Moon of Alabama Brecht quote
May 22, 2009

The Danger of Unrealistic Expectations

by Parviz

By now everyone knows that Edward Liddy just stepped down as Chairman and CEO of AIG. I believe this is highly relevant to this blog as the event validates many of the criticisms I have leveled at the majority of MoA posters. Liddy left because he could no longer tolerate the self-aggrandizing politics that was hindering his honest attempt at paying off tax-payers in as careful and deliberate a fashion as possible.

In trying to navigate between the Scylla and Charybdis of a) unrelenting criticism, and b) unrealistic expectations, he threw in the towel and answered the prayers of some and, as the saying goes: “Hell is answered prayers”:

Who is going to replace him? Obviously someone with knowledge and experience (= a hated ‘insider’?), maybe a turn-around specialist (= “vulture capitalist”?). Or somebody with sufficient ‘stature’ to face of a hypocritically angry Congress and Senate baying for blood when they should be sacrificing their own?

Liddy did the right thing. The American public didn’t deserve the services of somebody who took on the most difficult and high profile job in the U.S.A. for a nominal salary of $1 per year.

I often use analogies to make a point, so let me offer you another one:

There’s been an earthquake in Iran. The whole system is corrupt and buildings are built sub-standard, with the construction mafia pocketing the difference. 50,000 have already died and another 200,000 sit among or beneath the rubble. There is a desperate need for excavators, bulldozers and other machinery and equipment in the immediate vicinity, but these are all owned by the same contractors that caused the mess to begin with, and their employees are equally inept or corrupt. Now, what does the Government do? Forbid the use of those companies/contractors and call in new people and equipment from far away, knowing full well that every second’s delay could cause an additional death? Seize the equipment by decree and risk a protracted battle, I mean a really nasty one, between the government and the construction mafia that would divert attention from the job of saving lives?

What would I do if a solution were within my power? I would enlist the aid of everyone in the vicinity, whether corrupt or otherwise, to get the remaining people out from under the rubble and to hospital, and then, and only then, would I hold inquiries and dole out punishments. The U.S. economy has suffered precisely such an earthquake. Actions born of anger alone will not save it.

FT: Hostile atmosphere too much for Liddy - (alternative link)

Posted by b on May 22, 2009 at 8:28 UTC | Permalink

Comments

Some points from me:

1. If Libby can't take the heat he is the wrong man for the job

2. In case of the earthquake as a government I for one would size all equipment needed, at gunpoint if necessary, and throw into jail anyone attempting to sabotage that move.

3. We have already moved on. The earth quake is over. The (economic) rescue mostly done for now. But I see not attempts for punishment at all. Indeed what I see is the contractor mafia rebuilding the same system with the same shoddy houses that were responsible for the problem in the first place.

Posted by: b | May 22 2009 8:33 utc | 1

In Britain the mafia (which includes the government there) is doing as I said above.

Martin Wolf takes it apart:

A recent report on the future of UK international financial services, produced by a group co-chaired by Sir Win Bischoff, former chairman of Citigroup, and Alistair Darling, chancellor of the exchequer, fails to provide such self-examination. This is partly because the committee consisted of the industry’s “great and good”. It is far more because Mr Darling had already decided that “financial services are critical to the UK’s future”. Thus, the report’s remit was “to examine the competitiveness of financial services globally and to develop a framework on which to base policy and initiatives to keep UK financial services competitive”.

If you ask the wrong question, you will get the wrong answer. The right question is, instead, this: what framework is needed to ensure that the operation of the financial sector is compatible with the long-run health of the UK and world economies?
...
So how should one manage a sector that produces such “bads”? The answer is: in the same way as any polluting activity. One taxes it.
...
The sector argues that moving derivatives trading on to exchangesmight damage innovation. So what? Maximising innovation is a crazy objective. As in pharmaceuticals, a trade-off exists between innovation and safety. If institutions threaten to take trading activities offshore, banking licences should be revoked.
...
The “old normal” was simply unsustainable. The “new normal” must be very different. It is far from clear that the industry and government recognise this grim truth.

Same problem in the U.S. and elsewhere ...

Posted by: b | May 22 2009 9:23 utc | 2

In light of the forecast decline in electricity usage, Russia's divestiture of dollars, Obama's determination to expand Afghanistan, the continuing Chinese push into South America along with its efforts to establish the Yuan as a reserve currency, i'm not so sure the earthquake is over. I think a tsunami is yet to come -- it may only be a few months, or maybe take a few years, but it's coming.

With so much bad on the way,i think punishment should be the first thing on people's minds. The financial elite may seem like a mafia, but you throw a few high-profile banking managers into prison for twenty years each and i promise, you will have the devout cooperation of the rest.

The prison system is filled with people who are doing life for making tens or hundreds of thousands off of cannabis and cocaine, ostensibly because of some mythical "damage to society."

These bankers scammed trillions, and then trillions again, and haven't given up a thing. The damage they've done to society is immeasurably greater --

but they're being given a free pass.

Mark my words: change won't come until prison sentences start getting handed out. Until then, the corruption and systemic degeneracy will continue to worsen.

It's the end of an empire. Go, team!

Posted by: china_hand2 | May 22 2009 10:10 utc | 3

b, you may be right, but your analogy is imprecise in that this is paper, not people suffering and in need.

Your post certainly made me think again.

I think this all became a fait accompli once we bailed out AIG from the git-go. If AIG had "bankrupted" we could have canceled all of these contracts that were essentially fire-insurance on your neighbor's house.

The Bankruptcy could have opened up those contracts to scrutiny, paid off interested parties, canceled the blind hedges, CLAWED BACK THE BONUSES PAID ON THESE VOIDED CONTRACTS! But, that didn't happen.

I see this in terms of John Bogle's critique of Wall St. as being run by the inmates. He points out that most stock is held by mutual funds. Mutual funds hold any given position 16 months on average. This short holding doesn't get these funds too active in voting and affecting the company as a stockholder may. Hence, corporations represent not their owners, the stockholders, but the upper management.

Management has recently gotten the most egregious bonuses, though I think bonuses have risen since Reagan lowered the top marginal tax rate into the incomes of the upper middle-class. ($300K from two incomes with school debt, and many kids could feel fairly restrictive, maybe???)

Anyhow, good article, thanks for the ugly yet fair point.

Posted by: scott | May 22 2009 11:29 utc | 4

China_Hand2, I fully agree with you that "the Tsunami is yet to come", which is why I wrote this piece.

I also agree that corrupt bankers and corporate chiefs should be thrown into prison. What I disagree with is closing some of the corrupt corporations and institutions that can clearly be nurtured back to health. They should be assisted with new management, thereby minimizing the disruption to an economy that is already in I.C..

Posted by: Parviz | May 22 2009 14:15 utc | 5

Most problems can not be solved when we try solutions that would/might work "In a more perfect world" when we really live in a imperfect world.

Posted by: Pitchforks,Torches&Pikes World | May 22 2009 14:42 utc | 6

Liddy left because he could no longer tolerate the self-aggrandizing politics that was hindering his honest attempt at paying off tax-payers in as careful and deliberate a fashion as possible.

Liddy is hardly a honest broker. He was on the board on Goldman Sachs before being appointed CEO of AIG by Paulson. He made sure that GS got overpaid by the bankrupt AIG. He lied to congress when the bonus flap was first made public by understating the amount of money being paid out.

The American public didn’t deserve the services of somebody who took on the most difficult and high profile job in the U.S.A. for a nominal salary of $1 per year.

Liddy's Goldman stock went from $47 to $137 a share under his tenure as CEO of AIG (so he made more than a million dollars personally).

Here's a quick review of Liddy's service to the nation by Jane at firedoglake
Hamsher on Liddy

We can do better than having insiders like Liddy enabling the looting of our treasury.

Posted by: SimplyLurking | May 22 2009 15:50 utc | 7

O.K., SimplyLurking: Whom would you suggest, now that he's leaving anyway? I find it hard to imagine a replacement that had no kind of baggage whatsoever.

Posted by: Parviz | May 22 2009 16:16 utc | 8

Why assume AIG should be able to exist in the first place? Why not just dissolve the organization, annex its assets, call it a day?

Posted by: Jeremiah | May 22 2009 16:24 utc | 9

O.K., SimplyLurking: Whom would you suggest, now that he's leaving anyway? I find it hard to imagine a replacement that had no kind of baggage whatsoever.

How about if the government actually took over AIG (rather than investing billions with no control)? Why not appoint a government bureaucrat who has experience regulating insurance companies? The FDIC takes over failed banks all the time. I'm sure the appropriate state agencies take over failed insurance companies all the time as well.

We can stop pretending that running AIG requires secret knowledge that is available only with a handful of crooks that caused this crisis.

Posted by: SimplyLurking | May 22 2009 17:00 utc | 10

Jeremiah:

Well, the simple answer is that the closing down of AIG would have had a snowball effect of bankrupting its numerous counterparties, both in the U.S. and abroad, with far more damage than the $ 180 billion it borrowed to wind down its operations. It would have caused a global credit crunch that would have made it impossible for manufacturers to obtain loans of any kind without 100 % collateral.

The U.S. economy in particular, not just consumers but manufacturers, runs on credit, so when credit markets dry up fewer projects get started/completed and more people get laid off. An AIG default would also have bankrupted many good organizations and banks which would suddenly have discovered that many legitimate transactions they thought they had insured (like the financing of a power plant) were indeed uninsured, so they would have had to scrap such projects in order not to exceed capital ratio guidelines. It would have led to a global meltdown far worse than anything caused by the Lehman collapse.

By giving AIG time to unwind its positions the U.S. Government is preventing a fire sale of the company's assets, meaning that the taxpayer should recoup the entire investment.

Of course, those who caused the mess should be locked up and the keys thrown away, but life is such that the crooks go free and the murderers (Cheney) give speeches saying how great they are.

Posted by: Parviz | May 22 2009 17:02 utc | 11

SimplyLurking, good point. But then the U.S. Government should have nationalized everything on the spot, not just AIG. How about the 30 U.S. banks that went belly-up? GM? Citigroup/BoA/Merill Lynch and hundreds of other key companies which the government saved by financing them? Does the U.S. Government have enough capable people to literally take over the private sector and run a 14 trillion dollar economy all by themselves? The short answer is no.

Posted by: Parviz | May 22 2009 17:07 utc | 12

O.K., SimplyLurking: Whom would you suggest, now that he's leaving anyway?

How about me, Parviz? I'm dead serious.

Posted by: Obamageddon | May 22 2009 17:23 utc | 14

SimplyLurking, good point. But then the U.S. Government should have nationalized everything on the spot, not just AIG. How about the 30 U.S. banks that went belly-up? GM? Citigroup/BoA/Merill Lynch and hundreds of other key companies which the government saved by financing them? Does the U.S. Government have enough capable people to literally take over the private sector and run a 14 trillion dollar economy all by themselves? The short answer is no.

Parviz:

You are right...the government does not need to and cannot run the entire economy itself. However, in the specific case of AIG, a bankruptcy may have been our best bet. It would have been a lot cheaper for the government to unwind AIG's trades in an orderly fashion, rather than pumping money into AIG -- no questions asked. Goldman Sachs got paid face value for its CDSs, when they were trading at 50 cents to the dollar.

GM will in all likelyhood file for bankruptcy. The government action with regards to GM is a better model for dealing with troubled companies (from an economic and strategic perspective).

If the government had taken the same steps for Citigroup/BofA, the total cost would have been far less.

Posted by: SimplyLurking | May 22 2009 18:34 utc | 15

@Parviz - Well, the simple answer is that the closing down of AIG would have had a snowball effect of bankrupting its numerous counterparties, both in the U.S. and abroad, with far more damage than the $ 180 billion it borrowed to wind down its operations. It would have caused a global credit crunch that would have made it impossible for manufacturers to obtain loans of any kind without 100 % collateral.

Who ever said that anyone SHOULD get a loan without collateral? Why?

The U.S. economy in particular, not just consumers but manufacturers, runs on credit,

Which is wrong and must be changed. The faster the better.

so when credit markets dry up fewer projects get started/completed and more people get laid off.

Companies and projects depend on DEMAND and possible profit not on credit.

An AIG default would also have bankrupted many good organizations and banks which would suddenly have discovered that many legitimate transactions they thought they had insured (like the financing of a power plant) were indeed uninsured,

AIG Financial Services did not insure the financing of power plants but junk bonds.

Those contracts were illegal and should have been declared void.

AIG has a legitimate insurance business but there was no reason to let AIG FS crazy contracts drive down all of AIG. Take the whole thing in receivership and take it apart. AIG and its regular insurance contracts get refinanced by the state and then are sold of when times are better.

AIG FS is put into the ownership of (former) AIG shareholders and bondholder. Let them get happy with it.

Doable, easy and swift. The state has the power of legislation and can simply order that by creating an appropriate law.

Posted by: b | May 22 2009 18:51 utc | 16

@Parviz @12 But then the U.S. Government should have nationalized everything on the spot, not just AIG.

You may want to take a look here?

Posted by: b | May 22 2009 18:54 utc | 17

I do find it interesting that a seemingly well informed individual from a country which has been declared a rogue state by most of europe and north america should become an apologist for the robber barons. it must be as slothrop asserts, that capitalism has no borders and the exclusive club to which they the capitalist belong, can never find fault with fellow members.

I certainly do not understand the world of high finance and would never hazard an opinion as to what might be better. what I do believe is that we, the voiceless and powerless, are getting screwed over quite royally. perhaps that is the way it always was and we were just unfortunate enough to have experience a brief period following the second world war when it was a bit different. the social programs we are losing and the unions we have lost and the regulation of business that has been deregulated mostly came about after WWII. People born in the 80's and after never really knew life could be different as there was no memory of hard times.

anyway, someone sent me this link to bornagainamerica. I am not sure what to make of it. on one hand it seems to be heartfelt and a call to arms if you will to take back the country. on the other hand it seems just a bit too slick. what say you?

http://www.bornagainamerican.org/ or click on my name

Posted by: dan of steele | May 22 2009 20:55 utc | 18

AIG's collapse, and it has collapsed, was due to what was functionally corruption. AIG cannot be saved, at least not in any way that has anything to do with markets.

If he is a saint or the devil it's an impossible job and thus a stupid job. It's a Potemkin job. He was a fool for taking the job and wise to quit. The only people who would want such a job are simply unapologetic about paying off or making profit for yourself and your kind.

Did captain Smith recomend bailing the Titanic?

Posted by: rapier | May 23 2009 4:15 utc | 19

Well, I wrote b an email asking him to post my lengthy response to all about 7 hours ago, but it seems he hasn't checked his mailbox yet. I'm having the same old problem with lengthy postings.

Posted by: Parviz | May 23 2009 11:59 utc | 20

DOS, that is an offshoot of norman lear's born again america

Posted by: annie | May 23 2009 13:01 utc | 21

[comment by Parviz via email]

I just woke up to some challenging questions and will try to answer each point:

SimplyLurking, I totally agree that GS shouldn't have received face value, which is a different matter altogether and totally irresponsible because it occurred in a ‘free market’ context in which GS should have taken its lumps like everyone else. But I disagree with your statement that "in the specific case of AIG, a bankruptcy may have been our best bet. It would have been a lot cheaper for the government to unwind AIG's trades in an orderly fashion, rather than pumping money into AIG -- no questions asked". A) If the U.S. Government had taken over AIG its creditors would have demanded 100 % on the Dollar, otherwise the U.S. Government would have been technically, morally and literally in default. (It has enough problems as it is, with its AAA rating already endangered). B) If the U.S. Government had simply forced AIG into bankruptcy it would have triggered a direct $ one trillion default and possibly a $ 35 trillion consequential default (=
the total value of CDSs issued) that would have sent the U.S. economy into a tailspin and back to the Stone Age, and possibly to an unemployment rate of 50 %.

The current method has the U.S. Government enabling AIG to unwind gradually without triggering either one of scenarios A) or B) above, both of which would have been infinitely less desirable than the status quo. AIG's total exposure is now down to approx. $ 300 billion and being unwound daily. Its life insurance and other traditional businesses are extremely profitable and should bring in $ 10 billion/year once the toxic waste is removed. The U.S. Taxpayer is the major shareholder, so I don't see the problem.

B (#16), ”Who ever said that anyone SHOULD get a loan without collateral? Why?

I find the above comment both simplistic and a distortion of my own statement. I stated “without 100 % collateral”, not “without collateral”. Your statement goes from one extreme to another, which is what I always complain about on this Blog. You seem to be advocating a “cash under the mattress” economy, which doesn’t work on long-term projects like power plants that may involve a 30-year payback. What you should be doing is not attacking ‘lending’ per se but ‘abuse of lending’, corruption and a shameful absence of regulation.

I suppose that if people over 60 were getting targeted by lunatic drivers and getting run over at pedestrian crossings, you would solve the problem by banning all 60+ persons from leaving their homes. Or maybe you would ban cars altogether. Both solutions would achieve their aim. You (I mean all of you) are focussing your anger on the wrong target. Why is it that, despite obvious imperfections, there is nowhere nearly as much ‘waste’, ‘corruption’ and ‘unfairness’ in Germany and France as there is in the U.S.A.? Doesn’t that tell you that ‘Capitalism’, with free education, free healthcare, one-year fully paid maternity leave, superb infrastructure, 6-week holidays and numerous other benefits and safeguards ……. can indeed work? You can’t just ban lending because the U.S.A. has screwed up.

”AIG Financial Services did not insure the financing of power plants but junk bonds.

AIG insured not only CDSs but subprime mortgages (without which many people couldn’t have bought homes they couldn’t afford, meaning the blame should be shared) and commercial projects which are sound. A broad default would throw out the baby with the bath water and trigger a global panic.

dan_of_steele, thanks for the personal jibes and insinuations that I’m personally benefiting from my viewpoints. You’re beginning to sound like Obamageddon and Sam. I have been recently laid off, and b knows (or should know) why. I am also a victim of a take-over caused by disgraceful mismanagement, so I should be complaining louder than anyone. The fact that I defend ‘sensible’ as opposed to ‘irresponsible’ capitalism is because my judgements are based on intellect rather than bitterness.

I liked the “Born Again American” clip, but it was a ‘cri de coeur’ rather than a ‘call to arms’.
Rapier, I don’t know what Liddy’s motives were for taking the job, but let me develop your titanic analogy to view it from another angle:

Innocent people died on the titanic because of arrogance (the owners claiming that it was ‘unsinkable’, like the U.S. economy), shameless ambition (an attempt to set a new transatlantic record), poor oversight and a paucity of lifeboats.

“Did captain Smith recomend bailing the Titanic?”

No. But did he also recommend that no ocean liners should ever be built again? Or did he recommend, like I do, that the mistakes should be rectified on future lifeboats and that Management/Safety should be improved.
Did Captain Smith say: “Let’s sink it quickly because the whole thing’s a mess”? Or did he say: "Let's save whomever we can"?

[end comment by Parviz via email - b.]

Posted by: b | May 23 2009 13:18 utc | 22

Oh Parviz, such thin skin you have.

you do defend capitalism, you freely admit it. that is becoming ever more hard to sell around here. it may be better than anything else, I really don't know. but it is pretty damn harsh for a lot of people. I simply think (and acknowledge that I am simple) that there just has to be a better way.

Posted by: dan of steele | May 23 2009 16:34 utc | 23

dan of steele, it's clear you haven't understood a word I've written, because you interpret my plea for 'responsible capitalism' as a defence of all capitalism. I give up, which is not so much a reflection of my 'thin skin' as of your powers of discernment.

Posted by: Parviz | May 23 2009 17:14 utc | 24

parviz

your rudeness to dan, unwarranted

after all, he is just pointing out, rather kindly, i would have thought - that 'responsible capitalism' like bush's 'compassionate conservatism' are contradictions in terms

i'm rather more demanding than dan

i want the charnelhouse of capital to be burnt into the ground - the sooner the better

Posted by: remembereringgiap | May 23 2009 17:23 utc | 25

But I disagree with your statement that "in the specific case of AIG, a bankruptcy may have been our best bet. It would have been a lot cheaper for the government to unwind AIG's trades in an orderly fashion, rather than pumping money into AIG -- no questions asked". A) If the U.S. Government had taken over AIG its creditors would have demanded 100 % on the Dollar, otherwise the U.S. Government would have been technically, morally and literally in default. (It has enough problems as it is, with its AAA rating already endangered). B) If the U.S. Government had simply forced AIG into bankruptcy it would have triggered a direct $ one trillion default and possibly a $ 35 trillion consequential default (=
the total value of CDSs issued) that would have sent the U.S. economy into a tailspin and back to the Stone Age, and possibly to an unemployment rate of 50 %.

I was not talking about A...I was talking about how scenario B would have been the right way to handle the failure of AIG. Bankruptcy does not require a complete default -- see the bankruptcy of Chrysler. The US government could have decided which of AIGs obligations should be met in full, which transactions should be unwound at market rates (for example, Goldman would have got 50 cents to the dollar), and which transactions would be canceled. This would require the government to pump in money (it has already "invested" 100s of billions of dollars in AIG) but it would dictate which obligations get treated in what manner. With the current approach, there is no transparency about the manner in which this unwinding is taking place. The only justification for the corrupt manner of handling AIG's failure, is by painting apocalypse scenarios -- $35 trillion consequential defaults and 50% unemployment. NO ONE still knows what AIGs obligations were. How does the one come up with these crazy numbers about the effect of default?

AIG's total exposure is now down to approx. $ 300 billion and being unwound daily. Its life insurance and other traditional businesses are extremely profitable and should bring in $ 10 billion/year once the toxic waste is removed. The U.S. Taxpayer is the major shareholder, so I don't see the problem.

So AIGs exposure went from $1 trillion to $300 billion? How did they do this with much less than $700 billion being injected into AIG by the US government? And why do you think its fair that the US government is the major shareholder rather than the ONLY shareholder? Is this not giving the current AIG equity holders a free ride. Why should their stake not go to zero given where AIG was before being propped up by the government?


Posted by: SimplyLurking | May 23 2009 19:42 utc | 26

r'giap, if you think dan's calling me, directly, "an apoogist for the robber barrons" was being polite, then your powers of discernment are no greater than dan's.

As for "burning capitalism to the ground", you clearly want to replace it by Communism, which is the worst of all worlds. Please explain how corruption would be eliminated under a Communist system. As far as I can recall, the only things Communism ever produced were Nomenclatura, Presidents-for-Life, Gulags, Siberian death camps, privileges for its elite members (viz. "Animal Farm"), shoddy goods/equipment, nationwide alcoholism and long queues for such staples as subsidized eggs and butter, and eventually ........ bankruptcy. Hallo .........?!

Posted by: Parviz | May 24 2009 5:01 utc | 27

SimplyLurking, thanks for taking the trouble to respond.

AIG could not have been declared bankrupt like Chrysler because these are 2 completely different animals. Chrysler (like GM) went technically bankrupt because it produced miserable cars that nobody wanted, it had been bleeding cash for years and had no prospect of returning to profitability. In AIG's case it was a single division that bankrupted a company that was otherwise extremely profitable from ongoing operations. We should differentiate between companies whose profitable core activities have been sabotaged by rogue traders/divisions and those whose core activities should have been terminated long ago.

Secondly, if the government had taken over AIG's operations and decided what to pay to whom, notwithstanding the legal ramifications and complications it would have been merely "stealing from Peter to pay Paul", because GS would have received 50 cents on the Dollar and would have had to make up the deficit via additional "Transfer Assets to Rich People" funds.

The Apocalypse scenarios would have occurred, and I believe the global economy dodged a fatal bullet that would have magnified the effects of the Lehman bankruptcy by a factor of 100. It was purely because of the global panic generated by Lehman that global economic leaders decided to prevent further bankruptcies in the financial sector that fuels global trade and investment. The domino effects of Prime mortgage default and credit card debt would have followed immediately.

AIG's total exposure was close to $ one trillion (equivalent to its assets) in a fire sale (= paying 100 cents on the dollar to creditors and receiving 10 cents on the dollar from debtors or from its own asset sales). This is precisely why the U.S. Government had no alternative but to create conditions in which it could dispose of its assets and recover debts more favourably.

As for shareholders, I don't understand how you can claim current equity holders have been given "a free ride" after seeing their shares sink 98 % in value. Don't they deserve to retain 2 % of what they originally owned?

And what about those with pension and retirement plans? Why should they get shafted for corruption of which they had no knowledge and for which they were totally blameless? There seems to be a philosophy on MoA of lumping all shareholders together as crooks, whereas the vast majority of them are innocent victims of "the system", paying monthly into their retirement accounts for 30 years in the hope they could retire peacefully. Those who constitute the crooks may make up 30 % (an arbitrary figure) of total equity (= institutions and major stakeholders) but certainly less than 0.05 % (also a guess) of the total number of people owning shares. That 0.05 % should be incarcerated, not innocent retirees.

None of the above affects me, so I'm only speaking on behalf of what I perceive to be a group of devastated U.S. seniors and other innocent shareholders who have lost everything or almost everything. They certainly didn't get "a free ride".

Posted by: Parviz | May 24 2009 5:38 utc | 28

other innocent shareholders who have lost everything or almost everything

this supposes that people are entitled to earn money without actually doing anything. playing the stock market is exactly that, you pays your money and you takes your chances. and if you haven't understood that the house always wins then you will get no sympathy from me.

crocodile tears from some international first class flying big shot are laughable. if this is all there is, perhaps you should just link to whatever is on MSNBC.

Posted by: dan of steele | May 24 2009 10:36 utc | 29

O.K., so what do you recommend ordinary U.S. blue and white collar workers do with their monthly paychecks:

Put the cash in CDs that don't beat inflation?

Put their cash in Treasury Bonds which can also go down?

Put in under the mattress?

I fully realize that the stock market is rigged to benefit mainly the big owners of capital, but being wise after the event doesn't benefit those unsophisticated and easily brainwashed people (which covers the vast majority of Americans) who have lost most or all of their hard-earned life savings because of the tax and other benefits they were hoping to accrue.

And who's the big shot travelling first class you're referring to? And whose crocodile tears? If you're referring to me, well, I don't own any stocks. I just feel sympathy towards those innocent people who had been encouraged by the U.S. Government to place their life savings and faith in stocks. The only reason I selected AIG was because it is the poster child for everything that's wrong with Capitalism in general and with the U.S. economy in particular.

But I'm really amazed at your particular lust for vengeance against your fellow countrymen, many of them destitute, which I find vicious and distasteful. I suppose it's easy for those who never had anything to criticize and laugh at the misfortune of others who worked hard and saved all their lives. The Germans call it "Schadenfreude".

Posted by: Parviz | May 24 2009 11:23 utc | 30

O.K., so what do you recommend ordinary U.S. blue and white collar workers do with their monthly paychecks:

Put the cash in CDs that don't beat inflation?

Put their cash in Treasury Bonds which can also go down?

Put in under the mattress?

Guns and gold Parviz, guns and gold! That's what Americans should be investing in :)

Seriously Parviz, you bring-up the point that many of us forget; most of the "investors" in these CDS were institutional investors... ie mom and pop americans who count on their 401K for their retirement... this group is taking it in the ass from this mess.

From the small amount I think I understand about the current mess I get the feeling that the big boys of finance have set-up the perfect sting on the small investors... manipulating the way corporate and social security retirements were structured so that there was a lot of easy money floating around to "fund" start-ups, but in reality were Ponzi schemes that were being continually fed from a pool of new investors (ie 401Ks)

True, the working folks loved watching the numbers on their statements continue to rise, but they never realized these numbers were so many lies told by their fund's brokers.

As for Communism... Like our "Capitalism" it is just a name some authoritarian types chose to use to describe their particular brand of "rich vs poor" I don't think the Soviet Union was any more Communist than America is Democratic... but I think I prefer the American fantasy to the Soviet model... but neither are very good for the long-term well being of the people.


Posted by: DavidS | May 24 2009 15:00 utc | 31

In March of this year there were 16.2 million unemployed (U6)

The poverty level for a family of four is $22,500 http://aspe.hhs.gov/poverty/09poverty.shtml That works out to around 11 dollars an hour.

According to the US Census, in 2007 5.8% of all people in married families lived in poverty, as did 26.6% of all persons in single parent households and 19.1% of all persons living alone.

According to Current Population Survey estimates for 2007, 75.9 million American workers were paid at hourly rates, representing 58.5 percent of all wage and salary workers. On July 24, 2007, the Federal minimum wage increased to $5.85 per hour from $5.15 per hour. Data in this report reflect the average number of workers earning the prevailing Federal minimum wage or less for the year (those who earned $5.15 or less from January 2007 through July 2007 and those who earned $5.85 or less from August 2007 through the end of the year). Among those paid by the hour in 2007, 267,000 were reported as earning exactly the prevailing Federal minimum wage. Nearly 1.5 million were reported as earning wages below the minimum. Together, these 1.7 million workers with wages at or below the minimum made up 2.3 percent of all hourly-paid workers.

There are about 154 million in the workforce http://www.bls.gov/news.release/empsit.nr0.htm

http://www.hoover.org/research/factsonpolicy/facts/44189172.html IRA holdings account for roughly one-quarter of total U.S. retirement savings. In the third quarter of 2008, the total amount invested in IRAs was $4.1 trillion. Forty-one percent of households own an IRA.
Over the past eighteen years, IRA owners have shifted from investing their IRAs in bank and thrift deposits to putting them in mutual funds. In 2008, nearly half of IRA assets were held in mutual funds and stocks, compared to just 22 percent in 1990. During this same period, the share of IRA assets held in bank and thrift deposits declined substantially, from 42 percent in 1980 to 8 percent in 2008.

So, the point I would like to make is this. Though it is true that many people felt they must invest for their old age retirement, from fear of being destitute in their old age to natural greed brought on by tales of fantastic profits this was necessary because the state refuses to live up to its constitutional duty to protect the citizens. The Preamble states "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

I not concerned for the wealthy, they will be alright. there are far more people who are having a hard time and those are the ones that merit my attention. as Mr Spock says in Startrek, the needs of the many outweigh the needs of the few. This is true everywhere except when speaking of rich capitalists.

Posted by: dan of steele | May 24 2009 15:06 utc | 32

Thanks, DavidS, I was beginning to think I was the only one here to actually recognize the plight of ordinary Americans who invested in good faith (401Ks, IRAs, etc.,.). Those big-wigs who got caught, and even the very few in prison, probably have Cayman Island accounts to look forward to when they emerge from prison, or they have fabulous homes in the wife's name to ensure that at least their families enjoy the spoils.

Dan_of_steele, it seems we're finally coverging, slowly but gradually.

Posted by: Parviz | May 24 2009 16:06 utc | 33

Thanks, DavidS, I was beginning to think I was the only one here to actually recognize the plight of ordinary Americans who invested in good faith (401Ks, IRAs, etc.,.). Those big-wigs who got caught, and even the very few in prison, probably have Cayman Island accounts to look forward to when they emerge from prison, or they have fabulous homes in the wife's name to ensure that at least their families enjoy the spoils.

Dan_of_steele, it seems we're finally coverging, slowly but gradually.

Posted by: Parviz | May 24 2009 16:06 utc | 34

no Parviz, I don't think we are converging. I grant that poor people got the short end of the stick with this market collapse. I lost quite a bit of money myself. Truth is I mostly invested because I had some extra money and wanted to see if I could latch onto the gravy train too. alas, it was not to be, born a field slave and temporarily working in the big house I remain a wage slave and will be until I check out.

I fully agree with Obamageddon and the others who shake their head in amazement that the very people who caused this incredible transfer of wealth from the poor to the wealthy should be given the task of taking even more money from the poor for the wealthy.

and you are an avid cheerleader for them.

I was once quite surprised at the passion of people who act against their own best interests. Now it seems that is the natural order of things.

it is a damn shame.

Posted by: dan of steele | May 24 2009 16:50 utc | 35

Private debt in the US reached over $40 trillion. Lets assume the lenders are seeking an average of 5% interest on the loans. That means Americans are trying to pay 2 trillion in interest per year. The entire US economny is $13 trillion with about a third of that from the US government. So roughly $8 trillion is required to pay $2 trillion in interest or roughly 20% of the total of the private economy. According to Paul Krugman (Links May 23 09) the financial industry has doubled to 8% of GDP, increasing the burden on the borrowers who simply cannot pay such a large amount back. He also stated that at the hieght of this financial free lunch the financial industry was 41% of US profits. This is in effect a burdeon on the country not a benefit.

The lenders didn't care because they were in bed with the welfare state and insured the risks by buying default policies from companies like AIG. What a cozy relationship; just lend out all you want and insure any losses knowing Uncle Sam will bail you out with working people's money via honoring credit default swaps written with no collatoral.

What business does the US government have in shovelling billion of taxpayer dollars into European banks via AIG CDS contracts? Why should an American worker have to borrow $12 billion to give to Deutsche Bank? In the last quarter of 2008 seven of the top ten payouts by AIG were to European banks. This is the rich class being bailed out by the working class. You arguing that the US worker is benefitting from this is laughable. The financial sector needs to be shrunk not propped up. The bankers's bank (International Bank of Settlements) wrote a report on the need to unwind this unsustainable mess. Borrowing more money to keep it going just delays the inevitable and diverts resources from more productive means. Economic prosperity is built around innovation and productivity not lending money that can't be paid back without the former. This is what you are defending Parviz.

And quit posting that the Soviet Union was communist. Anybody that thinks Stalin was a communist doesn't know the meaning of the word. Using that as an example to bludgeon remembereringgiap for his post as you did in post # 27 is pathetic.

Posted by: Sam | May 24 2009 17:02 utc | 36

Dan: "I was once quite surprised at the passion of people who act against their own best interests. Now it seems that is the natural order of things."

I am equally surprised at people who cut off their noses to spite their faces. I can't prove that the U.S. economy would have become 100 % worse if all the debtors had been closed down, because a flood of liquidity prevented just such a scenario. Sometimes I wish it hadn't.

Sam, I am rather sick of people who criticize those who 'retaliate' but not those who 'provoke'. Your criticism of my response conveniently ignored the gratuitous accusation of your friend that I am "an apologist for the robber barrons".

Second, I completely agree with what Krugman says, always have and always will. It's ludicrous that 72 % of a nation's GDP consists of consumer spending. So why do you hold Krugman up against me?!? My model is actually the German model which I believe is 'socially responsible capitalism', and a Helluva lot more successful in every respect than the U.S. variety. So what's your point, because I don't see one unless you're preaching to the converted or simply enjoy stating the obvious?

As for the U.S. bailing out European banks, well, the U.S. created, packaged and marketed the toxic shit, so you have a moral duty to compensate at least a few of the European banks for the mess you created. Northern Rock, RBS and Lloyds weren't so lucky and got stuck with it.

Finally, please give me an example in world history of a successful communist state, so at least I can relate your and r'giap's obsession with this ideology to events in the real world. Thank you in advance.

Posted by: Parviz | May 24 2009 17:57 utc | 37

Another misinterpretation of my statements that I fogot to mention: You write

"This is the rich class being bailed out by the working class. You arguing that the US worker is benefitting from this is laughable."

I agree it's laughable, because I didn't write it. What I did write was that the U.S. worker would have been crippled far worse (= 50 % unemployment) if the house of cards had been allowed to collapse in its entirety, instead of just Lehman whose effects were bad enough. Nowhere, in any of my writings, have I praised U.S.-style Ponzi-scheme Capitalism. All I did was make recommendations based on my conclusions as to how to mitigate its effects without bankrupting the entire nation. That's a far cry from praising AIG or CDSs or anything else artificially created by the U.S.A..

I guess the Twist is your favourite dance because you seem to enjoy twisting people's words.

Posted by: Parviz | May 24 2009 18:24 utc | 38

As for the U.S. bailing out European banks, well, the U.S. created, packaged and marketed the toxic shit, so you have a moral duty to compensate at least a few of the European banks for the mess you created. Northern Rock, RBS and Lloyds weren't so lucky and got stuck with it.

bullshit!

the United States did not create, package, and market toxic shit. Your beloved capitalists did that. Some of them are based in the US and others elsewhere. The US did not do this with the support of its populace, most if not all were quite blissfully unaware of any such shenanigans. How in the hell do US taxpayers get stuck with that?

ah yes, it is coming back to me. capitalism means privatize profit, socialize loss. that's it isn't it?

Posted by: dan of steele | May 24 2009 18:39 utc | 39

Parviz @ 37:

Sam, I am rather sick of people who criticize those who 'retaliate' but not those who 'provoke'. Your criticism of my response conveniently ignored the gratuitous accusation of your friend that I am "an apologist for the robber barrons".

You have clearly stated that you agree with Obama's economic policies. He is clearly directing state welfare to the banks. If that isn't an apoligist for the robber barrons then I don't know what is. The banks were given tax breaks when the loot was pouring in and now that they are bleeding you expect working people to cover the losses? Free market capitalism and tax breaks for the profits and state welfare socialism for the losses is not a kind of economic policy I can support in any way shape or form.

As for the U.S. bailing out European banks, well, the U.S. created, packaged and marketed the toxic shit, so you have a moral duty to compensate at least a few of the European banks for the mess you created.

So elites from other countries came to the US and gambled away their money and now you think I have a moral duty to give a portion of my pay check to them? They never offered me a single penny of their profits and yet you think it is my duty to cover their losses? Let the elites that promoted this crap pay the losses and stay the hell out of working people's pockets.

Finally, please give me an example in world history of a successful communist state

I am not aware of one. Why are you asking me such a thing?

Posted by: Sam | May 24 2009 18:48 utc | 40

DoS@39

I guess it isn't that obvious to everyone that this mess is a United States mess... at least how it relates to americans because we're the idiots who have let all these bad things happen to our country. The financial mess didn't appear out of the sky one day like an invasion by aliens... it has been building for years and we, the people, have done scant shit about it.

Think about how many different schemes we've seen manifested between finance and government since, well since forever.

The public hasn't demanded any real change in the way the system is run, so it's their fault. We can't expect the people who have the power to weld it with any sort of justice, we have to demand it and keep demanding it.

I've been a fool for years; buying into all the wall street/government bullshit about everything from unions to trial lawyers. Now I'm just a fool, not buying into anything :)

We're lucky in America that we get to play the great white hope upon the world's stage and not Canada or Mexico... otherwise it would be us living in cinder-block shacks and sneaking across boarders to work.

Posted by: DavidS | May 24 2009 19:19 utc | 41

DavidS,

I will grant you that we as US citizens have mostly gone along with these things and have benefitted immensely from most of it. Not all of those decisions were taken with serious thought though. We have been conditioned to behave in certain ways and the powers that be have been relentless in staying on message. I am reading Noam Chomsky's Culture of Terrorism and he documents quite thoroughly how corporate media frames all of our arguments. It is a pretty good read and will certainly make you see Ronald Reagan in a different light. I believe you said you voted for him.

Sadly I must disagree with you. It is not your fault nor mine that bankers created a huge Ponzi scheme. Some of them profitted greatly. If small time investors were lucky enough to buy early and sell at the top they did well too. If they didn't well that is too bad isn't it? If they wanted safe they could have bought municipal bonds. that is what risk is about, high profits and possible losses.

And it was not just US bankers, European banks sucked up a few hundred billion euro too this last year or so.

Posted by: dan of steele | May 24 2009 19:43 utc | 42

DoS-

I doubt it was I who voted for the Reagan kook... I wasn't old enough. But granted I was a member of the Young Republicans my senior year (86)... those were silly times and I didn't know better. I think I joined because I got to wear ties and slacks and this pissed my hippie parents off. Anything to cause the parents grief :)

That the public is conditioned to behave in certain ways is no secret... Here is one of Uncle $cam's links for the doubter to inspect and check this premiseEdward Bernays : on Propaganda and Public Relations

And this is where we come to the ugly truth is that it is the public's fault they were screwed... not because of the investments that were made on their behalf, but because we've continued to look the other way and haven't demanded business change.

In a way you can't blame the business man for taking advantage of willfully ignorant consumers anymore than we can fault the rancher for slaughtering their cattle. If they allow it to happen, than "why not?" If you've ever eavesdropped on a couple of corporate raiders talking shop than you know that these guys are about as moral as serial killers... raiding business pays better than rape and murder (which only seems to pay if you do it in-mass to a population).

I agree we didn't invent and create this mess, but the public has continually bought into the whole house of cards and crossed their fingers... I learned my lesson during the first Gulf War when my meager 401K barely paid for my train ticket to Colorado after I got fed-up and left the corporate newspaper world for the corporate guiding world... At least the office is nicer on the trails, but it ain't so different.

I'm not trying to be a complete asshole (maybe just the left cheek) by continuing to argue that it was as much the fault of the public as it was of the business creeps. We tolerate the greed because many of us hope to get a taste of it at some point. The problem is we don't want it enough to lie and cheat to "earn" it and the corporate assholes do.

Posted by: DavidS | May 24 2009 20:39 utc | 43

Sam (40), I asked you to name me a successful communist state in world history because you so fiercely defended r'giap's desire of "burning capitalism to the ground". r'giap is a proud and avowed Communist, and you either defend his views or you don't. You can't have it both ways.

So if you want to coninue defending r'giap's Communist views you should also be in a position to name a single successful communist state in world history.

You should also be able to define what type of Capitalism it is (if not ALL Capitlaism as defined by r'giap) that so many on this Blog purport to despise.

This Blog is hot on negativism and low on well constructed alternative proposals, or even in properly defining what it is that everyone hates. Is everyone here criticizing Capitalism in general, or just the U.S. version?

Posted by: Parviz | May 25 2009 9:45 utc | 44

Parviz-

I think... I'm not sure and it is rude of me to talk for someone else... but I think r-gap likes the idea of Communism but I'm not sure he is a big supporter of any particular manifestation of it. So far there hasn't been a truly communist/socialist state that's tried to live out this experiment without resorting to totalitarianism – which as we know isn't communist any more than america is "democratic"

You have to admit a worker's paradise is a compelling fantasy, but then so to is a business paradise. It just depends on where and how you work; If you've started a business you're probably gonna view things a bit different than a guy flipping burgers at Mickey D's.

The US has become, or is close to becoming, more of a true Fascist state (corporate profits privatized, debts nationalized) than a Capitalist state... I'd even argue this has been the state of the union since WWII, at least as far as our largest corporations are concerned.

I don't have a "well constructed alternative proposal" because I've unfortunately fallen victim to American Apathy and I don't see much hope in changing anything. It seems the corporations gain ground in leaps and individual humans take it back in inches – it's a losing game for us.

I wish I could figure out a way to start us down a path that would end in some positive changes; but I don't see it.

It is human nature to never feel satisfied... this is hard to change and until we do there are always gonna be humans that ask, "I wonder if there is more?"

Lets just say I wished humans would value OTHER humans lives and property as much as they do their own.

I think human nature has killed our revolutionaries... Anyone with brains can look to the past and see how previous revolutions ended and figure that similar problems would creep into their program; might as well go back to playing video games (where the good guys can still win) and try to keep your head down.

Iran lost the Shaw and gained "a token from god" (ayatollah) in his place... Cuba got rid of the american gangsters and got Castro... I'd hate to think what we'd end-up with... I imagine it would be an entertaining cross between Survivor and Dancing with the Stars with a lot of sadistic sodomy and terrible tortures shown on prime time.

And Parviz this is the best a kook like me can come-up with before any caffeine has slipped past my parched lips :)

Posted by: DavidS | May 25 2009 11:32 utc | 45

b, I've been trying to post something for about 4 hours. Please consult your emails. There's something wrong with the system. Sometimes I get through even with lengthy posts, sometimes not even with short ones.

Posted by: Parviz | May 25 2009 13:16 utc | 46

Parviz,

sometimes all you need to do is copy whatever it is you want to post to a text document, close all of your browser windows, open MoA and then paste the text into the comment box and post immediately.

it appears that typepad is using some kind of session cookie that times out after a while. probably to thwart spammers but nevertheless annoying.

or, it could be that they are giving you time to modify your post so as not to come across with so much aggression ;>}

Posted by: dan of steele | May 25 2009 13:51 utc | 47

parviz, i really REALLY wish you could compose your comments without resorting to generalizations like this:

This Blog is hot on negativism and low on well constructed alternative proposals, or even in properly defining what it is that everyone hates. Is everyone here criticizing Capitalism in general, or just the U.S. version?

there is a diversity of thought here that such comments cannot acknolwedge, and your incessant demands for alternatives, which you claim the majority of us posting comments here don't do, are simply inaccurate.

i believe at some point, this country needs to embrace a sort of economic regionalism. scaling down our out-of-control financial sector could go hand-in-hand with an overhaul of our national priorities.

that's why i think developing local food production is so important. the way we've set ourselves up in this country is NOT SUSTAINABLE. that puts 300 million people here in danger, and it puts the rest of the world in danger (my friend has a saying: when the economy tanks, the army's a job) because pretty soon the only career opportunities that will exist will be in propping up our crumbling empire.

i am not always in disagreement with you, and i'm willing to make concessions, which i hope i've shown in past discussions. but when you seem intent on waging your little battles against a generalized depiction of the commentary here, it's hard not to just try and shoot you down. (of course, you make it easy when you say thing like: The American public didn’t deserve the services of somebody who took on the most difficult and high profile job in the U.S.A. for a nominal salary of $1 per year.)

Posted by: Lizard | May 25 2009 14:44 utc | 48

[comment by Parviz via email]

David, that was very enlightening, and I see what you're driving at. But it gets tiring for me to listen to other people (like r'giap) claiming Communism is the perfect state when there's never been one to compare against capitalist states (of which there have been many, good and bad).
I mean, wouldn't people on this blog get fed up if I were to state, every other post, that we should "burn down this and burn down that" because I believe in Utopia ....... (Q.: "Define Utopia". A.:"Sure, it's a place where everyone is happy, everybody is equal and anger/jealousy don't exist"). You see, it's a useless exercise.
What I've tried to do, rather unsuccessfully it seems, is to introduce a dose of realism into the constant debate, to show that everything's not either black or white, and that there are indeed grey areas, that Capitalism is not "all bad" (sure, the U.S. version stinks), that the world cannot live totally without credit (Bernhard, that snide remark is for you!) and that our aim should be to reform and not to destroy the little we have: "Burn everything down and let's start again" is O.K. if you're playing a video game, but not in the real world. As you correctly mentioned, the alternative may be even worse as with Khomeini, Castro .....
My haphazard recommendations:
Put the crooks in jail, increase fines, raise capital ratios for banks, cap lending rates at LIBOR Plus 3 %, tighten regulations and regulatory control, educate the public, improve educational standards, impose welfare and health care reform, smash the political lobbies and the corporate monopolies, get involved (I mean everyone on this Blog) in petitioning, writing and complaining to the mainstream media (which I personally do at least once a day), get angry, but don't for Heaven's sake turn into a bunch of nihilists or anarchists who believe there's nothing worth saving. Your dreams might one day be answered by an industrialized version of Pol Pot.
By the way, my views may be shaped by my age, as I guess I’m older than many of you. I had Communist sympathies in secondary school, was clearly Socialist at university, became a free-enterprise capitalist with my first wage-earning job and have now settled down as a social-democrat with a belief in the power of enterprise married to the strong responsibility of the State to care for those who fall between the cracks, whether through incapability or layoffs. (I consider both the other extremes -- laissez-faire Capitalism and Communism -- as pure crap). I don't care if I pay a total of 70% combined direct/indirect/VAT taxes, as long as the money is used properly and creates social harmony. I couldn't enjoy wealth if most the people around me were unhappy and hated their government, as in the U.S..
Try and make the U.S. more similar to Germany, France and Denmark, then you'll see not the perfect but the brighter side of Capitalism.
[end comment by Parviz via email]

Posted by: b | May 25 2009 16:24 utc | 49

Dan, I tried that (copy, close browser, re-open and paste immediately) even before you recommended it. Doesn't work. If this message appears it clearly has something to do with length unless, as you say, there are paranormal forces waiting for me to tone it down.

b, my email to you of 4 hours ago in response to DavidS, which I actually wrote about 12 hours ago, is still in your inbox!

Posted by: Parviz | May 25 2009 16:28 utc | 50

You see, everyone, anything lengthy is blocked as Spam.

Posted by: Parviz | May 25 2009 16:28 utc | 51

Thanks, b, our lines gor crossed just now!

Posted by: Parviz | May 25 2009 16:29 utc | 52

Lizard, I'm scared of writing a lengthy reply so as not to bother b again.

Regarding Liddy, I just don't know who can do his job and at the same time be someone without any political or economic baggage. It will tak enormous time for the U.S. to breed a new generation of responsible economists, which is why in my post to David I placed so much emphasis on both regulation and education.

Posted by: Parviz | May 25 2009 16:33 utc | 53

Go Parviz!

What we need is a perfect gray – not a half-toned gray (made of so many black and white dots) – but a real blending of the best human ideas for solving very human problems.

It's unfortunate that lawyer-talk (defining each word in the context of the surrounding words... very tiring) is how everything needs to be argued... the whole "tower of babel bullshit" that keeps humans from being able to meaningfully discuss simple ideas without becoming lost in the details waste time we could be using to actually accomplish something. Uggh!

I wish everyone who is a regular poster could layoff the personal attacks when arguing their point... seems like we (me too) do too much name-calling and sibling bickering when we get in the heat of "battle."

There are plenty of reasons to be angry, but spending your venom on our petty individual problems is wasted. This is how the average human becomes distracted from the assholes who need a good verbal thumping from ALL of humanity.

I guess this is a preachy post and I'm as big an asshole as the next person... just depends on the where and when, the amount of water I've drank (dehydration is one of the leading causes of irritability... really!) and how much MSM I've consumed. So I guess I'll fall-off my high horse and go shoot some plastic dinosaurs with the pellet rifle – if you're a rafter, you need to be prepared incase you fall into the Land of the Lost

Posted by: DavidS | May 25 2009 17:17 utc | 54

It will tak enormous time for the U.S. to breed a new generation of responsible economists

responsible economists exist, they're just not listened to. that's part of the problem.

i'll say it again. and again. alternatives exist. but you continue to demand that people furnish you with examples.

Michael Hudson is an economist that impresses me, which isn't difficult considering my layman's understanding of finance. but i think he could handle unwinding AIG better than Liddy. hell, i bet he would do a better job at treasury than timmy g, who makes the job look easy; just give your pals at Golden Sacks and their friends hundreds of billions of dollars.

Posted by: Lizard | May 25 2009 18:40 utc | 55

Lizard, be careful what you wish for. There's an expression that "those who can, can. And those who can't, teach." Hudson is no better and no worse than his presidential aspirant Kucinich, by which I mean that just as the highly principled Kucinich failed miserably to garner votes for his presidential run, similarly the principled Hudson would probably have faced numerous obstacles in practice that he couldn't have imagined in his worst nightmares.

This is why I keep saying that the whole system has to be changed over a lengthy period of time. If you could have brought Mother Theresa back to life and made her Secretary of Health I'm pretty sure she would have been the worst Health Secretary in U.S. history, just as the highly principled Jimmy Carter was one of the worst presidents (but one of the best ex-presidents, which proves my point).

What does Michael Hudson know about the corporate world? He's an economist, like 2001 Nobel Laureate Joseph Stiglitz (an equally fierce critic of the U.S. economy for years). Have either of them ever run a trillion dollar corporation?

So, you see, this is why I take a 'realistic' approach to problem-solving rather than wishful thinking. I'm on your side, but my approach is different.

Posted by: Parviz | May 25 2009 19:03 utc | 56

you don't know whether or not Hudson could be successful. the only way to find out if a principled person could succeed is to let them try. where you presume failure, i see opportunity.

similarly, you don't know for sure that the economic collapse would have been dramatically worse, as you keep insisting, without trillions of dollars being dumped into flailing banks. i think you're giving discredited economic analysts too much credence, while marginalizing the economists that have provided, at least for me, alternative ways of understanding what has happened, and will happen if we revive the old status quo. it won't be pretty.

...I keep saying that the whole system has to be changed over a lengthy period of time

i couldn't disagree more. the system has never been more vulnerable, meaning now is the time to push alternatives.

there are a lot of overburdened, undereducated people in this country, and the economic injustice of rewarding failure is making them justifiably enraged. in addition to hating bankers, they also hate muslims, immigrants, europeans (especially the french) hippies, college professors, etc, and their anger scares me.

they also don't like iranians very much, and as the economic policies you support make their lives worse, they will happily direct their anger at whatever group our corporate media decides to scapegoat.


Posted by: Lizard | May 25 2009 19:31 utc | 57

Lizard, all I meant to say in questioning your choice of Hudson was to point out that successful corporations are run by great managers, not by great intellectuals. Jack Welch is a prime example. This doesn't mean that Hudson would definitely have made a lousy head of AIG, only that great managers have different qualities from great theorists. When a poorly educated but successful British computer entrepreneur, Alan Sugar, was once asked the secret of his success he said it was simply because he knew how to 'lead people'. He even candidly admitted that during his first meeting with investors, when asked what his company's P/E was he replied that everyone was 'very fit' because he thought they were asking about the company's Physical Exercise programme!

The U.S. mess will take a long time to correct because the education system and the concept of Exceptionalism is embedded in the national psyche, not just in the Heartland but along the coasts as well. Too many Stars and Stripes, too much 'God Bless America', too much "shining light on the hill", too much "they're jealous of our way of life", too much "there's nothing that Aaa-meer-iii-caaa can't achieve" ........

What percentage of the U.S. population reguarly accesses MoA and other such fine Blogs? 0.0001 %??? The remainder are comatose, vaguely aware they are in a mess but unwilling or unable to do anything about it. Many of these same people still think theirs is "the greatest country on Earth" and wave the Stars and Stripes as soon as their President says "Jump!"

Posted by: Parviz | May 26 2009 4:51 utc | 58

What percentage of the U.S. population reguarly accesses MoA and other such fine Blogs? 0.0001 %??? The remainder are comatose, vaguely aware they are in a mess but unwilling or unable to do anything about it. Many of these same people still think theirs is "the greatest country on Earth" and wave the Stars and Stripes as soon as their President says "Jump!"

precisely the resource we haven't fully tapped yet. when our Enders Game war machine is perfected, we'll be administering surgical strikes with joysticks.

and though i feel comfortable referring to a sizable chunk of my fellow citizenry as comatose, i think maybe a better word for a non-merrycan to use is conditioned

Posted by: Lizard | May 26 2009 5:25 utc | 59

oh, wait, we're already administering surgical strikes with joysticks. i guess the future is already here.

Posted by: Lizard | May 26 2009 5:27 utc | 60

Parvis @ 44:

Sam (40), I asked you to name me a successful communist state in world history because you so fiercely defended r'giap's desire of "burning capitalism to the ground". r'giap is a proud and avowed Communist, and you either defend his views or you don't. You can't have it both ways.

I didn't write that post to defend communism or anyone for that matter, although I admit it does appear that way. I wrote that post to critisize you for basically calling Joseph Stalin a communist, which I personally think is absurd. What I saw was a form of McCarthyism and was reviled by it. I don't give a crap what r'giap's views are, I just didn't like the way you attacked him over it.

This Blog is hot on negativism and low on well constructed alternative proposals, or even in properly defining what it is that everyone hates. Is everyone here criticizing Capitalism in general, or just the U.S. version?

It is a debt crisis plain and simple brought on by deregulation and a bloated banking system. Those that were stupid enough to lend money to people that couldn't pay it back should lose their investment just like any other investor that makes a bad bet in a capitalist system. Borrowing more money to keep too many lenders around isn't going to solve the problem. The excessive borrowing needs to stop and the financial industry needs to shrink.

What's interesting is the entire country is built on cheap oil and cheap debt. The government subsidized gas guzzlers, mortgages, and capital gains. The EV1 (GM's electric car that they refused to sell) was crushed in 2003 the year Bush proclaimed mission accomplished. Hummers and McMansions were the order of the day and Bush was going to democratise the entire ME bringing that black gold back to America and everyone would live happily ever after. It was the largest gamble in history and it ain't over yet. It don't look too good now but like the old saying goes there's a sucker born every minute and there's still a lot of them out there. Obama will baffle them with bullshit and we await the outcome.

Posted by: Sam | May 26 2009 6:27 utc | 61

Sam, I'm mature enough to know the emptiness of Communist states during the past century, so stating that Stalin wasn't Communist is stating the obvious, just as the Chinese stopped being Communist in the early 1980s.

Where we differ is in our judgement of how difficult Obama's job is. You believe he should do everything differently, whereas I believe it would be impractical and impossible for him to try and put right all that's wrong with America. I've already stated what needs to be done in post # 49:

My haphazard recommendations:
Put the crooks in jail, increase fines, raise capital ratios for banks, cap lending rates at LIBOR Plus 3 %, tighten regulations and regulatory control, educate the public, improve educational standards, impose welfare and health care reform, smash the political lobbies and the corporate monopolies, ......

To the above I would add imposition of an additional 50 cent/gallon gasoline tax, the elimination of agro/steel subsidies that keep these sectors bloated and backward, elimination of all tax loopholes for the rich, etc.,.

I just don't believe Obama can achieve the above (at a cost of even greater disruption and an additional $ 10 trillion deficit) overnight. It will take time.

On Obama's foreign policy, however, I believe he could and should have been far bolder. He's messing up big-time.

Posted by: Parviz | May 26 2009 10:09 utc | 62

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