Rachel Maddow Explains

I think she and Elizabeth Warren are my heroes.

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I remember watching this lecture by Elizabeth Warren several years ago. Prescient, no?

Oh What Shall We Do About the Deficit?

Here is an article that I think puts the issue in very clear terms.

Talking about the deficit is a way of cutting morality out of the discussion. Waste! Mismanagement! Incompetence! Unaccountable earmarks! These things are noise. The actual questions are: is money to be spent on people who do not have money? And where is that money going to come from?

It seems clear that what we have decided is that the money should go to the top.  Maybe you've seen these graphics (via Hullabaloo):

If this seems OK, all right then, I guess there's nothing to talk about.

Apocalyptic Fears

I'm listening to Pres. Monson in the other room saying, "Fear not, be of good cheer," as I read Kevin Drum's comment on the right's (e.g., Mormon Glen Beck) recent apocalyptic tone:

But there is something different about their tone these days, and I can't quite put my finger on exactly what it is. My tentative take is that there's an inchoate quality to their fears that's new. In the past they were fighting against specific things: communism, hippies, Bill Clinton, Islamists, abortion, etc. But communism is dead, the hippies are grown up, Clinton is off doing good works in Africa, al-Qaeda is pretty quiet, and it's pretty obvious that the culture wars have been lost. They're doing their best to slot Obama into the old Clinton/Gore role, but he just doesn't fit and the media isn't playing along the way they did in the 90s. So they're stuck. Who, exactly, is their enemy these days?

I'm not sure they know themselves. But maybe that makes it worse. A nuclear-armed USSR may be scary, but at least it's something you can identify. These days that's a lot harder. Like a horror movie where you're surrounded on all sides by something you can never quite make out, I guess it seems to them like there's something horrible going on, but it's something so insidious that they're only allowed to catch occasional foggy glimpses of it. Budget deficits? Healthcare reform? Top marginal tax rates going back to 39.6%? Negotiations with Iran? Those aren't things that normally stir the blood. But what if they're really just stalking horses for something far more malign?

In comments: Mark Twain said, "What people don't know, they suspect." And another take on it, also from comments:

...I respectfully disagree from where I sit. The ranting I heard from John Bircher-types growing up in Idaho in the 1970s sounded pretty much the same as what we are hearing from AM radio and Faux News today. They didn't like the "Soviets" back then, but they were just as agitated over illegal immigrants, Arabs, European weakness, the UN and "world government" as they are now. "Soviets" and "the welfare state" have mostly dropped off the list of existential threats to the Union (though there are still lots of dark references to the "Russians," which is what they usually called them anyway), and gay marriage has been added to the list, but the tenor remains pretty much the same as it has for a long time. The biggest difference I see is that before Limbaugh became nationally syndicated in in the late 80s/early 90s, there were only a few oddball cranks with a national platform for this bile (e.g. Paul Harvey). Limbaugh's appearance on the national scene was a big change, and there has been a profusion of imitators since then that have turned up the volume a lot. But the music is pretty much the same.

And, I think the economic mess is more scary than the economy has been for a long time. It is very scary, and the Obama administration is downplaying how bad it is, for the good reason that economic hysteria creates its own apocalyptic outcomes. I realize that the right disowned the GWB administration as soon as their incompetence at everything including getting votes became undeniable, but it is interesting to see how quickly the economy is now the fault of Obama and the Dems. Nothing rational about it, except for the ones cynically stirring the pot in a bid for a return to power. Too bad they've got no better ideas than inflaming populist hysteria. That sort of anger is not always easily directed, however. It seems to me that with the mandate of such anger, despite his centrist leanings, the still-incredibly popular Obama could just as easily shrug and say, "well, the Establishment solutions are obviously not working, we need to go to nationalization," or to whatever other leftist solution presents itself.

I wouldn't argue with a turn to the left.

I [Heart] Krugman

Here's the link if it's too hard to see. And here's the link to the Shrill One's blog, FYI. We're all economists now!

Understanding the Financial Crisis

Here is the best explanation I've seen so far of the stock market crash, from our friend Elder Dennis Clark (currently in the Ukraine) via the brother-in-law of his daughter Heather.

My Grover Norquist Moment

What do you think is happening with the economy? What I read runs the gamut from "it's a necessary correction to an overheated market" to "it's a conspiracy by administration neocons to shrink the federal government to nothing and drown it in the bathtub." I've started reading more on economics, but it's not really helping my level of understanding--maybe because, as I'm also reading everywhere, nobody really knows what's going on with Wall Street right now.

My own no doubt overly simplistic take is that there was a lot of extra money floating around (where did it come from--overseas investors?) with few places to put it--industry had slowed and high tech bombed recently--except for home construction. Nobody had a real incentive to keep home prices down, so rather than the sweet, steady (but not excessive) appreciation home prices had shown since forever (in most places--John and I remember the boom and bust in Texas in the mid-eighties), home prices started up in what in retrospect should have been an obviously unsustainable way, as a proportion of people's actual income.

Because homeowners' equity was growing at such an incredible rate, ordinary people had a source of investment income known only to wealthy market players before that. Prospective home buyers were eager to get on board the cash-generating engine, and lenders were also eager, as the value of their investments grew almost exponentially with the passage of time. During the Clinton administration, Phil Gramm (R) and the Blue Dog Dems loosened regulations on loans to home buyers, and people began getting and making loans that in previous years would have been unbelievably reckless--balloon payments, adjustable rate mortgages, no down payment, no principal payment--in the wishful belief that home values would continue to escalate forever. I see commentators on the right blaming Clintonian efforts at making home ownership available to minorities (why not blame the brown people). I see commentators on the left with evidence that some lenders would actually steer naive borrowers to risky loans when they would have qualified for more conservative ones, because the profits for doing so were larger.

And then lenders/investers began inventing new ways of packaging the separate loans and selling them to each other, as a (supposed) way of reducing risk. The disadvantage was that nobody knew exactly the value of what they were buying. In our nearly twenty years of having a mortgage, our payments have gone to several different companies, as our mortgage was sold from one lender to another.


But the problem wasn't only with home prices. The economy outside of residential construction was in trouble, with actual standard of living stalling and by some measures even shrinking over the past eight years or so, personal savings disappearing, and people living on credit. Maybe this was due to easy credit on a personal and a national level, as our country plunged into a round of unprecedented deficit spending. Everybody else was still willing to lend to us, nobody--except the paleoconservatives maybe--really believed in a balanced budget anymore. There seemed to be no "moral hazard," no consequence for taking risky chances, on a personal or on a national level.


And then finally, and slowly, the whole unsustainable edifice began to collapse. When people begin to feel that they can't afford to buy a house no matter the projected increase in its value, they quit borrowing to buy. When enough quit buying, prices begin to fall. Even I get that, the law of supply and demand. So what's the problem--isn't that the way free markets work? Don't markets in the real world always eventually contract? What's the matter with just letting it happen?


A market contraction hurts poor people--I get that. Marginal people are always the first to lose their jobs and homes. I get why a democratic congress wants to avert or ameliorate that as much as possible. I also get that rich people will also suffer (relatively). I get that congresspeople of both D and R persuasions are unduly influenced by who takes them out to dinner and donates to their campaigns. What I don't get so much is the administration's plan--I wonder if my crazy conspiracy suspicions are real or not. Can it be that this "market contraction" and the administration's solution--a $700,000,000,000.00 transfusion from the public to the private sector--is just the next logical step in a "drown the government" effort? That the deficit spending, the deregulation, the resultant contraction, and the panicky "rescue" are all part of a feature, not a bug? That demonstrating--over and over--the truth that "I'm from the government, I'm here to help" is a statement to be feared, is intentional?


I have opinions about politics, which are both passionate and fun, but I deeply distrust my own biases, my ignorance, and especially my temptation to believe in conspiracies. I gave up my attraction to them after an epiphany many years ago. I was driving to work along FM 1960 from Spring Branch to The Woodlands, looking at miles and miles of identical half-empty strip malls--pawn shops, check cashing joints, hair salons, karate studios. I was thinking about the newly elected mayor of Houston and what I had read about the city's lack of zoning laws. I suddenly realized, with a sense of panic, that nobody was in charge. It was all totally accidental--like a metastisizing cancer. I felt that the whole world would be swallowed up.


I don't think there is a genius master villain smart or powerful enough to actually be in control of all this. But I wonder if some free market and small government ideologues in the administration are not pushing the rescue (sans oversight and regulation) just a little too hard for truly responsible disinterest. But I also realize that I'm uncomfortably close to putting on the lefty tinfoil hat. What do you think?