What is this "it" I'm talking about? Check out my January 26th posting here on the blog:
I can’t believe anyone in his right mind is still thinking in terms of “recovery.” Recovery of what? What is it we think we can recover? And why is it we think we need to recover? The last thing the world needs is a return to the status quo ante, which would simply be a re-inflation of the same old bubble and the perpetuation of the same old Ponzi economics.I admit I've been a bit worried about Paul Krugman's take on all this. He's been persistently advocating for huge deficits as a way of containing the crisis and sometimes it seemed as though he too, like Obama, was hoping the old system could somehow be revived. Last Thursday, however, he finally made his position crystal clear, in a great Op-Ed piece called The Market Mystique:
Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis. But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic. . .I've already referred to last night's Bill Moyers show, where he interviewed James Thindwa and discussed the Republic Windows and Doors rebellion. But the second segment was possibly of even greater importance. Veteran political reporter, William Greider appeared and what was his message? More or less the same as Krugman and good old DocG:
Much discussion of the toxic-asset plan has focused on the details and the arithmetic, and rightly so. Beyond that, however, what’s striking is the vision expressed both in the content of the financial plan and in statements by administration officials. In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.
To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.
But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.
BILL MOYERS: We saw Secretary Geithner on Monday. We saw President Obama on Tuesday night. We saw Secretary Geithner again on Thursday. And the storyline seems to be, we're going to get tough on the financial industry. Your old newspaper, "The Washington Post," says, calls it, "A sweeping expansion of Federal authority of the financial system. A rebuke of raw capitalism, and a reassertion that regulation is critical to the healthy function of financial markets." That's the storyline as I read the week, but if you read between the lines, what's missing?
WILLIAM GREIDER: Well, among other things that are missing from that story is that we had the rules and regulations, the agencies created some 80 years ago and afterwards to prevent this sort of catastrophe. And these same political players, Republicans and Democrats holding hands, stripped them away, eviscerated them. The same agencies these reformers want to put in power to prevent this from happening again. Starting with the Federal Reserve, the Securities Exchange Commission, other regulators, utterly failed in their duty to do that. Now, we're going to give them new power.
I'm offering a breath of skepticism toward this grand transformation of government. I don't want to be a cynic, but it feels more to me like trying to restore the old order that failed. And I mean by that these big mega banks that had been liberated by deregulation to do as they pleased and the other rules that were undermined. I think this President, and I'm a big fan of this President, but I think his first priority seems to be to recreate those institutions which, some of which are now insolvent, as healthy again.
And actually it's quite scary, because unless they set about to make much more fundamental changes, I fear we will, sure enough, get this back again.
Finally, here's what George Soros had to say recently, quoted in an article in the London Times, George Soros, the man who broke the Bank, sees a global meltdown. And by the way I have to give him special credit here, because he's been saying this sort of thing for a long time and no one was listening:
The urgent task now, he says, is to realise that the system that collapsed was flawed. “Therefore you can’t restore it. You have to reform it.” He worries that politicians have not yet accepted the need for fundamental change and that “a lot of bankers have their head in the sand”.My own take on all this is that ultimately it may not matter what Geithner, Bernanke, Obama and congress do or don't do, the result will be the same: total collapse beyond any hope of restoration. However, if they finally "get it" as so many others are now getting it, and decide to work toward fundamental change instead of restoration of the old oligarchic order, the ride to the bottom of the money barrel will be a whole lot smoother -- and safer -- for all concerned.