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Last week we read about the efforts of the willfully/happily ignorant Texas School Board to dummy up social studies/history books to make sure students were fully indoctrinated in the belief that unfettered free enterprise and market deregulation are not only the path to economic success but moral, even religious imperatives.
This week we continue to get confirmation that unfettered free enterprise and market deregulation lead inevitably to economic disaster and massive human suffering, while the nation’s inability to reverse course is a sign of its political and moral decline.
So, which lesson iz r kids learning?
If we think our government elites have advanced much beyond the delusion that humans walked with dinosaurs, how do we explain our government’s deference to too-big-to-fail banks and the continued belief by nearly half of Congress that government shouldn’t intervene in the economy to reduce unemployment?
We have an Administration that meekly announced on Wednesday that there isn’t much they can do about the fact unemployment will remain about 10 percent through the rest of year. It seems we just have to wait for the labor market to self-correct, which, we are promised, it will do after a predictable "lag" and after the bailed out and restored banking system deems it suitable to do less looting and more lending.
Last night, our Treasury Secretary told Rachel Maddow (as he’s told others) that the previous Administration and its regulators made egregious mistakes in overseeing financial giants. No kidding. But this is the same Tim Geithner who publically undermined even a modest Volker rule designed to encourge too-big-to-fail banks to become smaller. And it’s the same Tim Geithner who headed the New York Federal Reserve while it was watching, even helping, Lehman commit Enron-style accounting fraud by hiding its excessive leverage.
Just as the Texas Board is rewriting history, so our government is in the process of forgetting that its disastrous deregulation of the financial sector created the breeding grounds for a massive financial meltdown.
The worst financial collapse in 75 years occurred within the last 3-4 years, but that history seems to be having little effect on Congress. We aren’t planning to break up the big banks, don’t know how to wind down international mega-banks, can’t figure out how to change compensation incentives and have no better plan to avoid systemic risks than to ask a "council" composed of the same people who denied we had a problem last time to be more careful next time. Can we have a fully independent consumer protection agency to make lenders think twice before bilking consumers? You must be kidding.
Allen Greenspan, the previously infallible pope of unfettered markets, told Henry Waxman last year that his entire philosophical premise about self-correcting markets had just been shattered by the market’s collapse. That should have been the end of this free market nonsense, but that speech will likely not make it into the next text books. The current chairman fears the Fed’s credibility might slip if it raised the inflation target to spur more growth and employment.
Instead, we’ll all be reading about how everything would have been just fine if the government hadn’t indulged in reckless tax and spend policies, unfunded entitlements, government controlled health plans, and deficit spending that couldn’t possibly create a single job, except maybe the ones in your local Congressman’s district.
The Texas School Board isn’t rewriting history; it’s just revealing what our elites have come to believe and are still using as their guidebook. Welcome to Texas. Please bow your heads to say, "thank you, Jesus, and watch out for the dinosaurs."
Related:
Yves Smith, Lehman: Regulators chose to deny extend, and pretend; also, Geithner Implicated in Lehman Accounting Fraud Allegation
HuffPo/Ryan McCarthy, Lehman’s Bizarro World
Bloomberg, Geither says unemployment may peak in second half of 2010
Paul Krugman, Alexander Hamilton was always at war with EastAsia
BaseLine Scenario/Simon Johnson, Enron and Merrill, Greece and Goldman
Tula Connell, Texas may bar students from learning about Cesare Chavez, Thurgood Marshall
24 Comments
“Please bow your heads to say, “thank you, Jesus, and watch out for the dinosaurs.” ; great line.
“Texas probably won’t lose its not so grand distinction of being the country’s biggest industrial polluter anytime soon, but the state did manage to reduce its CO2 emissions levels by 2% between 2004 and 2007, according to an Environment Texas analysis.”
But they’re worried about Phyllis Schlafly, the Contract With America, the Heritage Foundation, the Moral Majority and the National Rifle Association.
“If we think our government elites have advanced much beyond the delusion that humans walked with dinosaurs”
We have evidence this is true. It happens every day in the senate.
Yes, the metaphorical evidence is everywhere.
This is, of course, nonsense. However, neither will market regulation and planning bring back the happy, bubbly times of the dot com, housing, you are either with us or against us, sole superpower era. The party is over. Really.
Raising the inflation target will do nothing except enrage the Chinese. C’mon Yanks! The path is clear: drastically lower your consumption and pay your debts like any other country in the world. Regulation and planning may help, but it is not a substitute for living within your means, with or without dinosaurs.
Sorry, but the economics of government fiscal policy, when the govt prints and guarantees it’s own currency, are not the same as those of a family which can’t create money, though you won’t find this explained in Texas-approved texts. The misconception is, however, common.
Also, virtually all serious economists will explain that you can increase employment by raising the Fed’s inflation target. Try any blog that follows the Federal Reserve Board; it is a frequent topic.
I am referring to the global financial system which has been so generous to Americans during the past three decades when the world’s resources, labor, and capital flowed from poor to rich countries following “market forces” and “freedom”. The system has collapsed. Americans will have to learn how to live without such generous tribute.
Yeah, such as employment in real estate and hedge funds, if you are so lucky as to also dominate global finance. I think that was the last bubble since the whole world has learned what a racket the US was presiding. The day of reckoning has arrived.
This pretty much sums up the debate…
I’m constantly amazed at how the Shock Doctrinaires like Greenspan and Friedman believed so resolutely that greed is good, and unfettered greed is even better. Greenspan, even in his confession that the system doesn’t work, seems mystified by some force he cannot articulate which acted against the designs of those well-educated in the Chicago School of Economics.
But contemporary business schools only encourage “enlightened self-interest,” without discussing its real nature, greed. We can only expect more of the same mega-bubble replication as long as bad assumptions continue to be made based on worse information, ignoring the role of greed.
contemporary business schools
Or as I like to call them: Idiot Factories.
But that’s just me…
Would one think that Obama might say “We can support states not having to buy the crappy, revisionist textbooks”? Nah. Neither sexy enough, nor do enough people actually care that their children/grandchildren will be taught that Tail-Gunner Joe might have been President if it hadn’t been for some pesky attorneys and the US Senate, or that Arthur Laffer was just ahead of his time like Copernicus and Galileo (both of whom will be demonized). American exceptionalism will be taught as our right, with the gifts of smallpox-ridden blankets as our act of kindness to the “savages”.
The Vandals and Visigoths now live/work on Wall Street, C-Street and K-Street but their effects are just the same, they’re just richer and care far less, I believe.
What Geithner, Summers and Greenspan all miss is that their theories are concerned with financial markets, and the result is that speculation becomes an industry, on a par with other crucial US industries such as the gaming industry. Neither produces anything. In fact, both move money out of the productive sectors.
The gamblers are in charge, and congress is addicted to the money.
Inflation is a double edged sword but yes they should increase the inflation target (within reason). The problem (to them) is this would raise interest rates. The fed has worked hard to keep interest rates artificially low in hopes it would turn the housing market around. That’s not going to happen.
” Neither produces anything. In fact, both move money out of the productive sectors”
The same could certainly be said about government in general.
Back in the day Kansas began teaching Creationism, now referred to as Intelligent Design, in their public schools. This did cause the state problems. In the larger cities in Kansas a significant number of conventions pulled out right away and the state found that its bids for conventions after that were much less successful. In reevaluating the Creationism/conventions equation Kansas decided tourist dollars trumped Genesis as science. Could similar pressure be applied to Texas? Would a flood of calls to the Texas Tourism and Conventions Bureau, whatever they call it, with dire predictions of lost convention business and what not have an impact? Times have changed, but I’ll bet Texas still likes tourism dollars. Anyway, just a thought.
I think most underestimate how pervasive this world view is across the south and west. Whether the textbooks reflect it in all states it is what a large number, a majority in most states, believe and teach children, even in the public schools.
And it is what the people they send to Congress on whole believer.
The corporates love it.They have a whole dumb ass nation of idiots to plunder and cheat.
I know how and what they think is so absurd we continue to blow them off as a bunch of nuts but they are in charge of the country and will be until Obama and the Democrats or some powerful movement puts forth an alternative that can arouse equal fervor.
Not fair, they teach ethics (or what not to do), and they are not Idiots.
Greed factories?
Ah, the governmentas the ultimate waseful consumer, canard.
Roads? Airports? Research? NIH? Public Health? Clean Water? Control of Pollution? The Commons? Rule of Law?
Please read “The History of the English SPeaking Peoples.” It’s very readable. You might end up with a new view of Government.
And we are not done yet folks….
The Fed is going to halt the purchase of MBS (garbage securities) this month and dump the 1.5 trillion dollar cash for trash scam in the lap of, drum roll pleasee….. FANNIE MAE AND FREDDIE MAC, come on down you are the next contestants on the PRICE IS NOT RIGHT!!
SO as the Fed expands it’s balance sheet (i.e. ‘Printing’ money) by 2 trillion dollars to buy this junk paper and T bills, they will then back door all those garbage securities onto the taxpayer (Treasury) by piling them into the books of those GSE’s which are ‘implicitly’ guaranteed by taxpayers.
The banks are being asked to forgive principal amounts to a qualitative ration on some $400 billion of mortgages, but no banks are takers since this would lift the veil on the illusion that these banks are actually still solvent!!
So they are even as I write this negotiating the next multi-billion dollar bailout. It’s not when or if, just a question of how much. Let me make a prediction: $250 billion.
Man I knew I should’ve become a slimy banker. Sucks having an instilled sense of ethics sometimes!
With all due respect, any ethics taught in these business mills barely skims the surface. I know. I’ve been there. Further, I know the type of people churned out by these factories, and to say that they’re simpletons would be to state it charitably. While they might understand a few rudimentary business concepts, they have not the faintest notion of how to conduct themselves in an ethical manner, personally or professionally. It’s all about, “I’ve got mine, so fuck you,” and “dog eat dog.”
If you have any doubt about that, I refer you to Exhibit A: The Financial Meltdown. Where do you think the engineers of that catastrophe came from? And guess what they’re doing now? That’s right. More of the same.
It’s hard for me to believe that there isn’t enough profit in producing textbooks acceptable to even states with the smallest enrollment, particularly in this age when books can be saved, edited, and printed on demand, that other state education authorities can’t insist on textbooks for students in the 21st Century. I don’t see why this too is Obama’s fault.
Now that F & F are fully backstopped and the Fed is winding down TALF, moving all of the new bad MBS onto allows the joys of revolving bailouts without the muss and fuss of getting Congress involved. F & F started buying back MBS that they had previously sold to customers soon after Geithner’s Christmas massacre. Two private “businesses” protected by taxpayers that have taken on the duty of protecting banks from losing money when they make bad decisions.
Now that F & F are buying other securities holders mistakes the Fed probably won’t need to ask for a serious bailout for anyone else until F & F can no longer hide their losses. Once that happens the government just has to make sure that the guys that looked at Lehman aren’t available or they move forward with nationalizing them into an opaque new agency in 2012 with the intent of keeping all of the losses and their sources undiscovered.
If the administration were really creative they’d sell all of the MBS and other dreck to SS at the face value they paid the MBS purchasers they bought out. That would have the added advantage of making SS “solvent” in the same way that Fannie, Freddie and AIG already must be while eliminating that pesky debt problem.
Gosh the Right is rewriting a lot of things these days. They’re rewriting the Bible because, you know, that infamous liberal King James was just too hard on the rich and too easy on the poor. Now they’re reworkin’ textbooks. I hold that there’s no reason to stop there, hell rewrite everything. Think of the movies we’d get; ‘Back With The Wind’ and ‘Guess Who’s Not Coming To Dinner’. I look forward to album re-releases. Instead of ‘Rubber Soul’ we’ll have ‘Abstinence-only Soul’ or instead of ‘Born To Run’ how about ‘We’re Born To Run Your Life’. The future’s so bright I got to wear shades!
That reminds me of a roast I saw of Pat Buchanon on PBS during gentler times. Jay Rockefeller, believe it or not, said that Buchanon’s idea of a good weekend was to rent the movie Roots and play it backwards.
Yes, there will be another bailout because of the very high percentage of homeowners who owe more on their mortgage than their house is worth. The only solution is to write down a portion of the principal to prevent the housing market from going into free-fall.
So it’s not really the MBSs, CDO’s and CDS’ anymore, although this is all damage donw. Banks are worried that millions of people will abandon their property once they realize what a shitty investment they’ve made which is going to be NEW damage to the economy.
This is what the banks would like to do, but it would cause a catastrophic loss on their books they won’t be able to hide with accounting tricks. Especially with the looming commercial property meltdown which will be 2-4 times as big as the housing meltdown.