was ill-informed was off base is looking more questionable right now. As she said, that vote did more to get the Democrats off the dime than all her contributions to MoveOn.org ever did. But we need to see if this reflex response wears off. But the Financial Times paints it differently: Pelosi admits setback in US health reform
Pitchforks take on Terminators Gillian Tett, Financial Times
Buffett lets public down…again and New off-balance sheet rule: Little impact on Wells Rolfe Winkler
A Few Thoughts on the Great Depression Tim Iacono
Antidote du jour (hat tip reader John L):
|Elephant in the snow|
Tim Iacono’s review of Murray Rothbard’s The Great Depression does not capture its jarring, mind altering quality. Once you’ve read it, you will never again quite think the same about politics and economics. Here’s a money quote from the conclusion which hints at its tenor (emphasis added).
“America had awakened, and was now ready to use the State to the hilt, unhampered by the supposed shibboleths of laissez-faire. President Hoover was a bold an audacious leader in this awakening. By every “progressive” tenet of our day, he should have ended his term a conquering hero; instead he left America in utter and complete ruin – a ruin unprecedented in length and intensity.”
Too bad about Bair. Looks like the main battle is on. Wonder what the back story is on this. Who leaked what to whom and when. That’s the real story and conspiratorially speaking looks like HuffPo is a double agent.
monoculture agriculture, as practiced in the US, is dependant on trucked in honeybee pollinators, because there isnt enough variety to support native bee populations…so it turns out that the monoculture agriculture in itself is destructive to the bees it depends on…
we sure screw everything up, dont we?
Following up on your post yesterday about Buffett being full of shit:
This is simply amazing. Buffett says “Make it so the C.E.O. of the institution that fails or that goes to the government and needs help really gets destroyed himself financially,”
Would those be the same C.E.O’s of the two failed institutions in which he bought huge amounts of stock (Wells and Goldman)? Why isn’t he calling for Blankfein’s head?
Buffet is correct. It is Warren Buffet who offered to bail out the LTCM fund in the first too-big-to-fail nobel prize-winning economist/gambler genius failure who had leveraged so high, up to 250:1 in international ‘arbitrage,’ that it threatened to collapse the government bond market.
You can read about this in great detail here.
Buffet’s take it or leave it offer to bail out the fund back then reportedly did not include bailing out the principals personally. But the FED moved in to rescue their economist/banker fraternal brothers. Had the LTCM principals not had the FED in their pockets to bail them out personally, today’s too-big-to-fail story would be very different.
The FED joined with the BIS is a vast international private club for the redistribution of wealth from the productive side of the economy to themselves.
themselves and their crony finance and FIRE members.
I’ll go on record again to say that Buffy is the Greatest Con Artist of all time. Gads, he makes Madoff look like a small time punk stealing candy from an unused vending machine (with a broken knob).
I could not agree with Buffett more. By all means destroy these bloodsucking plutocrats. They are bad guys and complete failures. But if that’s how Buffett feels, why is he investing in these companies? After all, the executives are still there. It’s ridiculous.
As an investor/speculator he calls his shots based on the rules as anyone would in any game; regardless of whether or not he believes in their corrrectness. He doesn’t make the rules. He is not a politician or a reformer.
I don’t think there is a moral equivalence between the investments Buffet makes and how he notices, when asked, what is wrong with the rules. I also don’t think (although I haven’t read the interview0 that he seeks influence or notoriety.
I didn’t like his cutting himself into the Goldman, Sachs deal with a far greater profit than anything taxpayers have received, but that’s his job. He did it after all when it looked like doomsday at the very bottom. And it may even have served a higher purpose by drawing the public’s attention to just how they were being screwed.
“We ought to focus on creating 15 million jobs, and if we do that, we’ll regain the confidence of the American people on domestic issues,” he said.
The entire political spectrum will be adopting this as the election year gets into full swing. Currently 11 million folks are on some form of unemployment insurance so government involvement in some type of New Deal job creation probably isn’t that far off. Yet no discussion from the political class about the changed nature of our economic life. Seems in D.C. oil is still $7 a barrel,everyone should be a homeowner with a 3 car garage and a college education equals a trophy wife or husband with large bonus payments guaranteed.
Re: A Few Thoughts on the Great Depression
Haven’t read either book, and certainly no authority on economic history or the Great Depression, but doesn’t FDR deserve credit cleaning and then regulating the ‘financial services industry,’ helping to create the post WWII prosperity? Iacono’s piece is short, but I still think it short-changes FDR.
Mr. Bernanke, a renowned Princeton economist and an expert on the Great Depression…
Bernake undoubtedly studied the history of the 1920s and 30s at the same place Iacono and Rothbard did.
Prejudice and truth about the effect of testosterone on human bargaining behaviour
“Here we show that the sublingual administration of a single dose of testosterone in women causes a substantial increase in fair bargaining behaviour, thereby reducing bargaining conflicts and increasing the efficiency of social interactions. However, subjects who believed that they received testosterone—regardless of whether they actually received it or not—behaved much more unfairly than those who believed that they were treated with placebo Thus, the folk hypothesis seems to generate a strong negative association between subjects’ beliefs and the fairness of their offers, even though testosterone administration actually causes a substantial increase in the frequency of fair bargaining offers in our experiment.”
If you are interested in how the Dem congress critters think, here is yesterday’s must-read post at TPM… Josh put it this way “I want to recommend that everyone read the email we just got from a Senate staffer who will have to remain anonymous.”
Here’s an interesting possibility… how about breaking that huge healthcare bill into manageable chunks that everyone can understand and then pressure the elites in the House of Lords (aka the senate) to go on the record about each piece. Embarrass them into more transparent behavior.
I have come to realize that the reason some of these controversial bills are so large, lengthy and cumbersome is to hide the looting the cronyism that gets buried in there. I would love to see a movement arise against these rdiciulously large and porked up pieces of legislation – call them “Too Big to Understand.”
House Liberals To Pelosi: “We Cannot Support The Senate Bill. Period.” http://theplumline.whorunsgov.com/health-care/house-liberals-to-pelosi-we-cannot-support-the-senate-bill-period/
At least Bair is consistent. Her national strategy is to do business with only the big banks and bankrupt the rest. She could have refinanced with Florence Bank, which would eliminated any appearance of impropriety. Just a thought – Is Florance Bank still in business, or were they taken over by the FDIC?
It the job of Ethics officers to cover up the crimes of the institutions they work for.
The story of the deficit commission has been out there for a while. It is interesting that Obama and the Democrats are going through with it. For one thing, it shows that Obama never really changes course, despite all the “change” hype he uses.
One of the most underreported aspects of the healthcare debate is that Medicare was going to be a big, probably the biggest loser, in it with something like $400 billion in cuts over 10 years. Even less remembered is that two weeks before Obama kicked off the healthcare debate, he had a conference on deficit reduction in which Social Security was the prime target. This was when Orszag’s old plan for cutting SS was run up the flagpole. Response was not favorable and it looked like cuts to SS were quietly shelved. But Obama’s pushing of the deficit commission demonstrates that they never really went away.
From an economic point of view, deficit reduction with such a weak economy makes no sense at all. It does highlight though the ideological bent of the Administration and its undiminished attachment to neoliberal Chicago school ideas.
From an electoral perspective, the Democrats might as well put a gun to their heads and finish themselves off now. In political terms, going after Medicare and now Social Security is about as deeply suicidal as can be imagined.
Being a broken record here but this is just further evidence of how completely bankrupt our elites are. They can send trillions to banksters without batting an eye. And then they spend the rest of their time how to rob Medicare and Social Security because these are bad for “deficits”.
One should take Iacono’s and Rothbard’s historical revisionism with a huge grain of salt. Rothbard, one must recall, was one of the leading lights of the Austrian School. So what he gives us, and Iacono parrots, is a view of the world seen through the highly ideologically tainted lens of the libertarian.
Of course their telling of history is cherry picked to fit the Austrian-Libertarian mold to a tee. Monetary policy, as always seems to be the case in the Austrian-Libertarian universe, is the talisman that produces magical or miraculous effects. As Iacono tells us:
The Fed’s role in sowing the seeds of destruction is under-appreciated
While the Federal Reserve isn’t credited with doing all that much from the time that it was founded in 1913 until after World War I, that changed in a big way in the 1920s. As recounted in great detail by Rothbard, continuous “inflationary” policies by Chairman Benjamin Strong from the early-1920s up until about 1928 played a key role in the crash.
As an antidote to Rothbard’s and Iacono’s historical revisionism, I recommend reading Frederick Lewis Allen’s two books which cover the same period, Only Yesterday and Since Yesterday, which can be found free on the internet:
It’s entirely too big of a project to deconstruct all the half-truths and distortions put forth by Rothbard and Iacono, so let me just take on a couple.
► First, let’s take a look at the moral climate that pervaded the country in the 1920s:
When the oil scandals (Teapot Dome and Elk Hills) were first spread across the front pages of the newspapers, early in 1924, there was a wave of excitement sufficient to force the resignations of Denby and Daugherty and to bring about the appointment by the new President, Calvin Coolidge, of special Government counsel to deal with the oil cases. But the harshest condemnation on the part of the press and the public was reserved, not for those who had defrauded the government, but for those who insisted on bringing the facts to light. Senator Walsh, who led the investigation of the oil scandals, and Senator Wheeler, who investigated the Department of justice, were called by the New York Tribune “the Montana scandalmongers.” The New York Evening Post called them mud-gunners.” The New York Times, despite its Democratic leanings, called them “assassins of character.” In these and other newspapers throughout the country one read of the “Democratic lynching-bee” and “poison-tongued partisanship, pure malice, and twittering hysteria,” and the inquiries were called “in plain words, contemptible and disgusting.”
The fact was that any relentless investigation of the scandals threatened to disturb, if only slightly, the status quo, and disturbance of the status quo was the last thing that the dominant business class or the country at large wanted.
► Then let’s take a look at the anti-government, laissez faire mentality that consumed the country:
He (Coolidge) maintained the status quo for the benefit of business. Twice he vetoed farm relief legislation–to the immense satisfaction of the industrial and banking community which consisted his strongest support–on the ground that the McNary-Haugen bills were economically unsound. He vetoed the soldier bonus, too, on the ground of its expense, though in this case his veto was overruled. His proudest boast was that he cut down the cost of running the Government by systematic cheeseparing, reduced the public debt, and brought about four reductions in federal taxes, aiding not only those with small incomes but even more conspicuously those with large. Meanwhile his Secretary of Commerce, Herbert Hoover, ingeniously helped business to help itself; on the various governmental commissions, critics of contemporary commercial practices were replaced, as far as possible, by those who would look upon business with a lenient eye; and the serene flattering pronouncements upon business and assurances that prosperity was securely founded.
An uninspired and unheroic policy, you suggest? But it was sincere; Calvin Coolidge honestly believed that by asserting himself as little as possible and by lifting the tax burdens of the rich he was benefiting the whole country–as perhaps he was. And it was perfectly in keeping with the uninspired and unheroic political temper of the times. For the lusty businessmen who in these fat years had become the arbiters of national opinion did not envisage the Government as an agency for making over the country into something a little nearer to their hearts’ desire, as a champion of human rights or a redresser of wrongs. The prosperity band-wagon was bringing them rapidly toward their hearts’ desire, and politics might block the traffic. They did not want a man of action in the Presidency; they wanted as little government as possible, at as low cost as possible, and this dour New Englander who drove the prosperity band-wagon with so slack a rein embodied their idea of supreme statesmanship.
► Then let’s take a look at one of the principle driving forces of the “the big bull market”:
What was actually happening was that a group of powerful speculators with fortunes made in the automobile business and in the grain markets and in the earlier days of the bull market in stocks-men like W. C. Durant and Arthur Cutten and the Fisher Brothers and John J. Raskobwere buying in unparalleled volume. They thought that business was due to come out of its doldrums. They knew that with Ford production delayed, the General Motors Corporation was likely to have a big year. They knew that the Radio Corporation had been consolidating its position and was now ready to make more money than it had ever made before, and that as scientific discovery followed discovery, the future possibilities of the biggest radio company were exciting. Automobiles and radios-these were the two most characteristic products of the decade of confident mass production, the brightest flowers of Coolidge Prosperity: they held a ready-made appeal to the speculative imagination. The big bull operators knew, too, that thousands of speculators had been selling stocks short in the expectation of a collapse in the market, would continue to sell short, and could be forced to repurchase if prices were driven relentlessly up. And finally, they knew their American public. It could not resist the appeal of a surging market. It had an altogether normal desire to get rich quick, and it was ready to believe anything about the golden future of American business. If stocks started upward the public would buy, no matter what the forecasters said, no matter how obscure was the business prospect. They were right. The public bought.
► And of course the Austrian-Libertarians never make the distinction between prívate debt and public debt. Lewis talks about the huge run-up in private debt, and what Hoover’s “solution” was:
Hoover had tried to keep hands off the economic machinery of the country, to permit a supposedly flexible system to make its own adjustments of supply and demand. At two points he had intervened, to be sure: he had tried to hold up the prices of wheat and cotton, unsuccessfully, and he had tried to hold up wage-rates, with partial and temporary success; but otherwise he had mainly stood aside to let prices and profits and wages follow their natural course. But no natural adjustment could be reached unless the burdens of debt could also be naturally reduced through bankruptcies. And in America, as in other parts of the world, the economic system had now become so complex and interdependent that the possible consequences of widespread bankruptcy–to the banks, the insurance companies, the great holding-company systems, and the multitudes of people dependent upon them–had become too appalling to contemplate. The theoretically necessary adjustment became a practically unbearable adjustment. Therefore Hoover was driven to the point of intervening to protect the debt structure–first by easing temporarily the pressure of international debts without canceling them, and second by buttressing the banks and big corporations with Federal funds.
Thus a theoretically flexible economic structure became rigid at a vital point. The debt burden remained almost undiminished. Bowing under the weight of debt–and other rigid costs–business thereupon slowed still further. As it slowed, it discharged workers or put them on reduced hours, thereby reducing purchasing power and intensifying the crisis.
So when Iacono says that it was “Herbert Hoover, not FDR, that broke the mold of what had been a Laissez-fare approach by government in regards to the economy,” that is a distortion, if not an outright lie. What Hoover did was to bail out the banks and big corporations.
But what Iacono fails to say is that the New Deal programs pushed through by FDR—lending a helping hand to the little guy and placing regulations on the financial sector—were anathema to Hoover and his big business backers.
But I fully agree with Iacono when he says: “To this day, it striking to me that perhaps the greatest lessons of the Great Depression have still not yet been learned.”
Of course the person that hasn’t learned those lessons, with his horrible butchering of history, is Iacono himself.
I join DownSouth in stating that Iacono is promoting an ideological kind of selective history to serve the Conservative and crony capitalist cause. First, panics and the deep depressions following them, had been endemic in U.S. and U.K. capitalist system during the 19th century and early 20th, well before the Federal Reserve. And Austrians use to acknowledge them before 1929. These Panics (the old term before Depression) of 1819, 1824, 1837, 1857, 1873, 1885, 1893, and 1907, all varied, but they were all immediately preceded by a period of Ponzi finance and displays of immoral and corrupt conduct by the business elites. Second, Hoover, as DownSouth accounts, and which can also see described in Schlesinger’s “Crisis of the Old Order” only reluctantly intevene, and then only to help favored financier, businesses, and banks (sound familiar). Also, Ianco, and I supposed Rothbard, ignore the major difference between Roosevelt and Hoover, perhaps because being Gold bugs it represents an inconvenient fact. Hoover basically destroyed U.S. industry and workers to maintain the dollar on Gold standard with full convertibility and no devaluation. Roosevelt eliminated domestic convertibility of the dollar to gold and internationally devalued it, thereby revising U.S. competitiveness. It was at that point, along with the fact credit began flowing in a revamp banking system, and public employment allowed some consumers to start spending again that saw economic growth return in the summerr of 1933. For more see: http://johnquiggin.com/index.php/archives/2009/05/03/austrian-business-cycle-theory/
Thanks for the link.
I found the following passage interesting:
Unfortunately, having put taken the first steps in the direction of a serious theory of the business cycle, Hayek and Mises spent the rest of their lives running hard in the opposite direction. As Laidler observes, they took a nihilistic ‘liquidationist’ view in the Great Depression, a position that is not entailed by the theory, but reflects an a priori commitment to laissez-faire.
According to Paul Krugman, Milton Friedman followed a similar career trajectory. He started out his career as an “economist’s economist,” writing “technical, more or less apolitical analyses of consumer behvior and inflation.” Later he would become a “policy entrepreneur” and “ideologue, the great populizer of free-market doctrine.”
Who knows what motivates these guys, but the lure of fame and fortune–of the rock star status that Wall Street can give them–must be immense.
I’m sad no one commented on the “cowards” piece. I love the line about Haiti in there. I’ve had a grand old time this week with the Haiti spectacle threading its way through the global glitterati. It’s awesome (that is, if you consider the juxtaposition of myopia and self-importance awesome).
Haiti has been the poorest country in the Western Hemisphere for a good long time now, and not only didn’t we do anything to stem the deaths from poverty and disease there but the US government has actively pursued policies that “arguably” made the situation worse. But now, because of an earthquake, we *must* go on a charity drive to lift Haiti back up to its deplorable status of a couple weeks ago. BE CAREFUL NOT TO LIFT THEM TOO FAR. We need to calibrate this *just right* so that they are no less miserable than they were just before the earthquake!
Let me pass along this line from “What Would Tyler Durden Do?” that pretty much summed up my thoughts in a more clever, less restrained way, “Why do they need a telethon anyway? Haiti is the poorest country on earth, and even before the earthquake it looked like the future in a video game about zombies. How much could it really cost to fix that? Wasn’t most of that stuff broken anyway? This seems like a trick. Are we even sure there was an earthquake? You’re not foolin me, Haiti. I’m on to your little game.”
Seriously, wasn’t most of that stuff broken anyway?
Well, I went and read the “cowards” piece, and it wasn’t bad but it’s all been said before. I don’t think the author was implying that Americans are more cowardly than anybody else, more that everbody in the so-called “Western” world is cowardly – though he was specific only about the US aspects. You could say the same about Europeans and Iraq – there were big (actually, huge) antiwar demonstrations in Euro capitals back in 2002/2003, and in lots of other cities, but now? Nothing.
At the risk of sounding racist (is it possible to be racist about a country like the US which is so ethnically diverse?), I will venture on a US-specific thesis, which isn’t that the US is cowardly (I don’t know) but that it is out of date.
This is actually a comment I put up recently at Economists View in response to a remark that “Without status competition among adults, a society goes into decline”. Here goes:
This is a concise statement of what seems to be a very fundamental belief among many people who aren’t born rich. To venture a rash generalisation, it seems particularly prevalent in the US, along with beliefs about social mobility, “free market” economics, the superiority of white people over black, red, yellow and brown people and (often) loud noises about the Christian religion.
This is a constellation of beliefs and attitudes typical of late nineteenth/early twentieth century imperialists and eugenicists. In Europe (another rash generalisation) it is regarded as hopelessly out of date, at the least, and entirely pernicious at the worst. In the US, however, it seems preserved in amber, a relic of a bygone age.
I think the article about Americans being cowards is a bit provincial. We have almost 7 billion cowards on this planet – they are called Homo Not-So-Sapiens Not-So-Sapiens, all of them afraid of going back to being hunter gatherers just because they can’t imagine dental care without anesthesia.