Three points of frustration

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RussB's picture
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
Three points of frustration

I wanted to blow off some steam regarding three things which I find offensive in themselves, and where the mainstream media coverage is especially irritating. (I assume it's not necessary to link examples; we've seen all three of these ad nauseum, and they're newly repeated every day.)

1. I understand why politicians and of course the industry want to pretend that cash is not fungible and that it's somehow possible to get a government handout, then bestow bonuses, dividends, buy new jets, go on luxury retreats etc., yet not have that be taxpayer money being spent that way. But why does the media go along with that? Why does anyone pretend there's even a question here?

If I may be allowed to offer a moral axiom:

If someone begs for a handout, he's at least implicitly guaranteeing he has cut his budget to the bone and needs the money only for absolute necessities. Therefore, every cent he spends from that moment on is to be judged according to the principle, the most frivolous dollar spent is the most recent dollar lent.

So for example if anyone extracted $1 from the taxpayers, and gave out $1 in bonuses, that's the taxpayers' $1. And so on through every taxpayer dollar.

I can't see how any disinterested observer would dispute this, and yet the media acts as if it's not self-evident, that we're dealing with angels dancing on a pin.


2. With regard to the nationalization debate, every day I see reportage endorsing the idea that "government officials are lousy at running banks". However true this may be, why do they always leave out the obvious, now empirically proven follow-up, that the private sector is also lousy at running banks, indeed that the government could hardly do a worse job than "the market" did.

By consistently, and I have to believe intentionally, leaving this out, the media has come out de facto against nationalization and in favor of the prevailing privatize-profits/socialize-costs program.

If it's unanimous that nobody knows how to run banks, that competence is not an attainable goal, then we need to move to simple equity, and it follows that the banks should be run by those putting up the money to keep them afloat, that is the taxpayers.

Those opposed to nationalization don't have a leg to stand on, rationally or morally. (Though I agree it's merely the least bad of bad options.)


3. Everywhere the ideological factoids: "Too big to fail", "Too interconnected to fail".

If these are true, it proves that those of us were correct who said all along that size and interdependence in themselves, taken to extremes, are evils. Now everyone agrees that once something is too big or too interconnected it becomes a clear and present danger to economic and social stability.

So how is it possible for the media (as well as pundits who would seem to be otherwise objective) to keep repeating this and yet never follow with the obvious: that by definition any serious attempt at a solution has to seek to guarantee that in the future nothing will ever again be too big or too interconnected, that a stable society and economy have to be decentralized, distributed, resilient, with lots of redundancy and decoupling.

As in the other two cases, I fear that it's the same old story - that by culture and by economic interest, the MSM is beholden to the gigantist, interdependence-swaddled, exponential growth/debt system. It's not only unwilling to question this system; left to itself it's simply congenitally incapable of even imagining the possibility of any questions.


Well, thanks for letting me get this off my chest. I hope some of this is interesting to you.  

Doug's picture
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3200
Re: Three points of frustration


Thanks for writing in an articulate way some of the thoughts that have been running through my brain for some time now.  Particularly your first point. 

1. It has amazed me for some time how politicians have justified tax increases by claiming they will go to a specific purpose.  My all time favorite is the lottery, or as some wag characterized it, a tax on stupidity and (my comment) a particularly regressive one.  The rationalization, at least in my state, is that the money will go to education.  I have never heard a pundit or politician point out that the income from the lottery will just replace money that would have otherwise come out of general funds.  The concept of fungibility of money appears nowhere in the media.

2. The notion that "government officials are lousy at running banks" is merely an extension of Reagans assertion that government is the problem.  That idea captured the public's imagination and has served the private sector very well, not necessarily to the taxpayer's advantage.  I would like to see a GAO audit on how much was saved or lost by taxpayers in the whole privatization movement.  I'm pretty sure the balance isn't nearly as rosy as the anti-government forces think.  As you point out, the evidence for private operation of banks is pretty sketchy.

3. The idea of "too big to fail" is akin to monopolization.  The gov't broke up monopolies, perhaps something like that should be done to corporations that also get too big.  There are some obvious problems with breaking up corporation in the context of a global economy, primarily that they will simply move off shore, but the idea should not be unthinkable.

At some point we as a global community will have to decide what kind of balance we want between multinational corporations and governments in controlling our futures.  The degree to which the merger of these two is occurring is, to my way of thinking, a far greater danger to individual freedom and economic well-being than our current gov't is, warts and all.  We still have the ability to change the way we are governed by holding our gov't leaders accountable.  We don't have that ability over corporations.  And, we may lose that ability if we don't exercise it.

RussB's picture
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
Re: Three points of frustration

Thanks, Doug. You're right about the monopolism implied by "too big/interconnected to fail".  I don't know whether or not old-style antitrust law would be effective in the case of the finance entities. Still, we can start with no-brainers like reinstating something like Glass-Steagal and moving quickly toward 100% reserve requirements. I've often seen each of those advocated, and that would be a decent start, but only a start.

One more point I forgot:

4. This whole notion, parroted incessantly by the media, that high salaries and "bonuses" have been necessary to attract the best "talent".

Now I'll grant that talent has long been a dubious term whose meaning isn't always clear, so there's nothing new about its vague, boosterish application to the finance industry.

But if it's supposed to mean a high level of competence and elegant performance (which I assume is what the average reporter means by it), then how is it possible for any reporter to write that bonuses were supposed to attract "talent" without immediately adding, as an observed FACT, that high bonuses failed to attract this talent, given the uniformly horrendous performance of these persons.

(Of course, the notion that extremely high executive "compensation" produces superior value was long ago exposed as a fraud. Around the world corporate CEOs, while well-paid, are not paid anywhere near as much as American CEOs, yet are consistently as productive or more so. Now with Wall St we see the most extreme criminal manifestation of this fraud.)    

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