Bubble Economy 2.0: The Financial Recovery Plan from Hell
Martin Wolf started off his Financial Times column today (February 11) with the bold question: “Has Barack Obama’s presidency already failed?”
The stock market had a similar opinion, plunging 382 points. Having
promised “change,” Mr. Obama is giving us more Clinton-Bush via Robert
Rubin’s protégé, Tim Geithner. Tuesday’s $2.5 trillion Financial
Stabilization Plan to re-inflate the Bubble Economy is basically an
extension of the Bush-Paulson giveaway – yet more Rubinomics for
financial insiders in the emerging Wall Street trusts. The financial
system is to be concentrated into a cartel of just a few giant
conglomerates to act as the economy’s central planners and resource
allocators. This makes banks the big winners in the game of “chicken”
they’ve been playing with Washington, a shakedown holding the economy
hostage. “Give us what we want or we’ll plunge the economy into
financial crisis.” Washington has given them $9 trillion so far, with
promises now of another $2 trillion– and still counting.
true reform – one designed to undo the systemic market distortions that
led to the real estate bubble – would have set out to reverse the
Clinton-Rubin repeal of the Glass-Steagall Act so as to prevent the
corrupting conflicts of interest that have resulted in vertical trusts
such as Citibank and Bank of America/Countrywide/Merrill Lynch. By unleashing these conglomerate grupos
(to use the term popularized under Pinochet with Chicago Boy direction
– a dress rehearsal of the mass financial bankruptcies they caused in
Chile by the end of the 1970s) The Clinton administration enabled banks
to merge with junk mortgage companies, junk-money managers, fictitious
property appraisal companies, and law-evasion firms all designed to
package debts to investors who trusted them enough to let them rake off
enough commissions and capital gains to make their managers the world’s
highest-paid economic planners.
economic collapse is the direct result of their planning philosophy. It
actually was taught as “wealth creation” and still is, as supposedly
more productive than the public regulation and oversight so detested by
Wall Street and its Chicago School aficionados. The financial
powerhouses created by this “free market” philosophy span the entire
FIRE sector – finance, insurance and real estate, “financializing”
housing and commercial property markets in ways guaranteed to make
money by creating and selling debt. Mr. Obama’s advisors are precisely
those of the Clinton Administration who supported trustification of the
FIRE sector. This is the broad deregulatory medium in which today’s
bad-debt disaster has been able to spread so much more rapidly than at
any time since the 1920s.
The commercial banks have used their credit-creating
power not to expand the production of goods and services or raise
living standards but simply to inflate prices for real estate (making
fortunes for their brokerage, property appraisal and insurance
affiliates), stocks and bonds (making more fortunes for their
investment bank subsidiaries), fine arts (whose demand is now
essentially for trophies, degrading the idea of art accordingly) and
other assets already in place.
resulting dot.com and real estate bubbles were not inevitable, not
economically necessary. They were financially engineered by the
political deregulatory power acquired by banks corrupting Congress
through campaign contributions and public relations “think tanks” (more
in the character of Orwellian doublethink tanks) to promote the
perverse fiction that Wall Street can be and indeed is automatically
self-regulating. This is a travesty of Adam Smith’s “Invisible
Hand.” This hand is better thought of as covert. The myth of “free
markets” is now supposed to consist of governments withdrawing from
planning and taxing wealth, so as to leave resource allocation and the
economic surplus to bankers rather than elected public representatives. This is what classically is called oligarchy, not democracy.
This centralization of planning, debt creation and revenue-extracting
power is defended as the alternative to Hayek’s road to serfdom. But it
is itself the road to debt peonage, a.k.a. the post-industrial
economy or “Information Economy.” The latter term is another
euphemistic travesty in view of the kind of information the banking
system has promoted in the junk accounting crafted by their accounting
firms and tax lawyers (off-balance-sheet entities registered on
offshore tax-avoidance islands), the AAA applause provided as
“information” to investors by the bond-rating cartel, and indeed the
national income and product accounts that depict the FIRE sector as
being part of the “real” economy, not as an institutional wrapping of
special interests and government-sanctioned privilege acting in an extractive rather than a productive way.
for the bonuses,” bankers in the United States and England testified
this week before Congress and Parliament. “We’ll keep the money, but
rest assured that we are truly sorry for having to ask you for another
few trillion dollars. At least you should remember our theme song: We
are still better managers than the government, and the bulwark against
government bureaucratic resource allocation.” This is the ideological
Big Lie sold by the Chicago School “free market” celebration of
dismantling government power over finance, all defended by complex math
rivaling that of nuclear physics that the financial sector is part of
the “real” economy automatically producing a fair and equitable
is not bad news for stockholders of more local and relatively healthy
banks (healthy in the sense of avoiding negative equity). Their stocks
soared and were by far the major gainers on Tuesday’s stock market,
while Wall Street’s large Bad Banks plunged to new lows. Solvent local
banks are the sort that were normal prior to repeal of Glass Steagall.
They are to be bought by the large “troubled” banks, whose “toxic
loans” reflect a basically toxic operating philosophy. In other words,
small banks who have made loans carefully will be sucked into Citibank,
Bank of America, JP Morgan Chase and Wells Fargo – the Big Four or Five
where the junk mortgages, junk CDOs and junk derivatives are
concentrated, and have used Treasury money from the past bailout to buy
out smaller banks that were not infected with such reckless financial
opportunism. Even the Wall Street Journal editorialized regarding the Obama Treasury’s new “Public-Private
Investment Fund” to pump a trillion dollars into this mess: “Mr.
Geithner would be wise to put someone strong land independent in charge
of this fund – someone who can say no to Congress and has no ties to
Citigroup, Robert Rubin or Wall Street.”
of this can solve today’s financial problem. The debt overhead far
exceeds the economy’s ability to pay. If the banks would indeed do what
Pres. Obama’s appointees are begging them to do and lend more, the debt
burden would become even heavier and buying access to housing even more
costly. When the banks look back fondly on what Alan Greenspan called
“wealth creation,” we can see today that the less euphemistic
terminology would be “debt creation.” This is the objective of the new
bank giveaway. It threatens to spread the distortions that the large
banks have introduced until the entire system presumably looks like
Citibank, long the number-one offender of “stretching the envelope,”
its euphemism for breaking the law bit by bit and daring government
regulators and prosecutors to try and stop it and thereby plunging the
U.S. financial system into crisis. This is the shakedown that is being
played out this week. And the Obama administration blinked – as these
same regulators did when they were in charge of the Clinton
administration’s bank policy. So much for the promised change!
three-pronged Treasury program seems to be only Stage One of a
two-stage “dream recovery plan” for Wall Street. Enough hints have
trickled out for the past three months in Wall Street Journal
op-eds to tip the hand for what may be in store. Watch for the magic
phrase “equity kicker,” first heard in the S&L mortgage crisis of
the 1980s. It refers to the banker’s share of capital gains, that is,
asset price inflation in Bubble #2 that the Recovery Program hopes to
first question to ask about any Recovery Program is, “Recovery for
whom?” The answer given on Tuesday is, “For the people who design the
Program and their constituency” – in this case, the bank lobby. The
second question is, “Just what is it they want to ‘recover’?” The
answer is, the Bubble Economy. For the financial sector it was a golden
age. Having enjoyed the Greenspan Bubble that made them so rich, its
managers would love to create yet more wealth for themselves by
indebting the “real” economy yet further while inflating prices all
over again to make new capital gains.
problem for today’s financial elites is that it is not possible to
inflate another bubble from today’s debt levels, widespread negative
equity, and still-high level of real estate, stock and bond prices. No
amount of new capital will induce banks to provide credit to real
estate already over-mortgaged or to individuals and corporations
already over-indebted. Moody’s and other leading professional observers
have forecast property prices to keep on plunging for at least the next
year, which is as far as the eye can see in today’s unstable
conditions. So the smartest money is still waiting like vultures in the
wings – waiting for government guarantees that toxic loans will pay
off. Another no-risk private profit to be subsidized by public-sector
While the Obama administration’s
financial planners wring their hands in public and say “We feel your
pain” to debtors at large, they know that the past ten years have been
a golden age for the banking system and the rest of Wall Street. Like
feudal lord claiming the economic surplus for themselves while
administering austerity for the population at large, the wealthiest 1%
of the population has raised their appropriation of the nationwide
returns to wealth – dividends, interest, rent and capital gains – from
37% of the total ten years ago to 57% five years ago and it seems
nearly 70% today. This is the highest proportion since records have
been kept. We are approaching Russian kleptocratic levels.
officials drawn from Wall Street who now control of the Treasury and
Federal Reserve repeat the right-wing Big Lie: Poor “subprime families”
have brought the system down, exploiting the rich by trying to ape
their betters and live beyond their means. Taking out subprime loans
and not revealing their actual ability to pay, the NINJA poor (no
income, no job, no audit) signed up to obtain “liars’ loans” as
no-documentation Alt-A loans are called in the financial junk-paper trade.
learned the reality a few years ago in London, talking to a commercial
banker. “We’ve had an intellectual breakthrough,” he said. “It’s
changed our credit philosophy.”
“What is it?” I asked, imagining that he was about to come out with yet a new magical mathematics formula?
“The poor are honest,” he said, accompanying his words with his jaw dropping open as if to say, “Who would have guessed?”
meaning was clear enough. The poor pay their debts as a matter of
honor, even at great personal sacrifice and what today’s neoliberal
Chicago School language would call uneconomic behavior. Unlike Donald
Trump, they are less likely to walk away from their homes when market
prices sink below the mortgage level. This sociological gullibility
does not make economic sense, but reflects a group morality that has
made them rich pickings for predatory lenders such as Countrywide,
Wachovia and Citibank. So it’s not the “lying poor.” It’s the
banksters’ fault after all!
this elite the Bubble Economy was a deliberate policy they would love
to recover. The problem is how to start a new bubble to make yet
another fortune? The alternative is not so bad – to keep the bonuses,
capital gains and golden parachutes they have given themselves, and
run. But perhaps they can improve in Bubble Economy #2.
Treasury’s newest Financial Stability Plan (Bailout 2.0) is only the
first step. It aims at putting in place enough new bank-lending
capacity to start inflating prices on credit all over again. But a new
bubble can’t be started from today’s asset-price levels. How can the
$10 to $20 trillion capital-gain run-up of the Greenspan years been
repeated in an economy that is “all loaned up”?
thing Wall Street knows is that in order to make money, asset prices
not only need to rise, they have to go down again. Without going down,
after all, how can they rise up? Without a crucifixion for the economy,
how can there be a resurrection? The more frenetic the price
fibrillation, the easier it is for computerized buy-and-sell programs
to make money on options and derivatives.
here’s the situation as I see it. The first objective is to preserve
the wealth of the creditor class – Wall Street, the banks and the other
financial vehicles that enrich the wealthiest 1% and, to be fair within
America’s emerging new financial oligarchy, the richest 10% of the
population. Stage One involves buying out their bad loans at a price
that saves them from taking a loss. The money will be depicted to
voters as a “loan,” to be repaid by banks extracting enough new debt
charges in the new rigged game the Treasury is setting up. The current
loss will be shifted the onto “taxpayers” and made up by new debtors –
in both cases labor, onto whose shoulders the tax burden has been
shifted steadily, step by step since 1980.
“aggregator” bank (sounds like “alligator,” from the swamps of toxic
waste) will buy the bad debts and put them in a public agency. The
government calls this the “bad” bank. (This is Geithner’s first point.)
But it does good for Wall Street – by buying loans that have gone bad,
along with loans and derivative guarantees and swaps that never were
good in the first place. If the private sector refuses to buy these bad
loans at prices the banks are asking for, why should the government
pretend that these debt claims are worth more. Vulture funds are said
to be offering about what they were when Lehman Brothers went bankrupt:
about 22 cents on the dollar. The banks are asking for 75 cents on the
dollar. What will the government offer?
the worst alternative is that is now being promoted by the banks and
vulture investors in tandem: the government will guarantee the price at
which private investors buy toxic financial waste from the banks. A
vulture fund would be happy enough to pay 75 cents on the dollar for
worthless junk if the government were to provide a guarantee. The
Treasury and Federal Reserve pretend that they simply would be
“providing liquidity” to “frozen markets.” But the problem is not
liquidity and it is not subjective “market psychology.” It is
“solvency,” that is, a realistic awareness that toxic waste and bad
derivatives gambles are junk. Mr. Geithner has not been able to come to
terms with how to value this – without bringing the Obama
administration down in a wave of populist protest – any more than Mr.
Paulson was able to carry out his original Tarp proposal along these
hardest task for today’s banksters is to revive opportunities for
creditors to make a new killing. (It’s the economy that’s being killed,
of course.) This seems to be the aim of the Public/Private investment
company that Mr. Geithner is establishing as the second element in his
plan. The easiest free lunch is to ride the wave of a new bubble – a
fresh wave of asset-price inflation to be introduced to “cure” the
problem of debt deflation.
how I imagine the ploy might work. Suppose a hapless family has bought
a home for $500,000, with a full 100% $500,000 adjustable-rate
mortgage scheduled to reset this year at 8%. Suppose too that the
current market price will fall to $250,000, a loss of 50% by yearend
2009. Sometime in mid 2010 would seem to be long enough for prices to
decline by enough to make “recovery” possible – Bubble Economy 2.0.
Without such a plunge, there will be no economy to “rescue,” no
opportunity for Tim Geithner and Laurence Summers to “feel your pain”
and pull out of their pocket the following package – a variant on the
“cash for trash” swap, a public agency to acquire the $500,000 mortgage
that is going bad, heading toward only a $250,000 market price.
“bad bank” was not quite ready to be created this week, but the embryo
is there. It will take the form of a public/private partnership (PPP)
of the sort that Tony Blair made so notorious in Britain. And speaking
of Mr. Blair, I am writing this from England, where almost every
America-watcher I talk to has expressed amazement at Obama’s
performance last week idealizing England’s counterpart to George Bush
when it comes to unpopularity contests. Blair’s tenure in office was a
horror story, not something to be congratulated for. He privatized the
railroads and entering into the disastrous public/private partnership
that doubled, tripled or quadrupled the cost of public projects by
adding on a heavy financial overhead If Obama does not realize how he
shocked Britain and much of Europe with his praise, then he is in
danger of foisting a similar public/private financialized “partnership”
on the United States
new public/private institution will be financed with private funds – in
fact, with the money now being given to re-capitalize America’s banks
(headed by the Wall St. bank’s that have done so bad). Banks will use
the Treasury money they have received by “borrowing” against their junk
mortgages at or near par to buy shares in a new $5 trillion institution
created along the lines of the unfortunate Fanny Mae and Freddie Mac.
Its bonds will be guaranteed. (That’s the “public” part – “socializing”
the risk.) The PPP institution will have the power to buy and
renegotiate the mortgages that have passed into the hands of the
government and other holders. This “Homeowner Rescue Trust” will use
its private funding for the “socially responsible” purpose of “saving
the taxpayer” and middle class homeowners by renegotiating the mortgage
down from its original $500,000 to the new $250,000 market price.
the patter talk you can expect, with the usual Orwellian euphemisms.
The Homeowners Rescue PPP will appear as a veritable Savior Bank
resurrected from the wreckage of Bubble #1. Its clients will be
families strapped by their mortgage debt and feeling more and more
desperate as the price of their major asset plummets more deeply into
Negative Equity territory. To them, the new PPP will say: “We’ve got a
deal to save you. We’ll renegotiate your mortgage down to the current
market price, $250,000, and we’ll also lower your interest rate to just
5.50%, the new rate. This will cut your monthly debt charges by nearly
two thirds. Not only can you afford to stay in your home, you will
escape from your negative equity.”
family probably will say, “Great.” But they will have to make a
concession. That’s where the new public/private partnership makes its
killing. Funded with private money that will take the “risk” (and also
reap the rewards), the Savior Bank will say to the family that agrees
to renegotiate its mortgage: “Now that the government has absorbed a
loss (in today’s travesty of “socializing” the financial system) while
letting let you stay in your home, we need to recover the money that’s
been lost. If we make you whole, we want to be made whole too. So when
the time comes for you to sell your home or renegotiate your mortgage,
our Homeowners Rescue PPP will receive the capital gain up to the
original amount written off.”
other words, if the homeowner sells the property for $400,000, the
Homeowners Rescue PPP will get $150,000 of the capital gain. If the
home sells for $500,000, the bank will get $250,000. And if it sells
for more, thanks to some new clone of Alan Greenspan acting as
bubblemeister, the capital gain will be split in some way. If the split
is 50/50 and the home sells for $600,000, the owner will split the
$100,000 further capital gain with the Homeowners Rescue PPP. It thus
will make much more through its appropriation of capital gains (the new
debt-fueled asset-price inflation being put in place) than it extracts
would make Bubble 2.0 even richer for Wall Street than the Greenspan
bubble! Last time around, it was the middle class that got the gains –
even if new buyers had to enter a lifetime of debt peonage to buy
higher-priced homes. It really was the bank that got the gains, of
course, because mortgage interest charges absorbed the entire rental
value and even the hoped-for price gain. But homeowners at least had a
chance at the free ride, if they didn’t squander their money in
refinancing their mortgages to “cash out” on their equity to support
their living standards in a generation whose wage levels had stagnated
since 1979. As Mr. Greenspan observed in testimony before Congress, a
major reason why wages have not risen is that workers are afraid to
strike or even to complain about being worked harder and harder for
longer and longer hours (“raising productivity”), because they are
one paycheck away from missing their mortgage payment – or, if renters,
one paycheck or two away from homelessness.
is the happy condition of normalcy that Wall Street’s financial
planners would like to recover. This time around, they may not be
obliged to make their gains in a way that also makes middle class
homeowners rich. In the wake of Bubble Economy #1, today’s
debt-strapped homeowners are willing to settle merely for a plan that
leaves them in their homes! The Homeowners Rescue PPP can appropriate
for its stockholder banks and other large investors the capital gains
that have been the driving force of U.S. “wealth creation,”
bubble-style. That is what the term “equity kicker” means.
situation confronts the economy with a dilemma. The only policies
deemed politically correct these days are those that make the situation
worse: yet more government money in the hope that banks will create yet
more credit/debt to raise house prices and make them even more
unaffordable; credit/debt to inflate a new Bubble Economy #2.
for Wall Street’s enormous Bad Bank conglomerates are screaming that
all real solutions to today’s debt problem and tax shift onto labor are
politically incorrect, above all the time-honored debt write-downs to
bring the debt burden within the ability to pay. That is what the
market is supposed to do, after all, by bankruptcy in an anarchic
collapse if not by more deliberate and targeted government policy. The
Bad Banks, having demanded “free markets” all these years, fear a
really free market when it threatens their bonuses and other takings.
For Wall Street, free markets are “free” of public regulation against
predatory lending; “free” of taxing the wealthy so as to shift the
burden onto labor; “free” for the financial sector to wrap itself
around the “real” economy like parasitic ivy around a tree to extract
is a travesty of freedom. As the putative neoliberal Adam Smith
explained, “The government of an exclusive company of merchants, is,
perhaps, the worst of all governments.” But worst of all is the
“freedom” of today’s economic discussion from the wisdom of classical
political economy and from historical experience regarding how
societies through the ages have coped with the debt overhead.
How to save the economy from Wall Street
is an alternative to ward all this off, and it is the classic
definition of freedom from debt peonage and predatory credit. The only
real solution to today’s debt overhang is a debt write-down. Until this
occurs, debt service will crowd out spending on goods and services and
there will be no recovery. Debt deflation will drag the economy down
while assets are transferred further into the hands of the wealthiest
10 percent of the population, operating via the financial sector.
If Obama means what he says, he would use his office as a bully pulpit to urge repeal the present harsh creditor-oriented
bankruptcy law sponsored by the banks and credit-card companies. He
would campaign to restore the long-term trend of laws favoring debtors
rather than creditors, and introduce legislation to restore the
practice of writing down debts to reflect the debtor’s ability to pay,
imposing market reality to debts that are far in excess of realistic
second policy would be to restore the power of state attorneys general
to bring financial fraud charges against the most egregious mortgage
lenders – the prosecutions that the Bush Administration got thrown out
of court by claiming that under an 1864 National Bank Act clause, the
federal government had the right to override state prosecutions of
national banks – and then appointing a non-prosecutor to this
the basis of reinstated fraud charges, the government might claw back
the bank bonuses, salaries and bank earnings that represented the
profits from America’s greatest financial and real estate fraud in
history. And to prevent repetition of the past decade’s experience, the
Obama Administration might help popularize a new psychology of debt.
The government could encourage “the poor” to act as “economically” as
Donald Trumps or Angelo Mozilo’s would do, making it clear that debt
write-downs are a right.
to ward off repetition of the Bubble Economy, the Treasury could impose
the “Tobin tax” of 1% on purchases and options for stocks, bonds and
foreign currency. Critics of this tax point out that it can be evaded
by speculators trading offshore in the rights to securities held in
U.S. accounts. But the government could simply refuse to provide
deposit insurance and other support to institutions trading offshore,
or simply could announce that trades in such “deposit receipts” for
shares would not have legal standing. As for trades in derivatives,
depository institutions – including conglomerates owning such banks –
can simply be banned as inherently unsafe. If foreigners wish to
speculate on financial horse races, let them.
policy ultimately rests on tax policy. It is the ability to levy taxes,
after all, that gives value to Treasury money (just as it is the
inability to collect on debts that has depreciated the value of
commercial bank deposits). It is easy enough for fiscal policy to
prevent a new real estate bubble. Simply shift the tax system back to
where it originally was, on the land’s site-rental value. The “free
lunch” (what John Stuart Mill called the “unearned increment” of rising
land prices, a gain that landlords made “in their sleep”) would serve
as the tax base instead of burdening labor and industry with income
taxes and sales taxes. This would achieve the kind of free market that
Adam Smith, John Stuart Mill and Alfred Marshall described, and which
the Progressive Era aimed to achieve with America’s first income tax in
1913. It would be a market free of the free lunch that Chicago Boys
insist does not exist. But the recent Bubble Economy and today’s Bailout Sequel have been all about getting a free lunch.
land tax would prevent housing prices from rising again. It is the most
hated tax in America today, largely because of the disinformation
campaign that has been mounted by the real estate interests and
amplified by the banks that stand behind them. The reality is that
taxing land appreciation rather than wages or corporate profits would
save homeowners from having to take on so much debt in order to obtain
housing. It would save the economy from seeing “wealth creation” take
the form of the “unearned increment” being capitalized into higher bank
loans with their associated carrying charges (interest and
wealth tax originally fell mainly on real estate. The most immediate
and politically feasible priority of the Obama Administration thus
should be to repeal the Bush Administration’s drastic tax cuts for
the top brackets and its moratorium on the estate tax. The aim should
be to bring down the polarization between creditors and debtors that
has concentrated over two-thirds of the returns to wealth in the
richest 1% of the population.
alternatives to the Bubble Economy such as these are not promoted, we
will know that promises of change were mere rhetoric, Tony Blair style.
 Martin Wolf, “Why Obama’s new Tarp will fail to rescue the banks,” Financial Times, Feb. 11, 2009.
 “Geithner at the Improv,” Wall Street Journal editorial, February 11, 2009.
Michael Hudson is a frequent contributor to Global Research. Global Research Articles by Michael Hudson
This is good. It’s on the same wavelength with much of what I’ve been thinking.
Basically, we have (1) a corporatist, neo-feudalist elite, and (2) a veritable bubble society, where the whole basis of the economy and social psychology, indeed the whole culture, is exponential debt and gold rushes.
The elite manages to achieve ever more concentrated wealth and power through a general political agenda and through disaster capitalism, which affords an ever more frequent litany of opportunities.
The two-party winner-take-all pseudo-democracy enables them every step of the way. Politicians are both corrupt and either corporatist ideologues or brainwashed into "capitalist" mythology. (Just this afternoon Krugman on his blog gave his assessment that Obama doesn’t want to nationalize these bank-derived structures simply because he’s "culturally" averse to it. Brainwashing.)
I think it does look like Obama’s presidency has already failed. It certainly will if he continues down this path. Obama may not be corrupt like Bush, but he does seem ideologically just as committed to the Bush economic agenda. (We can call it the Clinton-Bush-Obama corporatist agenda.)
What’s worse, his entire temperamental thrust seems to be toward appeasement. His apparent obsession with "bipartisanship" and appeasement is inexplicable from any point of view other than being a basic character flaw. After all, how is it possible to have been paying attention to the way things have gone the past few decades and still believe it’s possible to appease the republicans, unless you have some desperate personal dream of doing so?
With regard to the point about the giant bank derivations using money extorted from the public to gobble up smaller, real banks, the question I’ve long been asking (it seems obvious to me) is, if we need this massive public bailout, because failure at the top, and on Wall St, will reverberate to Main St, then why don’t we go to the real links in the chain and shore up the real, local, real deposit-real lending banks? Why don’t we shield these (there have to be ways at least as effective, and probably alot simpler) from those alleged reverbs, as we let the cancerous growth die off (or better yet burn it off)?
(Basing everything at the smaller bank level would also provide a better base from which to launch the "stimulus".)
One last point, regarding what was said about the poor being inexplicably willing to crucify themselves on debt disaster which wasn’t even their own fault, in a way the rich would never do: This is the same question Thomas Frank wrestled with in What’s the Matter With Kansas? , why do so many among the lower classes support Republican policies which are so obviously radically against their economic interests? Presumably the answer isn’t just stupidity and clever manipulation of "culture war" issues.
I had occasion to think about this the other day when I was rereading part of Arendt’s Origins of Totalitarianism. She referred to how the unclassed, atomized masses of post-WWI Europe, especially in Germany and other places wracked by hyperinflation, insurrection, and other economic and social upheaval, developed a strangely selfless way of looking at day-to-day life ("selfless" in the sense of not looking to their socioeconomic interests), while at the same time they became keenly interested in ideology, conspiracy theories, culture war issues, etc., as a kind of mass political escapism, and that this helped prepare the ground for the rise of totalitarianism.
We’re still very early in the world-historical crisis. To paraphrase Churchill, we’re still in the "beginning of the beginning". But I wonder if people, especially in America where class consciousness has always been artificially repressed, and rational self-interest may therefore be an atrophied faculty (and not only among the poor), are already beginning to check out on "reality" (i.e. give up on really trying to roll up their sleeves and tackle a problem) and fly off into escapes.
Eight years of George Bush is difficult to explain otherwise. And that Obama can clearly signal that he intends to largely continue with the Bush agenda, and not immediately bring down mass protest (where are all the people who supposedly wanted "change"?), is also difficult to explain otherwise.
And that Obama can clearly signal that he intends to largely continue
with the Bush agenda, and not immediately bring down mass protest
(where are all the people who supposedly wanted "change"?), is also
difficult to explain otherwise.
Excellent point. With the huge database of followers who helped elect him to the Presidency, Obama could go to the people and get their support to ram through really significant change. He has the power at hand but chooses not to use it. Why?
As already so eloquently noted in this thread and others, the fact that he has gone down the path he has is indeed a puzzlement!
"Excellent point. With the huge database of followers who helped elect him to the Presidency, Obama could go to the people and get their support to ram through really significant change. He has the power at hand but chooses not to use it. Why?"
The people in that grassroots database are probably the only hope for putting any pressure on Obama to actually live up to some of his promise of change.
I know a few among them have said things like "it’s our responsibility to hold him accountable". But most of them are still under the effects of the Kool-aid.
For example, I get e-mails from MoveOn. While they used to be independent of the Dem party and I suppose still nominally are, judging by these communiques they sound like Obama flunkies, angling to become his equivalent of Fox news or something.
As for Obama himself, I know the more intelligent among his supporters, those who can’t help seeing how bad things look so far, keep saying he knows exactly what he’s doing, that he has a Machiavellian master plan, that this has all been to check off the "bipartisan" box, and now that the Reps have put themselves in the wrong by rejecting his overtures before the eyes of the people, Obama now has full political freedom to really begin, and now we’ll see the real action.
I very much hope that’s true, but I’m not holding my breath. It seems like appeasement is in his blood, that at his core he believes it’s possible to find this Eldorado of "common ground" where everyone will sing kumbaya together, and he’s willing to sacrifice himself and everyone else to seek it.
He really believes we’re all brothers and can find "change" together. But the inconvenient truth is that there’s a vast, entrenched structure of die-hard dead-enders opposed to change, whose agenda is nothing less than to destroy the future forever.
The only way to achieve change, to try to save the future, is to blast this entrenchment out of the way.
I believe Obama is unwilling and thus unable to see this truth.
"He has the power at hand but chooses not to use it. Why?"
Didn’t they take his blackberry off him….?
"He has the power at hand but chooses not to use it. Why?"
Didn’t they take his blackberry off him….?
You are such an agitator, aren’t you!
Actually, if you followed our news, you would know that he got to keep his Blackberry but his email address is now super-secret and limited to a very select few.