Jesse Walker points out that the top two right-wing radio talkers are taking up for poor, persecuted AIG. My, my, we may see some interesting developments on the right-wing populism front.
I mentioned the other day that Harvard's Ken Rogoff said next year's big story is going to be the social effects of the fury that will sweep through the culture once Americans realize how bad this crisis is. We're already seeing some of that this week, over the AIG bonuses. I understand the critically important point about the sanctity of contracts, and how we shouldn't abrogate them without a proportionally grave reason. What galls people, I think, is not so much the bonus contracts per se, but that the system allows such things to be legal. It is hard to explain to ordinary people how the same relatively small group of people who set up a scheme that has so far cost the US taxpayer $170 billion, and may yet cost more, and that put the whole global economy in jeopardy, can not only escape punishment for their recklessness, but can be financially rewarded for it. It offends one's common sense, and sense of justice.
Anatole Kaletsky worries that the rage against bankers threatens both capitalism and democracy. Excerpt:
This bloodlust raises a truly alarming question: can capitalism and democracy survive side by side?Four months after Mr Obama's election the policy paralysis in Washington continues - and the backlash against the financial policies required to avert disaster becomes more vicious by the day. This brings to mind a disconcerting historical reality airbrushed away in the simplified picture presented by textbook economics: the people who are now blamed for the Great Depression of the 1930s and Japan's lost decade - Andrew Mellon, the US Treasury Secretary in the early 1930s, and Yasushi Mieno, the governor of the Bank of Japan from 1989 to 1994 - were not stupid, ignorant or wicked.
They were considered at the time the leading economists and financiers of their generation and were widely admired for their honesty and ethical standards. And they enjoyed widespread public support for their puritanical views about the virtues of saving, the dangers of creating future booms and the necessity of punishing and "purging" imprudent and unethical boom-time behaviour.
The confusion of moralism and economics led to disaster, as even schoolchildren are now taught. But many people also understood this in the 1930s.
John Maynard Keynes campaigned for budgetary flexibility and abandonment of the gold standard for at least a decade before publishing his General Theory in 1936. And he was a genius of rhetoric as well as of economics. He could argue far more eloquently for expansionary policies than any of his latter-day disciples, from Mervyn King and Ben Bernanke down to humble journalistic scribblers such as myself. He could explain his ideas with equal brilliance in the abstractions of Treasury mandarins or the straightforward language of common people: "Housewives of England, for every shilling you save, you put a man out of work for a day."
But Keynes's arguments were ignored by democratic governments the world over. Gordon Brown describes a document in the Treasury archives in which Keynes's proposals for saving Britain from depression were dismissed by the Permanent Secretary with three scribbled words: "Inflation, Extravagance, Bankruptcy."
More:
Most people in the 1930s agreed with the Treasury that Keynes was irresponsible and deluded. And that is what many believe today - that a debt crisis cannot be cured by borrowing; that saving is virtuous while spending is wasteful; that printing money creates inflation and that the best response to recession is to fire government bureaucrats.If these beliefs become conventional wisdom among voters, then coping with the economic crisis will become as difficult as it was in the 1930s - at least for democracies. And here we come to the real horror.
In the 1930s only one country put expansionary policies fully into practice. Hitler's Germany, guided by the explicitly Keynesian economic thinking of its Finance Minister, Hjelmar Schacht, rapidly restored full employment by building the autobahns, even before it turned to rearmament. The US and Britain, by contrast, never applied expansionary policies even in Roosevelt's New Deal. It took Hitler's war to create the consensus required for the bold fiscal policies that pulled the democratic countries out of depression.
Now consider this: is it coincidence that China is only leading economy where growth seems assured and there is no doubt about the solidity of the banking system?
So is democracy incompatible with bold economic expansion? Obviously, I hope this is not true - and I am encouraged that for 250 years everyone who has bet against American democracy and capitalism has lost. But what if President Obama proves unable to unify America around an effective policy to pull itself out of recession?
I can think of only one answer: we had better start learning Chinese.
So: is our anger, however justified, going to cost us dearly? If Kaletsky is onto something, Limbaugh and Hannity, however appalling they are in this instance, might have a point. Right? Help me out here.
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As a Libertarian, I'm generally against the idea of Government intervention, however I cannot bring myself to any level of outrage over the idea of a punitive tax on any company accepting bailout money who have employees that receive 'retention' bonuses in excess of $250,000 in lieu of a normal salary. There is always the risk of punishing someone who may be undeserving. And yet, at the same time, these companies receiving the bailout money would be bankrupt or totally shut down without government intervention in the first place.
Once a company goes Zombie, all notions of socialism and free market are tossed out the window. We've entered a new place. a place where people are drawing salary *only* because the government stepped in. With companies in reasonable shape either refusing bailout money (Ford), or returning bailout money, I would argue that the companies left who haven't returned bailout money are the ones that were dying. And by having to choose between bankruptcy or accepting government aid, those companies must accept that the third party (in this case the government) who saved them, now has a say in the operations of the company.
We can argue all day about creating moral hazard by bailing the companies out, or the Systemic collapse that may have happen had we let them fail. But right now the facts on the ground are fairly straight forward. We did bail the companies out. The Companies that could refuse or return the bailout money, did. And while the bonuses comprise a tiny piece of the bailout puzzle, because of the sense of moral outrage from all circles, there is a disproportionate interest in those bonuses.
And to Gayle Miller:
Defining anything going on right now as Socialism comes across as a very interesting and mistaken definition of 'Socialism.' Like it or not, the system as a whole had a short sharp systemic crisis after the bankruptcy of Lehman Brothers. The major financial systems had become so intertwined and interwoven that the collapse of any one company left the others in a dire situation.
We can argue all day about the root causes, but one of the final straws that forced the AIG bailout was their selling of So many speculative Credit Default Swaps. AIG had effectively promised to pay out around 2 times as much in CDS's than the company itself was worth. Effectively, AIG had made promises that it could not keep.
The CDS market has had some changes implemented, and hopefully those changes coupled with the bailout will be enough to keep the system going in a similar form.
Otherwise, the housing market appears to be bottoming out, consumer confidence is going back up, the markets have reached the level it was at as of January 20th, and prices have stopped spiraling down.
Now the next risk is preventing a bout of inflation over the next year as the economy begins turning around.
I have issues with some of the things Obama has done, but calling this Socialism devalues the word and reduces the argument to one of hyperbole and emotional overreaction.
And to Gayle Miller:
Defining anything going on right now as Socialism comes across as a very interesting and mistaken definition of 'Socialism.' Like it or not, the system as a whole had a short sharp systemic crisis after the bankruptcy of Lehman Brothers. The major financial systems had become so intertwined and interwoven that the collapse of any one company left the others in a dire situation.
We can argue all day about the root causes, but one of the final straws that forced the AIG bailout was their selling of So many speculative Credit Default Swaps. AIG had effectively promised to pay out around 2 times as much in CDS's than the company itself was worth. Effectively, AIG had made promises that it could not keep.
The CDS market has had some changes implemented, and hopefully those changes coupled with the bailout will be enough to keep the system going in a similar form.
Otherwise, the housing market appears to be bottoming out, consumer confidence is going back up, the markets have reached the level it was at as of January 20th, and prices have stopped spiraling down.
Now the next risk is preventing a bout of inflation over the next year as the economy begins turning around.
I have issues with some of the things Obama has done, but calling this Socialism devalues the word and reduces the argument to one of hyperbole and emotional overreaction.
Yes, let's see how the commenters here feel if congress passes a bill denying them remuneration already earned under contractual terms from their own jobs,
If there were any justice in the world these people would be unemployed. Their company took such large unsecured risks that their recklessness threatened the worldwide economy. Were it not for the United States government intervening, their company (and dozens more) would be bankrupt, and every insurance policy that relied upon AIG would be worthless.
The fact that AIG continues to exist is due only to massive government intervention to prevent a wider economic calamity. Their contracts should be honored exactly as if the company had ceased operation and was being sold off in bankruptcy.
americans are giing me a headache just now...the world knew it was too good to be tru now we can see. America is such a huge mess right now...an eyesore to watch....especially the right wing nut jobs.No sponsorship is just a start ppl shld actually turn of their tvs and take up a sport.Ugh
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