Monday, September 15, 2008


Today, as the market swooned and giants fell and industrial production was reported as falling and unemployment stood at 6.2% and basic commodity inflation raged; John McCain stated that, "the fundamentals of our economy are sound." Hebert Hoover, famously, stated pretty much the same thing as the Great Depression gained steam. Eugene Robinson of the Washington Post noted to Keith Olberman that it might be a good idea to give the McCain campaign a copy of Hoover-isms. The idea being to not repeat that famous Republicans statements. They do have a problem.

The "modern" Republican ideology is not that, it is very old and even with repetition has not improved. The idea is that government is bad, it is an obstacle, and that greed will make good decisions for Americans - especially if government isn't in the way. I really cannot begin to explain the government is bad piece, Republicans love it if it socializes risks of wealth and interferes with private affairs and runs military adventures but beyond that it is just an impediment. (sure you can make the case that since they're so bad at governing that it is bad under them) The very real and understandable, if discredited, idea of greed making good decisions is a perversion of Adam Smith's Wealth of Nations. Smith noted that unfettered markets make corrections, he did not state that markets were infallible. Republicans have decided that wealth is infallible - or at least sufficiently in their interest to be represented as so - greed will make proper decisions. Sufficient numbers of people acting in their own self-interest will balance those interests to a net gain for all - that is the idea. The problem is with those corrections part of self-interest. Lehman Brothers acted in its self interest as it bought up risky housing loans profiting handsomely as long as they paid, when they quit paying nobodies self interest was served by it so a correction occurred - Lehman Brothers' mistake paid with bankruptcy. You see, there was no balancing of interests with these giants at the time, that balancing came after the fact, it will be poor consolation to those losing jobs and incomes due to the credit crisis that Lehman has been paid out for stupidity. After this mess is done there will be more people willing to do something to prevent it for awhile and then this idiocy will reappear.

Take for example, trickle down economics, not once has this happened. Yacht building and McMansion building may benefit, but there is little spread out effect with this. A new house has a huge ripple effect throughout the economy, but 10 mansions don't equal 1,000 houses. Small businesses generate much more economic effect for Americans than the ultra-wealthy. The ultra-wealthy don't build factories or run stores, they invest and their investments are aimed at their own security and wealth accrual much more than they are a the general good. A very narrow set of interests is served, there is no balancing. They can put their money wherever in the world it returns the best with the least risk. Making and doing things involves a lot of humans and with them come risk and potential short returns. If this idea that an ultra-wealthy class will benefit society at large worked, the Robber Baron Era wouldn't be called that. Economic models running as far back as medieval times show that large dislocations of wealth don't work that way. The stupid idea gets discredited and abandoned until another Republican run at it. How that happens is a comment on just how stupid we are.

Teddy Roosevelt presided over the modern beginnings of regulated accrual of wealth. Whether this was a personal philosophy or not, the nation was in the throws of disintegration and something had to be done. He paid in large coin with his own Party for doing so. After each round of regulations instituted to fix abuses and subsequent recovery from the disasters of those abuses deregulation (evil government) raises its head. Phil Gramm is John McCain's chief economic advisor, he also was the deregulation and loophole champion of the Republican Congressional majority. A large piece of the current banking mess and commodities trading mess trace their roots to his hands. Getting government out of the way was his mantra - still is. If you think John McCain is foreign to that, ask him about his intercession on behalf of Chuck Keating (another banking mess), his votes in the Senate, and his obvious support of Phil Gramm. Oh, hell, just try to find where his actual policies are different than GW Bush/Gramm.

There is a pretty cool dam named after Herbert Hoover, I'm ok with that, but it is unnecessary to work hard enough to create another Great Depression so it can be named the McCain Depression. No kidding folks, even somebody like Greenspan recently noted that if we work hard enough at it we could have another one. There is an unemployment/liquidity tipping point at which the effects of those symptoms become great enough to create a cascade. As businesses and housing suffer from credit problems jobs go away, jobs going away guts the the sales market, and the circle is closed and spiralling. The ultra-wealthy will weather whatever comes with little discomfort, my readers and fellows in the working world will suffer badly. I give a damn and I've been hollering about this crap for quite a bit longer than this endless Presidential campaign. If John McCain even really gives a damn at this point, he's way behind me and he's been in a position of influence and information for twenty six damn years. "Change You Can Believe In" my ass.

No comments: