One of the things that Matt Stoller has stressed that the possibility of reform is remote until breaks within the elites take place.
Jeffrey Sachs, Columbia professor and director of the Earth Institute at Columbia, is a controversial figure for his neoliberal stance on macroeconomics and his role in promoting the use of “shock therapy” in emerging economies. But it is also important to recognize that criticism from a connected, respected insider has more significance than that of someone like Bill Black, who has made a career of taking on bank fraud but has never reached a top policy-making level.
This talk is blistering at several points. It was recorded at a conference “Fixing the Banking System for Good” on April 17 (hat tip Jesse). If you have trouble with the embedded version, try YouTube.
[NC’s anonymous transcriber made a complete transcript of Sachs’ statement, so I’m going to replace the partial transcript previously posted with what follows. –lambert]
Professor Jeffrey Sachs, Columbia University
Fixing the Banking System for Good conference
Philadelphia Federal Reserve
April 17, 2013
Jeffrey Sachs: […] I think, you know, your point, Larry, is a very powerful one. And at a not a literal level of single-purpose banking, but of, you know, a more general level, Glass-Steagall successfully did that for quite a long time, and its removal was a very, very cynical play by Rubin, Summers, Clinton, Gramm and others who all had very strong interests, personal interests, in the outcomes of that deregulation, and exploited the gaps that they created, and then to the chagrin of some of us at least were invited right back into the White House in early 2009, after they had made this calamitous mess, to be the ones supposedly to fix it. And I know that Summers, for example, continued to really institute moral hazard policies right and left by fighting against any limits on compensation of these people who had entered into the breach.
So, this is a case where institutional reform of separating fractional reserve banking and basically the provision of liquidity from gambling should be done, but I would add this other point, which is that a lot of what’s happened actually and what’s been revealed is in my view prima facie criminal behavior. It’s financial fraud on a very large extent. There’s also a tremendous amount of insider trading, and you can even watch it when you’re living in New York, how that works.
So it’s not so mysterious, but we don’t even act – take John Paulson, for example. Paulson worked together with Goldman Sachs to defraud massively many European banks which bought the toxic mortgages that Paulson had put together. When this Abacus deal was taken up by the SEC, Goldman ended up paying a small fine. The chair of Goldman, of course, continued in his position and continued at White House state dinners, and Paulson wasn’t even mentioned once in any of the proceedings, and he took home a $1 billion dollar paycheck the next year, even as Goldman was paying a roughly $700-million-dollar fine, if I remember correctly, for the abuse that Paulson was part of. I can’t believe, no matter what the financial regulations, we can’t do better than that. That’s really pathetic.
Audience: As a former congressional staff attorney and retired tax lawyer, looking at the possibilities of small steps which might be taken, how affirmative would you think reenactment of Glass-Steagall would be?
Jeffrey Sachs: I think that it is quite important to re-create a mechanism where liquidity is separated from large-scale financial gambling. It’s really, in my opinion as a macroeconomist, it’s the collapse of liquidity that is the real macro danger. The rest is the collapse of confidence, lawlessness, decency and so on, but what made Lehman so damaging, of course, was how it infected the money markets, the interbank loans, and the complete drying up of commercial paper. This was the devastating effect. It was basically March 1933 replayed.
So liquidity is what is the real value here from a macroeconomic point of view. Loss of wealth, I could care less whether they make more or less money. I don’t even care whether they make big money particularly except I think a lot of them are crooks and that it’s based on a lot of nefarious behavior, but the macroeconomic significance is a kind of diamond in the banking crisis which we know to be part of a fractional reserve banking system.
And it seems to me analytically we have two – we have basically two levels of decision making. One is separating liquidity in the banking sector from other kinds of speculative financial activity. This I would do for sure, and I would never have put Goldman Sachs back under the Fed’s protection as a banking unit so that it could receive direct loans from the Fed. That’s ridiculous, and sad, actually.
But the second point then is Larry’s point, and this is whether fractional reserve banking itself has value enough to keep it in its current form. I’m not convinced, I have to say, one way or another. I kind of, you know, grew up in a fractional reserve banking system. I do believe that it provides liquidity in normal times if regulation is good. I tend to believe that there is value in reserve banking, but it’s also highly volatile, as theorists have recognized at least for 150 years, and as Milt Friedman agreed, as Diamond said, as Larry has pointed out, and I think we have the choice, could we really have liquidity without fractional reserve banking? If we could, we might be able to address, you know, another, another degree of this problem.
The final point, of course, is separating the politicians from the crooks, but maybe that’s so close together that they can’t actually be separated. Maybe it’s just the same community.
Audience: Yeah, hi. This is Mike Imhoff. [inaudible] My question was, your international experience, you’re talking, you were starting off by saying you’re talking to a lot of international decision-makers. What is the sense there about the readiness to try different monetary and financial approaches to what we have today? Do they feel that they can start to do that on their own in their own countries, or do they feel that they depend on the central countries like the United States and the Europeans to do something first?
Jeffrey Sachs: I think in general for most small countries or most developing countries – I’ll put aside the very largest ones – there is a sense of almost complete dependency on the international system – their payments, their lines of credit, interbank markets, the need for swap facilities with the Fed or the ECB, the pervasiveness of tax havens, the extent of flight capital from their countries, the legal structures where basically very clever U.S. lawyers helped to free all of these countries from their tax revenues. They feel very much dependent on a system that they feel is dysfunctional, but they are also, they’ve been well schooled that for the last 25 years their goal is to be part of the international system. They just woke up to a system that they find very destabilizing, and they don’t see any clarity of the way forward, and most of the advice that they get is to be part of this system and be quiet, basically. This is how the system is; you join it, you stay on good terms with the Fed, with the IMF, with others, and there is very little sense of autonomous potential among these countries. Really I can only emphasize the palpable anger and vulnerability that’s felt right now is very, very high.
Audience: My name is Dennis Peacock, and I represent the faith-based side of macroeconomics, and I just want to congratulate you that you pulled us back to the reality that in spite of all the complexities and theories and mechanics that we deal with in economics, that economics is really about values and the values and ethics of people. Thank you very much.
Jeffrey Sachs: Well, thank you very much for saying it and practicing it. I do believe – by the way, I’m just going to end here because I’ve been told I have to run to the U.N. in fact right now – I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I’m going to put it very bluntly. I regard the moral environment as pathological. And I’m talking about the human interactions that I have. I’ve not seen anything like this, not felt it so palpably. These people are out to make billions of dollars and nothing should stop them from that. They have no responsibility to pay taxes. They have no responsibility to their clients. They have no responsibility to people, counterparties in transactions. They are tough, greedy, aggressive, and feel absolutely out of control, you know, in a quite literal sense. And they have gamed the system to a remarkable extent, and they have a docile president, a docile White House, and a docile regulatory system that absolutely can’t find its voice. It’s terrified of these companies.
If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I’m afraid to say, and no party is – I mean there’s – if not both parties are up to their necks in this. This has nothing to do with Democrats or Republicans. It really doesn’t have anything to do with right wing or left wing, by the way. The corruption is, as far as I can see, everywhere. But what it’s led to is this sense of impunity that is really stunning, and you feel it on the individual level right now, and it’s very, very unhealthy.
I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language, and I’ve not seen it once. And that is shocking to me. And if they won’t, I’ve waited for a judge, for our president, for somebody, and it hasn’t happened. And by the way it’s not going to happen anytime soon it seems.
[Moderator]: Professor Sachs, thank you so much.
Clearly, Sachs is not taken by Lloyd Blankfein’s “doing God’s work” claims, nor by the hectoring of overstretched consumers to make their debt payments after banks got overt and back door bailouts, and continue to be subsidized by savers via ZIRP.
We can only hope that Sachs’ direct talk emboldens others at his level to speak up.
Every single idea Sachs has promoted in the past twenty odd years has produced unimaginable disaster, and now he wakes up to notice greed is a problem? Has he told the Russians?
James Madison understood checks and balances. He may be the last important person who did. We have spent thirty five years listening to fools and charlatans chanting black is white, spouting gibberish and calling it economics. Sachs should be required to wear a dunce cap in public. Greenspan, Rogart and Reinhoff too.
If they were golfers they would turn sixes into threes without batting an eye.
Jack, I totally understand your visceral reaction, but he’s speaking out now and in ways that he will pay dearly for among what will soon be his former colleagues, because of this statement. This is where change begins – nothing more, nothing less.
I don’t think Sachs will play dearly for it. He has a rather good sense for the Zeitgeist and Economic Policy fashions.
Just like he went to become the ultimate neo-liberal / shock-therapy man when it was in vogue after 1989.
Ralph Nader has been the modern day James Madison.
But Nader, thanks to elites fronting for oligarchs and a corporate fawning press and a gullible electorate, has gotten little traction for his message of the importance of a vibrant and responsive citizenry to balance corporate greed. (God bless you, Ralph.)
I’m buoyed by Sachs statement. But, as he himself says, the corruption is endemic.
We have undergone a coup. The People have abandoned their true role in government, and will pay the price for doing so. As for the authorities rolling over — why would they not roll over in the absence of any motivator from the electorate?
In all of this, Obama has proven himself to have the dirtiest hands of all. He was handed an opportunity to affect change — the Bill of Goods he sold the electorate — and he did nothing but join in on the swindle. He is the face of weak government. He is the face of fraud. He is the face of, and apologist for, white collar crime.
Wat we are living is the new “business as usual.”
I believe you make a very important point. A government leads by example, and in this case Obama’s legacy has been sealed. Rather than take the opportunity presented to him by a populous starving for reform, he chose to look out for those with the biggest campaign purses.
Still stunning at this point, why anyone is willing to believe a word that comes out of his mouth. It takes real chutzpah to condone what is obvious criminal behavior of the banking elite and pass it off as simply unethical or immoral.
Amazingly, a majority of people still believe the Republican guy would have been worse. That is really the only argument made by anybody who isn’t in on the looting himself.
Our institutions have become too big to succeed, but apparently they are just the right size to be gamed.
That our corporations had become uncompetitive was what Romney and his ilk realized in the 80s. And gamed the situation by “corporate raiding.” If there had been any government in place then to protect pension funds and jobs and even whole industries we wouldn’t be going through this now.
I do believe the republican would have been worse.
At best, the R’s would have been no different.
IMO the essential difference between D’s and R’s is velocity, not direction.
“Still stunning at this point, why anyone is willing to believe a word that comes out of his mouth.”
I have had this explained to me in various ways. One version is, nobody’s perfect. I expect too much. Huh? Well, maybe I do. I’m kind of against treachery and deceit and drones and so on.
Another version goes thusly: Obama knows things we can’t know. (But why can’t we know? Never mind.) Ours not to question why. We must trust that Obama knows more than we do and is doing the right thing, even though it’s not clear to us at this time.
And there’s always: The Republicans made him do it.
These justifications (and similar variations) wear very thin.
Also, I suspect, once some folks take a stand, they hold their ground. No matter what. They’ve enshrined Obama and by gosh, they’re gonna defend him. There’s an evil TeaPartier behind every bush just waiting to take him down. Into the fray, banners held high: Obama! Obama! Obama!
Be realistic, demand the impossible! el che
Ach, I always do. :)
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die:
I got “He made his bones as a community organizer, do you really think he wants old women in housing projects to starve to death?”
My answer is: Yes, I do.
Not because I think he enjoys the suffering and premature death of old women (or if he does, secretly, it is only a side benefit), but because each of those dead old women will represent lucre in his bank account when he moves into the global aristocracy.
Harry Lime explained it in The Third Man:
“Victims? Don’t be melodramatic. Look down there. Tell me. Would you really feel any pity if one of those dots stopped moving forever? If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare? Free of income tax, old man. Free of income tax – the only way you can save money nowadays.”
Cognitive dissonance is the reason for all of these lame excuses: People can’t admit they’ve been snookered, because it’s embarassing and reveals the snookered one to be a gullible fool. This is difficult for anyone to admit, because we all believe we’re smart. People make up excuses to explain away any situtaation which us look stupid. Hence, Obama knows things we don’t know, is forced to do things he doesn’t want to do, etc, anything but the truth, which is that they have been artfully deceived by a huckster.
I think it really is that simple.
I happened to think it has been thirty years of American citizens listening to 30 second sound bites and then voting for the idiots that said them.
It is we the people that got us into this mess and it is we the people that will get us out of it. I just hope it’s not too late and I hope the remaining 40% that don’t get it take their heads out of the sand and go beyond the 30 second sound bite.
You’re absolutely correct.
Also compare with the Milgram Experiment, as described in “Obedience to Authority” by Stanley Milgram.
““Still stunning at this point, why anyone is willing to believe a word that comes out of his mouth.””
Obama is a remarkably good salesman. A bit like his role model, Reagan, he can say things which are completely absurd and easily disproven in 20 seconds, and get half the population to believe them.
That makes him dangerous, of course.
Both were (and are) consummate public relations men. Public relations attacks the achilles heel of democracy by manipulation of crowd emotions. Le Bon explained that crowds do not reason, and why.
And of course ignorance plays an important role. People may think they are smart, even concerning things of which they understand nothing. Advertising softens them up, minute by minute, hour by hour, day by day, year by year. Perhaps it’s a miracle most people know anything at all?
The greatest lie of the past forty years is that a government serving the needs of the general population is bad, while a government enabling corporate predation and swindling and executive looting constitutes a triumph of ‘free market principles’. An ability to wrap this in equations will get you tenure, not only at the University of Chicago (as one might expect), but also at Harvard.
A truly consummate charlatan gets to be Chairman of the Fed.
I don’t think any Obot is capable of believing anything Obama says. They would have to listen.
There are two major kinds of Obots:
-There are people who became emotionally invested in Obama for one reason or another and can’t let go without admitting they have shallow reasons and are immoral jerks. It has nothing to do with anything he has ever said because they don’t have a clue. His 2004 speech was bland platitudes about Kum Bay Crap.
-The other main group which probably considers themselves Democrats first over being an Obot treat politics like team sports. Obama is just on the team now, and if they bought an Obama jersey, they want him to do well. The GOP is just another team in the league. If the GOP sucks, they don’t have a game to watch. Campaign commercials despite their poor effectiveness provide them a way of keeping score much like I check baseball scores every day. This group will move on from Obama if he isn’t super-popular the second he is former President Obama and move onto the next free agent acquisition.
To keep it simple, Obama isn’t conning anyone. His supporters don’t care. Low information voters largely just trust “leaders” in the correct community (local Democrats, union reps, and so forth), but of the people who aren’t surprised by federal elections every two years who like Obama, they just don’t care. In some ways, they deserve Obama. He is just like them.
Try running for office in this country on a shoestring and a prayer. You might then get a tiny, tiny idea of what it takes to get elected.
It’s the system, not the person running for office. You don’t get elected without a great deal of money showing up in your election coffer.
And that will not change until we reform the electoral system – and not only the money part, but the gerrymandering as well.
Exactly true. Obama got elected because of who he is. Who he is, something of a chameoleon or, as he’s called elsewhere in the thread, a good PR man, caused TPTB to back him, just as they also backed his opponent. The way our system works, currently, I don’t know about the past, by the time of the general election I don’t think it makes a great deal of difference which major party candidate we elect. The next four years are scripted out about the same either way.
Severe electoral reform is absolutely the first order of business.
[smugly, piously] I voted Green.
Anyone interested in hearing another interesting talk by Sachs should check the series “Economics and Theology” in the INET’s webpage.
It’s not as if the information Sach provides is a big discovery. He also seems to confuse two different factors. One is deregulation while the other is criminal banks fully supported, money and otherwise, by the government.
Clinton instituted a lot of deregulation. That is the direction the country was going from Kahn in Carter’s day until, essentially, now. Obama now wants to “deregulated” the safety net. Bush and mainly Obama have turned the government into the banks money printing press. As commenters say above, Obama’s place in the history books is very negatively sealed.
It is possible that neither Bush nor Obama knew fully what they were doing when they appointed Bernanke. The real crisis is in the academy. You are not going to hear that from Jeffrey Sachs.
none of these morons even knows what money is. they’re like experts in a strange language, a language they’ve spent years learning
but it’s like Chinese. somebody can say something in Chinese that sounds like “chaiee quong wa aye doie ba fu wa”
And you might think “Whoa! There’s an expert! She must be a female Einstein to know all that.” if it’s a woman. If it’s a man, they’d think “A learned professor, for sure. He must be brilliant”
But it might translate into “I need a beer and a sausage right now, with some hot mustard”.
All these boneheads know how to do is speak in their own private language, but their words don’t mean anything in reality. it’s metaphysics, sorry if somebody is a metaphysics expert I don’t mean to be rude, but it’s all nonsense. each person makes it up for themselves if they canh, and if they can’t they just repeat “bwai koo yaa fah mong chang haiieee la” to themselves, and they think they know something
craazyman, I love you!
Sachs has had a soapbox for years, and admittedly he has used it for some good (not enough to make good on his past in my opinion). Why isn’t he writing this in HuffPo or some other more public space?
I guess it’s easier to let Bill Black and Michael Hudson take the lumps, do nothing, and keep your lounge chair at the Harvard club. Good on Sachs for his words, too bad it had to be heard via a cell phone recording. He seems to know about “the system” and why people keep quiet, right?
I hate these guys. I hope they get their comeuppance.
in the youtube comments, Bill says that he is going to get get the conference files Monday from the IT person. If he actually gets them, he’ll post it.
There’s only one way that can happen. We shut the spigot on collossal earnings by (1) taxing capital gains exactly like compensation and (2) putting that rate up to where it was before Johnson started to bring it down in the early 1960s and Reagan finished the hatchet-job in the 1980s.
Between these two presidencies, the rates came down from 91% to 28%; from where they have since rebounded slightly to the present rate of 39.6%.
Raise the rate back to where it was originally and we take the incentive out of gaming market’s that exists on Wall Street today.
I disagree. I think that macroeconomic policy has enabled and obfuscated the criminal behavior. And now that I’ve read Sach’s comments (which are all about macroeconomics, essentially a values-based project), I’m encouraged.
Drat. Ixsnay on my response here. It’s supposed to go to the thread below.
For some reason, Sachs always struck me as one of the more reasonable neolibs. Like he was at least aware of some sense of larger perspective or boundaries or consequences.
Anyway, I figure as long as there is room for pointing out the obvious within the system, we still have the ability to avoid more massive societal collapse, so in general developments like this make me hopeful that a complete collapse is not inevitable.
He always struck me as a guy really motivated by ideology, and sticks to it even in the face of evidence. So, is he still a neoliberal? Does he view the criminal behavior as aberrant dimension of neoliberal macroeconomic policy, or does he view it as part and parcel…an unavoidable outcome of a morally abhorrent ideology? Unless it’s the latter, I wouldn’t trust the guy ever. I might get my answers by listening to the video and I’ll do that at some point when I need a break from work.
What is happening on Wall Street has nothing at all to do with macroeconomics, except the part where a disaster like the Great Recession happens when the Golden Boys ‘n Girls provoke a catastrophe like the banking meltdown due to subprime mortgaging Toxic Waste.
It will happen again, be prepared for it. These goons know no bounds in the face of wimpish oversight authority at the Fed and SEC.
I disagree. I think that macroeconomic policy has enabled and obfuscated the criminal behavior. And now that I’ve read Sach’s comments (which are all about macroeconomics, essentially a values-based project), I’m encouraged.
Milton Friedman rolls in his grave[!!!].
skippy… its funny… the folks that killed – offed with prejudice – any the last visage of virtue in their mad little experiment… now have remorse – doubt about unfettered wealth creation?
The crisis of our time is a moral crisis.
I recently read the tale of Sodom and Gomorrah in full(This is not dwelt on in Irish schooling). The most interesting part of the tale is Abraham’s efforts to dissuade God from destroying the city. Abraham asks God to spare the city if 50 good people can be found there. God agrees, but Abraham is unable to find 50 such people. When Abraham bargins down to 40, 30, even as low as 10 good people, he still cannot find any. The city is destroyed in fire and sulphur, etc.
Jeffrey Sachs strikes me as an Abraham-type figure. For five years he has gone among the bankers, seeking even 10 good men/institutions, whose existence would justify merciful treatment for the entire industry. But in 5 years he has found nothing; nothing but greed, crime, deception, hubris, and sin. Sachs now stands like Abraham after his searches, unable to actually find a case for saving the system.
The solution is fire and brimstone.
There must be an almighty purge of the Western financial system. I use the term purge in its Soviet sense because that is unfortunately the scale of what is required here. The guts of two million people are going to have to be investigated, audited, and in most cases permanently disbarred from our financial and political systems. The reform that is needed will be on the scale of the administrative reforms in post War Europe, or more disturbingly, on the scale of the reforms of the French Revolution.
I believe the the cleanest method of cleaning up the system, and the one with the least risk of spiralling into a true Soviet purge or Directorate type situation, is simply to allow these men and their rotten institutions to become bankrupt. Accept the financial distruption and pain over the more dangerous political power struggle. Once their money is gone, these overinflated men will wilt into political powerlessness, and a more prudent generation and culture can take their place.
Regardless, this crisis is deep, and there will be many tears on the long trail to a real, moral, recovery.
Careful what you wish for… Disruptive bankruptcy would be an opportunity for either 1) increased concentration of wealth and continued disregard of laws (rigged crony capitalism); or 2) reforming the system to be more fair and just (a social contract).
During disruptive, volatile crises wealthy individuals and institutions have the capital to scoop up undervalued organizations, firms, employees and industries. I prefer to break fewer eggs to make my omelet.
Ya mean, as in “the rich get richer……”
I’d argue that corruption and greed in the financial industry is only one of many tentacles present in our system. It’s pervasive throughout government, the executive, legislative, and judicial branches, the energy corporations, our healthcare industry, labor policies, many of our religious institutions. We even see the destruction of society itself, with increased emphasis on individual responsibility to self, and a decline in the obligations to others that define what it means to be a social entity. It was captured by the campaign slogan “I built it”, the increasing view that each person exists as an island upon themselves, rather than interconnected with others, a part of something bigger than one’s self.
The question is if any of this can even be fixed or does our society need to be completely restructured from the ground up? Do the elite realize they need a middle class to retain their elite status? Do they realize the social safety net was created not out of concern for the poor but to appease them and prevent them from using violence to loot and overthrow their oppressive overlords? I’m surprised a despondent foreclosure victim hasn’t walked into one of the Wall Street Banks with an assault weapon and opened fire on the C-suite crew. And here’s a thought exercise……..With Wall St. and the NRA duking it out in the aftermath, who would prevail?
And then let Preston Sturges make a movie of it.
Thinking Sullivan’s Travels, when the big Hollywood director lost everything and gained the world.
I’m ready for a comedy.
Excellent! Thank you for sharing. And so right about it being far more important coming from an insider.
World of Gold appeared on CBC last night. Like the Sachs speech I didn’t learn anything I had not already heard from internet journalists. But CBC is MSM. To speculate on banker manipulation of gold and silver prices and have it reach a new audience is significant.
It won’t save us from the disaster to come but we shouldn’t be saved. It was our apathy and ignorance which has brought the social democracies to their knees. And we’ve certainly benefited from easy money and have lived “high on the hog”. If the fire and brimstone is about to come down then it’s rightly going to land on Sodom and Gomorah.
These type of guys are concerned with system collapse for specific reason
They can then no longer extract a yield.
This is the motive for panic – they butchered rather then sheered.
When Italy falls (and it is falling) into a Greek style abyss it will be all over because bigger countries cannot rely on global external trade to the same extent as smaller countries can.
“This is the motive for panic – they butchered rather then sheered.”
This is characteristic of psychopaths — inability to think about long-term consequences. Our problem right now is the sheer number of psychopaths at the top of major corporations and filling the banks.
Butchering as opposed to shearing was inevitable, not because wallstreeters are psycopaths, but because shearing requires too much co-operation and also demands that self-restraint be exerted vis a vis the taking of ill gotten boodle.
This entails the horrible risk that the other guy might end up with More, thus winning the game of life.
No, logic and reason demand taking everything you can get your hands on, as fast as possible, and making good your escape and leaving the collapse for some other sucker to deal with.
Come on… Jeffrey Sachs is suddenly an expert on human interaction? How much human interaction did he attempt with the millions of unemployed and suddenly destitute Russians and others subjected to the inhuman consequences of autocratically imposed shock therapy?
Both Sachs the multi-millionaire academic and “these people on Wall Street” are egocentric, self-righteous elitists. Sachs is whining because smug Masters of the Universe value street smarts over book smarts and they don’t fawn over him enough to placate his ego.
European countries are now not coming back………..
Its all over.
To much damage has been done to old societies and also their physical capital structure because of a false credit demand signal
They can no longer rely on their local hinterland and workforce when this phase of post 1970 /80 globalization breaks down.
Ireland went from wages as 70% ~ of GDP in 1980 to 40% + of GDP……………..
That surplus extracted was used to make the junk hinterland of today.
Ireland lost a couple of % of its agri land post 1957 to urban junk production.
As it was the best land in the main I reckon 10 %~ of the agri productivity of Ireland is lost every year……EVERY FUCKING YEAR.
The losses are in the system more or less forever.
“false credit demand signal”… the term fracking comes to mind..
skippy… although I would offer the term “false” inappropriate… more like – manufactured – as it were… for future profit extracted in the now… against the tsunami of friction building up in the system. Hedging roflmmaso … ahhh economic self rationalism…
Last nite on the BBC there was just a blurb with no follow up about how it is inconsequential that we are finding new oil reserves because the global concensus is to phase out the use of fossil fuels due to global warming. And the blunt statement followed that if oil prices crash it will cause a new financial crisis. What an interesting headline. Can’t help but think economies will be very different in the future. Economies will become sustainable. This really is the end of an era. So the peripheral info that Bill Still gives us about a meeting at the Philly Fed about how to do monetary reform is very timely. No? We now have control of oil to the degree that prices will not crash too fast. But where are we going from here? “When the truth is found to be lies…”
“… and all the joy within you dies”
There, finished for you.
Jeffrey Sachs is an incredible hyppocrite. He laid waste to a string of countries with his shock therapy and now he thinks things are out of hand? I will consider taking seriously his alleged new-found humanity when he takes responsibility for what he has wrought.
Sacks has never backtracked on any of his shock-therapy adventures. A couple of years ago —- the economic crisis was well under way —- he was asked in an interview I read about the criticisms of his shock therapy, and his reaction was to shrug his shoulders as if he couldn’t understand what there could be to complain about. He clearly had not spent a minute in his life thinking about the destruction he caused.
When Sachs apologies for what he has done and makes tangible amends for it, then it will appropriate to take him seriously. Until then, no.
WILL WE EVER GET ANOTHER GOVERNANCE SCHOLAR?
Spent entire adulthood studying governance
In college worked in a a senators office
12 years developing budgets
Best background to be president
After presidency spent life helping in the poorest nations.
GDP–rose from 6300 to 11,600
NATIONAL INCOME-5,000 to 8,000 Billion–took 20 years to grow 2500B before Clinton
JOBS CREATED–over 22 million–record by far
AVERAGE WEEKLY EARNINGS–$360 to $478
AVERAGE WEEKLY HOURS WORKED–never hit 35.0–hit that mark 4 times in 80’s
UNEMPLOYMENT–from 7.2% down down down to 3.9%
WELFARE TO WORK—11,533,710 on federal roll in 1996 and 3,880,321 in 2007.
MINIMUM WAGE–$4.25 to $5.15
MINORITIES–did exceedingly well
HOME OWNERSHIP–hit all time high
DEFICIT–290 Billion to whoopee a SURPLUS
DEBT—-+28%—300% increase over prior12 years
FEDERAL SPENDING–+28%—80% under Reagan- who da true conservative?
DOW JONES AVERAGE–3,500 to 11,800 all it’s history to get to 3500 and Clinton zooms it
NASDAQ–700 to 5,000—all of it’s history to get to 700 and Clinton zooms it
VALUES INDEXES– almost all bad went down–good went up in zoom zoom zoom
FOREIGN AFFAIRS–Peace on Earth good will toward each other—Mark of a true Christian–what has Bush done to Peace on Earth?
POPULARITY—highest poll ratings in history during peacetime in AFRICA, ASIA AND EUROPE even 98.5% in Moscow–left office with highest gallup rating since it was started in 1920’s.
STAND UP FOR JUSTICE–evil conservatives spent $110,000,000 on hearings and investigations and caught— ONE— very evil man who took a few plane rides to events.
BOW YOUR HEADS–Thank you God for sending us a man of Bill Clinton’s character, intelligence, knowledge of governance, ability to face up to crises without whimpering and a great leader of the world.
THANK YOU GOD FOR THE GOOD TIMES THE CLINTON YEARS.
Ah yes, the man who gave us Summers and Rubin. Those half million formerly alive Iraqi children no doubt concur…
Wealth inequality grew more under Clinton than under Reagan or Bush II.
Deregulation of derivatives in the CFMA setting up the conditions for the 2008 meltdown
Repeal of Glass-Steagall via Gramm-Leach-Bliley which kept regular banking and insurance activities separate from investment banking. Ditto above.
Clinton’s two Treasury Secretaries were Robert Rubin and Larry Summers.
Clinton promoted the pro-corporate DLC and neoliberal Washington Consensus.
I once had a more positive view of Clinton but events made me go back and re-examine his Presidency. Now I see him as an integral part in the construction of kleptocracy. Clinton was just more wily mixing a little sugar with his cyanide.
When i think of clinton, i think of the telecom act, and the crushing of the seattle protests
April 19th – Waco.
Nafta; elimnating AFDC; Telecom Act; repealing Glass Steagall… still feeling worshipful?
“I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language and I’ve not seen it once”
Where has he been? I’ve been waiting 45 years for the same thing….Michael Milkin spoke in moral language?! The S&L scandal was “moral”? Come on.
These people only delude themselves.
Good to see the notion of criminality admitted. The problem remains that we need an OMF-style change. In thought experiment terms I see a people’s court in which drivel as ‘Delaware defences’ could at most be mitigation. The proceeds of the long-term crimes would be hunted down and ‘burned’ in a sensible debt jubilee – a sort of global inverted Cyprus. I suspect barring a couple of million actors would only produce a couple of million more unless the system was broken up. The dark side of Year Zero inevitably raises its head in this pigs seen flying scenario.
Money essentially allows me to teach/assess and translate this into effort elsewhere. The crime is largely that we have allowed it to become-remain the means of cheating those who put the effort in. This is the admission we need and one we all need to make, left, right and centre. In the current system my ten quid is worth the same as that raised in drug-dealing, financial fraud and so on. The problem is now so bad that ‘my ten quid’ is massively undercut by the financial-criminal system, and that I can’t earn it without joining that system. As an academic I have to teach kids (mostly) ‘earning’ a 3 or 4 year debt of $100K with material I could provide for $10K – so I mostly don’t and assess in management apprentice schemes that don’t lead to such obvious debt peonage. Even this isn’t ideal. There is, of course, a link between those of us who teach (at high cost)and the criminal behaviour of the banksters and politicians.
I could teach biology in schools. I wouldn’t want interference from religious clowns to affect that. I can teach Critical Theory and radical economics in universities – yet here the religious control-fraud freaks get in as surely as ‘creationists in Texas biology’. The mechanism is control of the jobs market – which works on me through feeling it immoral to create unemployed radicals who don’t have the common language skills of business to use in the face work of job interviews and such as value at risk calculations. The corruption is in deeper than anyone like Sachs would know.
SUPERB statement by Sachs.
I was at that conference. Sach’s talk was greeted with loud applause. Later some guy from the CATO institute got up and condemned him for using inappropriate language and echoing a “Communist-style” morality that assumes all hedge fund managers must be crooks by definition. Exactly one person applauded. Then the IMF economist on the stage (Michael Kumhof) said: “actually, not only agree with Sachs, I think he doesn’t go far enough…”
Perhaps the tide is turning?
(Is this the real David Graeber? If so, thanks so much for your work! Debt made me reconsider so many received truths.)
“But I meet a lot of these people on Wall Street on a regular basis right now. I’m going to put it very bluntly. I regard the moral environment as pathological. And I’m talking about the human interactions that I have. I’ve not seen anything like this, not felt it so palpably. These people are out to make billions of dollars and nothing should stop them from that. ”
Given that these people are actually pathological, sociopathic, psychopathic, and too powerful to jail, it is quite likely that the only thing which will stop them is execution.
This is why I support the death penalty — but not for ordinary murderers, mass-murderers, serial killers, not for relatively harmless people like that.
Only for people who would otherwise talk their way out of prison, or continue masterminding worldwide crimes *from* prison. People like the banksters who Sachs describes. They need their heads chopped off — it’s the only way to guarantee that they will stop their crime spree.
Since they’ve taken over most of the attorney generals’ offices, an independent grand jury prosecution seems like one of the few remaining “legal” ways to nail them.
If that doesn’t work, people will be demanding revolution, and I’ll be there with them, as will Jeffrey Sachs. People do not like it when lawless, heartless thugs run around stealing things without consequence for years on end; indeed, it is for the purpose of preventing this that many governments are formed.
I don’t think death should be necessary, I’m quite sure subtantial jail time would rein the behavior in. But they are leading themselves to the guillotine – those who make peaceful revolution impossible…
“And I’ve waited for a judge, for our President, for somebody and it hasn’t happened. And by the way, it’s not gonna happen any time soon, it seems. ”
This is when it happens. Based on my study of history, it’s only after people give up on expecting anyone to speak out soon that… they start speaking out. I’m not sure why. Once they start speaking out, people realize they’re not alone, and revolution can happen in *hours*.
We live in a society that has admired and rewarded antisocial behavior since the 1920s perhaps, surely since the 1960s with the Beatles, Stones, etc. No one should be surprised that antisocial behavior has appeared in more critical parts of society like Wall Street and DC. To eschew or criticize antisocial behavior became reprehensible uncool by the sixties and remains so. In Chicago, where the murder of children by other children has become a commonplace, police work is often stymied by witnesses who refuse to identify the killers, proclaiming that they are not snitches. Much better to allow the killers of children to remain free to repeat the crime than to be a snitch. Religious leaders who once were the moral leaders of the country have died off and left no heirs.
Nah most of them started teaching the Prosperity Gospel or something, instead of trying to help poor people or teach moral goodness.
“We live in a society that has admired and rewarded antisocial behavior since the 1920s perhaps, surely since the 1960s with the Beatles, Stones, etc.”
It’s hard for me to think of the Beatles first and foremost as being anti anything. They were pro — pro joy, pro love, pro creativity, pro people, pro peace, and everything that follows from that. Antiwar I’d accept, but not antisocial.
I admit to a certain unease when Establishment types appear to get religion. It is all well and good that Sachs calls out criminality on Wall Street, but I have to wonder if he has a coherent vision of what is going on.
Does he, for instance, understand his own role and that of his class, the elites, in this criminality?
The political sphere is not docile. It is complicit. It benefits from this criminality, not just in political contributions but in corporate, lobbying, think tank, and academic sinecures after leaving office or losing re-election.
I only have the quotes given above to go on, but I see only one generic reference to reform. This gets back to a point I have made before. If an institution is thoroughly corrupt, it can not be reformed. It can only be replaced. Even so, at a minimum, Sachs would need to outline what reforms he is talking about and how they would be implemented. And it would have to be something more than for the politicians to become less docile.
Also in the quotes given Sachs does not address wealth inequality and that these Wall Streeters in search of their billions can only achieve them by stealing from the rest of us.
If Sachs develops a cohesive critque of the powers that be, if he breaks with them and consistently pounds away at them, then he could become a voice, despite his past, worth listening to. However I would note that it has been Krugman’s shtick for years to sporadically give indications that he gets what is going on only to relapse into the comfort and security of the Establishment which is looting us.
My sense of what’s going on is we need to get to a state of practice ‘before’ economics attuned to it as a history of mistakes we can plan to avoid.
All I can think of when I read articles on reforming the evils of Wall Street is:
“This is a fantastic sales pitch on the validity of a house of cards.”
This guy’s seen a bandwagon and he’s jumping on it. Despicable.
So, he has just now become aware that gambling is going on in this establishment?
Like blaming a weathervane for being a weathervane. Like many, I see this as a very encouraging data point. No doubt many of the same critiques were made of the Girondins.
Wel, Lambert, I am not sure what you mean about the weathervane, but I would be more likely to applaud Mr. Sachs stmt as insightful, even monumental, if he were not a croupier.
And am still trying to figure out the weathervane thingy — pls forgive if I have misunderstood yr reply.
One hopes that Sachs is shifting in response to the winds that blow in his exalted stratum of the political class.
Sachs’ conversion from Goldman Sachs doctrine and from his own Shock Doctrine theology is encouraging. But after unleashing the predators of unbridled privatization on the Russian economy, nearly destroying it, his own lack of personal repentance is disappointing.
So is his inability to recognize and call out evil at the top. For Obama’s conspicuous collusion with the looters, he offers the same old worn out excuse: Wall Street has “gamed the system to a remarkable extent, and they have a docile president, a docile White House and a docile regulatory system that absolutely can’t find its voice. It’s terrified of these companies.”
So Obama is not really evil. It is not greed and powerlust—only cowardice. You see, he’s terrified of Jamie, Lloyd, and Jon Corzine; has been for five years. Obama is not a crook. He’s just a chickenshit chickenhawk.
Thanks, Jeffery. You’re almost there.
Good comments by Hugh ( as ever ) and David Graeber ( glad you were there ) . Sachs has found his conscience don’t knock it . No-one knows what will happen next .
“I regard the moral environment as pathological. And I’m talking about the human interactions that I have. I’ve not seen anything like this, not felt it so palpably.”
I wonder if he’s seen this among his own students. I’ve seen it with mine. Didn’t get the same feeling c15 years ago when I was an undergrad in Econ/Finance.
Dr. Pitchfork, can you elaborate? What are you seeing?
To paraphrase C.S. Lewis,
We create an economy that highly rewards selfishness and greed and then are shocked to discover that everything is being run by the most selfish and greedy.
Unfortunately it’s not just Wall Street. The meanness pervades the entire economy. It’s like passenger’s on the economic Titanic fighting to see who gets into the lifeboats.
A friend who works in the healthcare industry related this story which she heard from someone involved.
It seems that the healthcare industry has been struggling, for the past few years, with the amounts the Federal Government will reimburse for services to the poor. The reimbursement amounts were recently increased. The CEO of one hospital was planning on using the increase to boost wages, hire staff, do maintenance and replace equipment, they’d been putting off.
Mr. CEO was fired, in the words of one of the hospitals board members, because he had stolen his grandchildren’s inheritance.
Is this for real?
there you are Ms G
i sifted thru memos about your absence…
was getting a mite concerned.
Once a patient goes brain dead and relatives sign his organ donation consent form, he will get the best medical treatment of his life. A hospital code blue may be a call for doctors to rush to the bedside of a beating heart cadaver who needs his or her heart defibrillated.
It is most certainly true. I could name names but I don’t want to put people’s jobs in jeopardy.
If Blankfein is doing God’s work, then God’s work is the destruction of the United States.
Awesome. Too bad Sachs doesn’t speak this way when he gets invited on Bill Mhar’s TV show or when he writes for the Huffington Post.
I too find his past troubling but maybe his break with the Washington Consensus/ Shock Doctrine Neo-lib policies are his tacit admission of guilt and his atonement. What we need in this time of smooth talking liars is deeds not words unfortunately. I hope his words will give other men of conscience the courage to at least speak truth to this great evil which is strangling our nation.
Oops. Maher. I don’t watch a lot of TV.
From where I’m sitting, there aren’t too many who are buying Obama’s con anymore. Hell, even many of the pundits on MSNBC are calling him out. I think even Rachel Maddow has finally come around that he isn’t really a progressive, and she used to idolize him. Volunteering to cut entitlements recently (again) has served to be the lightbulb moment for many of his more persistently loyal fans.
Yep. The wheels are falling of the wagon. The only people who don’t get it are the Obots. Of course, Bush was able to govern quite successfully (as he defined success) with approval ratings in the 30s, so Obama may be able to do the same thing. Then again, on the whole and on the average, the country is worse off now than it was in the Bush era, at least if we look at the day-to-day experience of the non-rentier classes, so Obama may not be able to skate.
Jeffrey sachs can go jump in a cesspool.I think these elitists , who evidently didn’t know any better when….they did everything they have done…are just as useless now.I don’t care about any supposed damascus moment for them.
For this schmuck to talk about how he has been waiting to hear….Hear what?We all have day jobs, and we all know this stuff already.What has he been getting paid for ,during these years he was “waiting”.I ,personally am past any idea of reforming anyone.Everyone who has been a part of the problem for the last lifetime,should be painted with their deeds.Here is a person with acces to “behind the curtain”, and what do we get….”I’m shocked!Shocked to find out there is gambling going on in here.”
Everyday these crimes are condoned by the academic class, who sees wall st as one job oppurtunity, and politics as another. These three aspects of our problem have a co-dependence problem.Sane adults need to stop listening to any exuses,rationalizations,conversions,epiphanies, or whatever these “low-character” types feel the need to pretend to be.
I think taking yes for an answer makes more sense. Yves comments: “[T]he possibility of reform is remote until breaks within the elites take place.” That’s just what’s happening here. I care a lot more about good outcomes than figuring exactly which circle of Hell Sachs should end up in.
I’m not as optimistic. Actions speak louder than words, and so far, I don’t see any action from Sachs or anyone else. The “breaks” in the elites, IMHO, aren’t real as long as it’s just conflicting speeches. Given the outsize egos and competitive nature of Wall St., it’s not news that Sachs thinks everyone *else* in Wall St. is a crook. That’s how *every* Wall Streeter thinks of himself vis-a-vis his industry.
The real “breaks” will occur when elites actually turn on each other in a way that does actual harm to their competitors e.g. turning state’s evidence in a trial, lobbying against each other’s interests, or engaging in some other action that actually opposes the actions of their fellow elites. Until then, talk is just talk. I hope you weren’t equally optimistic in 2007 when Wall St. mavens were talking about the need for more regulation too…
There is now a COMPLETE Sachs transcript.
I will forgive Mr Sachs for South America and Poland because of this expression of remorse. That is our way in the west.
But I will attend carefully to what he tries to do next
Better late than never.
We need to act quickly then, create government lending facilities to pick up the slack of private banksters, and get a stimulus passed to create jobs and fill the output gap.
So Mr Sachs has had an Amygdala transplant?
I’m with the band-wagon theory.
What this president, Obama, has done is cement the presidency of the United States as the protector of the greatest financial criminals the world has ever seen. He has turned the United States into a banana republic, Banana republic is defined as government where the rich have no consequences, but the common man is held to the letter and oppressed by the law.
History will not be kind to Obama. And I voted for him.
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