27 September 2008
What a Revoltin' Development, Ollie!
Have you been following the problems of America's economy? If you haven't it is because your abbot won't allow you any outside contact with the world.
First some context about economists and their biases. In economist circles from 1950 to today, debates about the federal reserve actions, Wall Street trading, monetary policy, financial accountability to stockholders, IRA's, private and public cash management, credit and the value of the dollar versus other currencies divide economists into two fundamentally different ideological camps: Monetarists (Milton Freidman and the University of Chicago) and Keynsian (John Maynard Keynes and the University of Michigan, et al.). The monetarists lost their prime power when private ownership of gold was made illegal and when the dollar went off the gold standard. Still, monitarism ideas prevail among the neo-conservative politicians, the very rich and those who aspire to libertarian or individualistic ideals. Keynsians prevail within the more liberal political parties, with beneficiaries of The Great Society programs instituted by Presidents Johnson and Nixon and those who do not fear government involvement in regulating commerce, scientific research, education and health care. To me, Keynsians are better than monetarists, but most ideologues disappoint me sooner or later. Yes, I flip flop, too.
We never have had a "free market" in this country since its founding. We Americans define 'free market' according to who has controlling power in the market place: multi=national corporations, very rich individuals, unions and union bosses, consumer boycotts, or local, state and federal government regulatory bureaucracies. So, unless one can be more precise about the definition of 'free market', please try other arguments than the "free market" myth.
The Great Depression. Black Tuesday. October 29, 1929. I've read about it, my parents worked through it, supporting their unemployed parents and siblings. The parallels between September 1929 and today's economy seem alarmingly similar: credit crunch, increasingly growing disparity of incomes between the rich and the other classes, and Wall St. financiers more focused on wealth than value for their revenues.
The Paulson Plan repeats the approach taken by the Hoover Administration, although Hoover rejected his Treasury Secretary's initial recommendations, that were the same as Paulson's are.
The Gingrich Contract on America of 1984 began the systematic deregulation of American industries and primary utilities that some Republicans in the House continue to today. The neocons, usually devotees of monetarist Milton Friedman, just keep trying harder to do the same things by focus on liquidity. By so doing, they make the mistake to failure: if the current strategy is not working, it must be that we are not trying hard enough. Let's do more of the same tactics. A more thoughtful approach considers that success has a much greater chance if one abandons a current, stymied strategy and develops another, perhaps novel strategy.
Frederick Hayek (Nobel Laureate in Economics) predicted the 1929 Crash several months before it happened. The free market champions in the banks and on Wall Street did not heed his warning. Instead, they followed the monetarist approach of liquidity based on credit according to Milton Friedman, also a Nobel Laureate, who greatly influenced Ronald Reagan and the neo-conservative Republicans.
We seem to be condemned to repeat history, just month earlier in the year. Perhaps had we an Administration that valued competence more than personal and political loyalty, we might not have gone this far into crisis. We don't have a competent President and Administration; the best plan they can create to stem this crisis is one that even Hoover rejected in 1929.
What survived from Roosevelt's New Deal are federal institutions that addressed the universal needs of Americans: Social Security, the National Labor Relations Board and the Securities and Exchange Commission. These three programs stabilized the economy by guaranteeing a floor to poverty, empowered unions to increase employment and workers' incomes and established oversight of Wall St.
It is a bit comforting that Congress is listening to its constituents, because the majority of the phone calls and emails are from those people who reject what the Paulson Plan-even as amended-purports to do.
Do I have an answer? No, I don't know the details of Wall St.'s mechanisms and I believe there are much better informed and capable persons working on the problem than I am. I can, however, discern an impending crisis when I see one. I hope that Congress stays at work and defers their electioneering until this problem is fully identified and preliminary steps are put into place.
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First some context about economists and their biases. In economist circles from 1950 to today, debates about the federal reserve actions, Wall Street trading, monetary policy, financial accountability to stockholders, IRA's, private and public cash management, credit and the value of the dollar versus other currencies divide economists into two fundamentally different ideological camps: Monetarists (Milton Freidman and the University of Chicago) and Keynsian (John Maynard Keynes and the University of Michigan, et al.). The monetarists lost their prime power when private ownership of gold was made illegal and when the dollar went off the gold standard. Still, monitarism ideas prevail among the neo-conservative politicians, the very rich and those who aspire to libertarian or individualistic ideals. Keynsians prevail within the more liberal political parties, with beneficiaries of The Great Society programs instituted by Presidents Johnson and Nixon and those who do not fear government involvement in regulating commerce, scientific research, education and health care. To me, Keynsians are better than monetarists, but most ideologues disappoint me sooner or later. Yes, I flip flop, too.
We never have had a "free market" in this country since its founding. We Americans define 'free market' according to who has controlling power in the market place: multi=national corporations, very rich individuals, unions and union bosses, consumer boycotts, or local, state and federal government regulatory bureaucracies. So, unless one can be more precise about the definition of 'free market', please try other arguments than the "free market" myth.
The Great Depression. Black Tuesday. October 29, 1929. I've read about it, my parents worked through it, supporting their unemployed parents and siblings. The parallels between September 1929 and today's economy seem alarmingly similar: credit crunch, increasingly growing disparity of incomes between the rich and the other classes, and Wall St. financiers more focused on wealth than value for their revenues.
The Paulson Plan repeats the approach taken by the Hoover Administration, although Hoover rejected his Treasury Secretary's initial recommendations, that were the same as Paulson's are.
The Gingrich Contract on America of 1984 began the systematic deregulation of American industries and primary utilities that some Republicans in the House continue to today. The neocons, usually devotees of monetarist Milton Friedman, just keep trying harder to do the same things by focus on liquidity. By so doing, they make the mistake to failure: if the current strategy is not working, it must be that we are not trying hard enough. Let's do more of the same tactics. A more thoughtful approach considers that success has a much greater chance if one abandons a current, stymied strategy and develops another, perhaps novel strategy.
Frederick Hayek (Nobel Laureate in Economics) predicted the 1929 Crash several months before it happened. The free market champions in the banks and on Wall Street did not heed his warning. Instead, they followed the monetarist approach of liquidity based on credit according to Milton Friedman, also a Nobel Laureate, who greatly influenced Ronald Reagan and the neo-conservative Republicans.
We seem to be condemned to repeat history, just month earlier in the year. Perhaps had we an Administration that valued competence more than personal and political loyalty, we might not have gone this far into crisis. We don't have a competent President and Administration; the best plan they can create to stem this crisis is one that even Hoover rejected in 1929.
What survived from Roosevelt's New Deal are federal institutions that addressed the universal needs of Americans: Social Security, the National Labor Relations Board and the Securities and Exchange Commission. These three programs stabilized the economy by guaranteeing a floor to poverty, empowered unions to increase employment and workers' incomes and established oversight of Wall St.
It is a bit comforting that Congress is listening to its constituents, because the majority of the phone calls and emails are from those people who reject what the Paulson Plan-even as amended-purports to do.
Do I have an answer? No, I don't know the details of Wall St.'s mechanisms and I believe there are much better informed and capable persons working on the problem than I am. I can, however, discern an impending crisis when I see one. I hope that Congress stays at work and defers their electioneering until this problem is fully identified and preliminary steps are put into place.
Labels: Bush, Economy monetarism Keynes, Friedman, Paulson
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