16 December 2008

Happy Birthday, Bill 'mutha-fuckin' Hicks!!!

It's just a ride and we can change it any time we want. It's only a choice. No effort, no work, no job, no savings and money, a choice, right now, between fear and love. The eyes of fear want you to put bigger locks on your door, buy guns, close yourself off. The eyes of love instead see all of us as one. - Bill Hicks

12 December 2008

"The Fundamentals of the economy are strong."

"Smell that? Of course you do, it's your 401K."
(Henry Paulson juxtaposing a fart as a private retirement plan)

Nobel-laureate economist, Joseph Stiglitz (not the guy pictured above) provides an interesting, though abridged, historical layout of the economic meltdown and the importance of the getting our history correct so as to smartly deal with the potentially disastrous economic depression we are facing today.

The more I read, the more it seems to be apparent that the problem is not the cyclical (and somewhat predictable) downturn that occurs in any large economy. Instead, the problem is the very infrastructure of our economy. There has been a major flaw in the way we have done business over the last 20 years, at least. As Dr. Stiglitz sees it:
In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.

Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Can we all finally say, "Fuck Ayn Rand and her followers!"? If there ever was an ideology that needed a thorough, brutal and final rebuke, it's that horseshit. . .

Either way, Dr. Stiglitz wraps up his piece, I think, rather succinctly. Even if you haven't been following the minutia of the economic crisis, this is a good set of ideas to have in your head as you do. . .
Was there any single decision which, had it been reversed, would have changed the course of history? Every decision—including decisions not to do something, as many of our bad economic decisions have been—is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You’ll hear some on the right point to certain actions by the government itself—such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
Down with the Trickle Down™.