Now, a year on, the Times of London looks at the events of the last twelve months in Iceland. Because the story ran in the “Women’s” section, there’s a somewhat odd slant of the story as it talks about the election of the current prime minister, Johanna Sigurdardottir, and the replacement of most of the cabinet ministers with women, but if you can get beyond the patronizing tone of that part of the article, it’s a good review.
Relatedly, The Nation has this article about the state of the Latvian economy, which also went tits-up last year and has been struggling quite badly since. Like Iceland, Latvia had been experiencing a boom through financial speculation, even as Latvia had been experiencing emigration of its labor force to the rest of Europe (Latvia joined the EU in 2004). Unlike Iceland, which has a very homogenous population and culture, Latvia has a very large Russian minority as a legacy of its forced inclusion in the Soviet Union, and political stability has been far less easily maintained than in placid, plodding Iceland.
Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”
Now, I don’t think Tom Friedman reads my little blog, but didn’t I basically say this just the other day? This is not just a downturn, it’s a threshold for changing the entire paradigm, kiddies, and throwing money at rich people isn’t going to cut the mustard.
Now the drums are starting to pound in the faraway hills, calling for the head of Treasury Secretary Timothy Geithner. While Geithner undoubtedly has the support and blessings of President Obama, and Obama needs to take some heat on this too, it has been Geithner as the supposed “go-to guy” on the banking crisis who is starting to make Hank Paulson look like a freaking Chatty Cathy. Financial commentator Henry Blodget rants on at length about Geithner’s failure here and comes up with the following indictments:
Before taking office at the end of January, Tim Geithner had many months to develop a solid plan for what to do. He had the opportunity to see what was working and what wasn’t and to consult with dozens of experts, many of whom had no stake in the matter (unlike the Wall Street kingpins who seem to have shaped Geithner’s inaccurate view of the situation). He had the opportunity to see and understand that what America needs most right now is clarity and decisiveness.
Then he took office. In the five weeks since, Tim Geithner has:
* Given a speech billed as the solution to the financial crisis in which he promised something vague, someday, that sounded an awful lot like the bad plan that didn’t work in the past administration (which really isn’t that surprising, given that Geithner was the one who came up with the earlier bad plan).
* Floated multiple versions of the same plan into the press hoping that one would be enthusiastically received by someone other than Wall Street (no dice.)
* Refused to seriously discuss the consensus opinion of most neutral economists and experts: That the banking system is insolvent and that the solution is pre-privatization.
* Given Congressional testimony in which his brusque, defensive manner and weak responses have inspired no confidence and served only to make people wonder again why Obama picked him for the job.
and, most importantly, Tim Geithner has:
* Refused to revisit or defend his almost certainly inaccurate view that this crisis is merely a temporary price decline caused by a lack of liquidity, rather than a collapse of a debt-driven economy. You can’t cure the patient if you’re treating the wrong problem.
Now, I’ll say again that Barack Obama deserves almost as much blame for 1. picking Geithner because he knew the appointment would appease Republicans and 2. endorsing what was basically the Paulson Plan II even though it was clear before the inauguration that it was the wrong thing to do. And at some point I hope people are going to hold Obama to that. But for now, he should probably find someone who a) isn’t Larry Summers or Bob Rubin and b) paid his fucking taxes on time to replace him.
This somewhat lame defense of Geithner appeared in Tina Brown’s Daily Beast from BBC reporter Katty Kay. Kay’s arguments all stem from the political side of the equation, while Blodget’s critiques come from the policy side. In this particular situation, though, political arguments are probably the last line of defense anybody really wants to engage in. The reality is that the bank bailout situation remains an enormous failure that simply started with Bush and has continued with Obama and needs a new direction, which almost certainly requires a new point-man.
Oh, and while we’re at it, this post from CNBC commentator Barry Ritholtz ought to make the steam start pouring out of your ears, if it isn’t already. Ritholtz says that Bloomberg News reports that the bailout money that the government has been pouring into AIG is being funneled back to Goldman Sachs and other investment banks, not being used by AIG for its own situation. They are getting away with this because they don’t have to tell anybody what they are doing with the money. And guess what….Hank Paulson AND Tim Geithner are both former Goldman Sachs bigwigs…hmmm…
To go along with my rant, here are some linky items about the economy:
We’ll start with this illustrated audio clip of Franklin Roosevelt speaking in front of Madison Square Garden in 1936, as he was running for his second term (via Crooks & Liars). Though there are some crying “enough” with the comparisons of Barack Obama to Franklin Roosevelt, the simple reality is that there is a great deal to compare, if not in the men themselves, then certainly in the situations they found themselves in as they took office. By 1936, the initial efforts of the Roosevelt administration to resolve the banking crisis had been successful, and he was trying to move forward with the broader stimulus efforts of the New Deal, and yet FDR was still faced with stubborn do-nothing opposition from the Republican Party. Roosevelt, however, recognized the position he was in as one of strength and used it to clobber the Republicans into near-total irrelevance for the next dozen years. A certain secret Muslim non-American Communist terrorist gun-hating bomb-thrower-loving scary black man I can think of ought to be keeping this in mind.
One of the key players in the Roosevelt Administration was Secretary of Labor Francis Perkins. Perkins had served under FDR while he was governor of New York as the state’s Commissioner of Industry and had fought for many reforms to the state: minimum wage laws, capping the number of work hours in a week for women, and unemployment insurance among them. She was the first woman to hold a cabinet position and was one of only two members of FDR’s cabinet to serve for the entire duration of his presidency. As Secretary of Labor, it was her agenda that led to the creation of Social Security and federal minimum-wage laws. Writing at Tina Brown’s Daily Beast, University of Chicago historian Christine Stansell reviews a new biography of Perkins that tries to expand on the personal side of Perkins’ life more than the professional, but Perkins is not generally well-known in modern times so any book about her remakrable accomplishments is worth a look.
Here’s Captain Obvious with a bulletin for you: Advertising Age reports that the struggling economy and huge increase in the number of people out of work has been a serious boom for job-hunter social networking site LinkedIn. They’ve doubled their monthly number of visitors over this time last year, snagging 7.7 million visitors per month, and presently have 36 million registered users. Now, by comparison, Facebook has over 90 million members, but most of them are already employed and spending their days goofing off playing on Facebook.
Just in case you missed it, on Tuesday the New York Times editorial board came right out and said what a lot of us have been saying lately: it’s time for President Obama to stop bailing out the banks, nationalize them temporarily, eliminate the bad ones, stabilize the good ones, and tell the fucking Republicans to STFU about “socialism”. If it were me, I’d also fire Timothy Geithner and find somebody to run Treasury who wasn’t beholden to Wall Street, and then I’d sharpen up my guillotine and start publicly executing some bank executives, but I guess that’s why Obama’s the president and not me.
Everybody’s favorite “jealous putz”, the junior senator from Vermont, Bernie Sanders, wasn’t very happy with the non-answers he was getting from Federal Reserve Bank Chairman Ben “Bailout” Bernanke about where the money was going, so now he’s proposing legislation to force the Fed to disclose the names of institutions they have lent money to since March 2008 and provide full details about the amounts and the rationales for making said loans. Bernie’s website includes the text of the legislation and a video clip of him chewing on Bernanke’s ass.
Lastly, I’m sure you remember that I have posted a couple of times about the severity of the economic situation in Iceland. Iceland, Latvia, and a few other small nations have been hit especially hard because their tiny economies were not capable of withstanding the strain from the failures of their national banks due to overzealous speculation. The government in Iceland collapsed recently (with the unintended and somewhat irrelevant side effect of bringing to power the world’s first openly lesbian prime minister), people are beginning to protest with pitchforks and torches (literally), and it’s looking like Iceland will have to adopt the Euro as its currency, because the Icelandic krona is now worthless (take THAT Zimbabwe!).
The latest issue of Vanity Fair has a fantastic in-depth feature piece by journalist Michael Lewis about what’s going on in Iceland these days and how they screwed the pooch in the first place. Turns out it’s all the fault of the men, who basically still act like drunken Vikings on shore leave. And, in case you’re wondering, everybody in Iceland DOES know Björk, so shut up about it.
,
Blogger and magazine guru Rex Hammock had a very good post over the weekend entitled “Things I No Longer Believe In”. It’s mostly aimed at the destruction of the credibility of the institutions and individuals who have played a role in the economic disaster we’re going through. He singles out Congress for its inability to see beyond the short-term political strategies of its membership, the notion of any institution being “too big to fail”, and the absurdity of “real-tine market analysis” on CNBC, among others.
I thought it was a very thoughtful exercise, and I agreed with all of his choices and rationales for them. Still, I think I can add a few of my own:
“The American Dream” — okay, so this one needs a little more definition, because I think there are actually several different “American Dreams” to choose from, so the one I am specifically referring to is the one that posits that every American can and should be a middle-class homeowner living in a suburb. This idea really didn’t manifest itself as “The American Dream” until after WWII; previously, the “American Dream” was more about rising up from lowly serf to captain of industry in the Horatio Alger style, but the Great Depression pretty much proved what a pipe dream that really was to most Americans, and so sights were set on the less-lofty goal of home ownership as the pinnacle of achievement for the majority of Americans. Of all the ideas that went to hell in a handbasket with the boom and bust of the last decade, it is this one that was oversold by greedy and unscrupulous banks and mortgage companies, then twisted into unrecognizable permutations that would have otherwise been dismissed as outright fraud years earlier. On closer historical examination, there’s a lot to suggest this wasn’t a particularly sustainable idea in the first place, but I’m usually willing to give the decision-makers of the past the benefit of the doubt for not being able to imagine THIS as the future.
Economists — Who did these people fellate to convince the world that they deserved doctoral degrees? They’ve proven to be very good at rationalizing things after the fact, but anybody can do that. What they obviously can’t do is explain how to keep the economy from falling into a bottomless pit. Pet theories, cherry-picked examples and evidence, full-blown quackery, and an appalling determination to promote their own ideas over anybody elses make them the least-reputable “scientists” one can possibly imagine. Lately there’s been some complaint that the media are relying on their own bloviating gasbag pundits for insightful commentary than “real economists”, but that’s probably a wise move on the part of the media outlets.
“Saving For Your Future” — Yeah, right. An entire generation of people has just watched whatever retirement savings they had disappear into billions of scattered electrons. The older half of the Baby Boom will be the last generation of Americans to engage in the cultural fantasy of “Retirement”, and the rest of us will work until we drop dead in our cubicles. As my half of the Baby Boom skids headfirst into our “golden Years”, we’re going to have to reinvent collective housing, develop entirely new models of labor that accommodate older employees, and probably stage a “Million Grannies March” on Washington to undo the half-assed systems that our older Boomer siblings didn’t have to worry about because they didn’t need it.
“Planned Obsolescence” — The “everything’s a widget” model of capitalism is going to have to go the way of the dodo tout suite. Making everything from phones to TVs to dishwashers to cars so freakin’ flimsy that they break just to look at them will not be sustainable from the standpoint of consumers without money to spend, from businesses that can’t constantly sell “more more more more”, and from the rapidly encroaching realities of our depleted natural resources and shifting climate. This means that everything the businesspeople think about running their corporations is now and forevermore obsolete, and they might as well all give up and start over again.
I’ll keep adding to this list as I come up with others. You can, too.
Things have been pretty tough in Iceland since the start of the banking crisis back in the fall. The three largest banks in the country all were nationalized to keep them from going under. British Prime Minister Gordon Brown basically called the entire country a nation of frauds and froze a billion pounds of assets in Icelandic banks operating in the U.K. Unemployment has tripled (although it’s still only 4%), and there are persistent anecdotal reports (regularly denied by officials) that the citizens are hoarding food and other supplies out of fear that there will be a political collapse.
So maybe it’s time for the Icelanders to give up on their clean, wholesome, Scandinavian progressive way of living and return to a darker time, when Iceland was populated by Viking marauders, fierce warriors, and, of course, witches and sorcerers. The Museum of Icelandic Sorcery and Witchcraft remembers a time when the volcanic isle was home to practitioners of the black arts. Among their exhibits is this replica of a pair of “necropants”, made from the skin of some unfortunate human sacrifice to the underworld. And the whole place is overseen by a huge, terrifying raven:
A couple of Icelandic Viking raids on Scotland and skinning a couple of Labor MPs for necropants, and I’ll bet Gordon Brown would be singing a whole different tune about whose assets are whose.
Well, if there’s anyone left who wants to quibble with my motto, “Capitalism Destroys Everything”, I’ll pause for a show of hands.
Thought so.
Here’s an article from a website that focuses on issues related to “Peak Oil” called Energy Bulletin from a fellow named Jerry Silberman. He says our present economic crisis may well be “The Last Recession” ever, because capitalism has blown itself out for good. A quick pull quote:
One thing that may make this transition easier is that, whether we like it or not, this is the final recession of this system. Along with the peak of oil production, now visible in our rear view mirror, capitalist expansion is done. The slope down will not be uniform, there will be upticks along the way, and regional variations, but the peak is past. There is only one way to go, and it’s down.
Now, say what you will about the Peak Oil gloom-and-doomsayers, but he makes several very good points about diminishing resources across the board (not just petroleum) as disincentives to invest, causing a spiral effect. But his second point is that even though the model of ever-more-profitable-at-any-cost capitalism has reached its conclusion, it may be possible to use this opportunity for a model of sustainability, where growth is not always the most desirable outcome:
Shift our values to a sustainable model, where growth is not a primary goal or an unqualified good. Let’s make our “investment” decisions based on what will be sufficient to meet our human needs for physical security, social justice, and cultural enrichment. Central to this model is the determination that all our strategies, and the goals we seek, must be within the limits of our resources such that projected over the uncountable generations, they must not deprive us of the ability to sufficiently meet our basic human needs. As outlined above, the principles and practices of capitalism cannot deliver this kind of model.
All the bullshit from the Republicans about Barack Obama being a “socialist” or a “Marxist” notwithstanding, Obama does have the opportunity to sow some of the seeds that need to be planted now to make this transition out of mass capitalism manageable, and his stated intentions with regard to energy policy and national infrastructure are on the right track, but throwing trillions of dollars at industries that have destroyed themselves with absolutely no guarantee that said bailouts will have any positive effect except to allow big executive bonuses and spa weekends is getting off on the wrong foot.
Noted British historian Niall Ferguson has an article in the December issue of Vanity Fair that tries to explain the current economic crisis by putting it into historical context. It’s a good way to get some perspective on the whole thing and doesn’t bog down in trying to explain all the financial technobabble*. If you read the “phony economy” piece from Harper’s that I linked to yesterday, this is a good expansion on that idea, as Ferguson looks at the historical origins of the finance sector as the driving force of American capitalism. I don’t know that I agree that the “American Dream” of single-family home ownership only dates back to the 1930s; I would argue that every pioneer who hitched up a wagon team and headed west across North America was looking for his own land and a home, and that the central notion of the land not belonging to the nobility but to whomever could make that land productive is as old as America itself. Nevertheless, the institutionalization of home ownership is indeed a unique American idea, and the impact it has had on our current economic state of affairs is undeniable.
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.” – Thomas Jefferson
“What they really complain of is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power. In vain they seek to hide behind the flag and the Constitution. In their blindness they forget what the flag and the Constitution stand for. Now, as always, they stand for democracy, not tyranny; for freedom, not subjection; and against a dictatorship by mob rule and the over-privileged alike. “ – Franklin Delano Roosevelt
Personally, I have about 700 billion reasons why each and every investment banker should be put to death, but, then, I’m not exactly Supply-Side Jesus, either.
It’s about 3:00 p.m. as I’m writing this post, and the DJIA has lost a bit over 725 points, taking it below 10,000 for the first time since 2004. There’s an hour or so left in the regular-hours trading day, so it’s pretty safe to say at this point that it has been a pretty bleak day for the market specifically and for the economy in general.
Our most serious problems are waiting for us just around the bend as the meltdown of the banks and now the plunge of the stock market begin to make their presence felt in the “real” economy. But in some places, the proverbial shit has already hit the proverbial fan.
Despite borrowing from the Bush playbook in their recent scuffle with Georgia over South Ossetia, the Russians are mostly just a lot of hot air…at least according to this article by international relations scholar Murray Feshbach in yesterday’s Washington Post. Russia’s economy is almost completely reliant on selling oil, so they are just as badly impacted by the downturn in the world economy as everybody else (although they might be in a better position later on). Last week I had a link to a website from a Russian fellow who says that his country is better prepared to withstand the hardships of a global depression because Russians are more accustomed to doing without, but that’s a pretty back-assed way of looking at how bad things are going to be in a country that is only just emerging from two decades of internal turmoil. But it’s not just the economy, Feshbach says. The Russian military has completely fallen apart and won’t be rebuilt anytime soon given the suddne lack of funds. The most devastating thing, though, is the burgeoning health crisis in Russia. Russia is actually depopulating at a rate so high that it cannot recover from the loss of people. The average Russian male only lives to the age of 59, compared to 72 in most developed countries. Russians suffer from heart disease at three times the rate of Americans, they drink twice as much as the WHO considers safe, and tuberculosis is becoming a national epidemic, with crumbling medical infrastructure unable to handle the uptick in cases.
Iceland, on the other hand, is in deep doo-doo right NOW. Iceland’s economy has seen a huge boom in the last decade or so, mostly from playing the numbers game in the international credit markets. Oops. The third largest bank in the country failed last week, and the government doesn’t have enough money to bail them out. They seized the bank, but the seizure may take the government down with it. Contributing to the problem is that the national currency, the krona, has collapsed and is as worthless as the currency in Zimbabwe. Over the weekend, there were bank runs as people tried to salvage what they had, and there have been reports of people beginning to hoard food. Iceland has asked for emergency inclusion into the EU so that they can abandon their now-worthless currency and convert to the Euro, but with the EU looking at rough waters, too, they aren’t terribly inclined to bring in a country that’s already failing.
“Nothing is illegal if one hundred businessmen decide to do it.” — Former Atlanta Mayor Andrew Young
Not that I’m one for Biblical allusions, but if the “sweetened” bailout rescue bill isn’t the modern equivalent of 30 pieces of silver for Judas, I don’t know what is. We can only hope that the senators who voted for this bill follow Judas’s example and off themselves out of shame. The re-vote in the House is still not quite guaranteed to pass, but seems a lot more likely to now that the journey to the Dark Side is complete. My House rep is still saying he’s going to vote against it, but they really only needed to pick off those 12 Republicans, and it appears they’ve done just that.
Here in Massachusetts we get to see a lot of political advertising for New Hampshire campaigns due to the lack of media outlets in New Hampshire itself, and in the close race between Republican incumbent senator John Sununu and perennial Democratic challenger (and former governor) Jean Shaheen, the attack ads are coming fast and furious, mostly from the “527″ groups. One ad for Shaheen points out that Sununu has been a supporter of privatizing Social Security (right along with George W. Bush and John McCain, though the ad only mentions Bush). “Imagine what would have happened to Social Security in the last few weeks if Bush and Sununu had gotten their way…” the voice-over intones.
Well, maybe they just did. Writing at Dangerous Intersection, contributor Tim Hogan says he took the time to read carefully through the 450 pages of the “rescue plan” and he thinks that there’s a provision in the bill which will allow Hank Paulson to privatize Social Security by fiat:
In Section 118 of the House bill under “funding” the bill said “the Secretary [of Treasury] may use any authority granted under Section 31 of Title 31 of the US Code to fund the bailout.”
I “Googled” “Title 31, Section 31 of the US Code” and came up with how the government funds itself. But, included in that Title 31, Section 31 was a provision for the Secretary of the Treasury to issue obligations equal to the monthly payments needed under Title II of the Social Security Act.
So I “Googled” “Title II of the Social Security Act” and it seems those are the payments to the elderly recipients of such funds, among other things.
Secretary Paulson apparently could have deemed the monthly obligations payable under Title II of the Social Security Act to be those obligations which fund the bailout.
I haven’t seen anyone else raise this red flag yet, so I am not sure if he’s simply making an inference based on the loose way the relevant part of the U.S. Code reads, or if this is indeed a serious hidden gotcha. I would not put it past the Bushies to make a play like this, but I really can’t say with any confidence that he’s right; I surely hope to hell that he isn’t.
