Sunday, October 12, 2008

The Economy: No Easy Answers, Too many Culprits

I will say it plainly, among the culprits are ourselves. I know that will make me a bit of a pariah but understand this: we elected the government leaders who set the tone for a deregulated world so that we that we could let ourselves be bamboozled into overextending our personal and national debt.

Bob Herbert's The Mask Slips hits all the points that have been in my head for a while:
For the nitwits who vote for the man or woman they’d most like to have over for dinner, or hang out at a barbecue with, I suggest you take a look at how well your 401(k) is doing, or how easy it will be to meet the mortgage this month, or whether the college fund you’ve been trying to build for your kids is as robust as you’d like it to be.

Voters in the George W. Bush era gave the Republican Party nearly complete control of the federal government. Now the financial markets are in turmoil, top government and corporate leaders are on the verge of panic and scholars are dusting off treatises that analyzed the causes of the Great Depression.

Mr. Bush was never viewed as a policy or intellectual heavyweight. But he seemed like a nicer guy to a lot of voters than Al Gore.

It’s not just the economy. While the United States has been fighting a useless and irresponsible war in Iraq, Afghanistan — the home base of the terrorists who struck us on 9/11 — has been allowed to fall into a state of chaos. Osama bin Laden is still at large. New Orleans is still on its knees. And so on.

Voting has consequences.

I don’t for a moment think that the Democratic Party has been free of egregious problems. But there are two things I find remarkable about the G.O.P., and especially its more conservative wing, which is now about all there is.

The first is how wrong conservative Republicans have been on so many profoundly important matters for so many years. The second is how the G.O.P. has nevertheless been able to persuade so many voters of modest means that its wrongheaded, favor-the-rich, country-be-damned approach was not only good for working Americans, but was the patriotic way to go.

I must say no joy exists in being right about Conservative Republicans.

Also over at The New York Times, Thomas Friedman writes about The Post-Binge World:
"There is a parallel with markets. At their core, markets are propelled by fear and greed. They’re just the balance at any given moment of those two impulses. Over the long run, you cannot spin the market. You cannot sweet talk it into going up or beg it not to go down. It’s going to do whatever it’s going to do — whichever way greed and fear tug it. And the market always bats last and it always bats a thousand.

What am I saying? We are where we are today because we went on a credit binge and we’re now paying the price. Because it was the biggest credit binge the world has ever been on, a lot of wealth is going to be wiped out. Now what you’re witnessing is the market re-evaluating and re-pricing every asset in the world, without mercy, telling each stock, bond and bank what its value is in a post-credit binge world."

***

The whole story of the last few months has been about different government plans to get the banks lending again. But the market is not waiting. It just keeps saying to the big banks and insurance companies: “We think you’re carrying a lot of junk on your books, and if you don’t mark it all the way down and re-price it to what it is really worth today, we will re-price you — fairly or not.” The market is going to do what it is going to do.

So what could ease this crisis? “There is going to have to be a workout,” said the financial strategist David Smick, author of “The World Is Curved,” a book about the hidden dangers in today’s global economy. “There will have to be a restructuring of all these institutions to clean up their balance sheets and recapitalize them.” Banks and insurance companies will have to be reconstituted, merged or left to die, until these toxic assets are properly priced and off the books.

We forgot about unbridled greed except where we promoted it. For all the conservatives talk about free markets that would make us all plutocrats if we just got rid of government regulation, they forgot that some of those regulations bridled their greed. Or maybe that was why they wanted deregulation so much?

In a few weeks we must make a choice between McCain and Obama. I have come down hard for Obama. Is he perfect? No. If he presented himself as perfect, then I would not vote for him. Unlike McCain and the Republicans, Obama presents himself not as hidebound to ideology as they. Can he save us from ourselves? No, but he has the best chance of leading us to where we need to go - a more sensible, if not so immodest a future as promised by Bush and his cronies.


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