I'm not an economist either but I'll bet Summer's objection to giving $2,000 checks is more about cruelty than economics. Look at his face -- hardened, dissipated and with eyes that would freeze a rattlesnake in its path. He didn't object to the billions handed out in the 5,000+ pages of this bill. There's a clue.
You don't have to "bet" on anything. The article is not hard to find or understand, really, though Matt did a terrible job, in his effort to paint it as an homage to Ebenezer Scrooge.
I don't think they qualify, unless a disproportionate amount of their income goes to freezer tech. But families who make a household income of $150K per year and who have suffered no practical economic setbacks this year are eligible, which doesn't make a ton of sense compared to, say, boosting the unemployment stipend, boosting anti-poverty programs at the federal level, or providing assistance to states and municipalities which really need the money to keep afloat.
Of course, they aren't going to get it. But they didn't mind riding on the backs of the working class who delivered all those necessary packages, kept the lights, and the gas, and power on, not to mention the almighty internet. But let us all tread very lightly not to pass on TOO MUCH CASH to those people. I mean, they probably don't even own any stockl
Summers's argument is that the money would be better spent on assistance to working people who actually lost income due to covid (e.g. through unemployment assistance), and actual anti-poverty programs. That seems valid to me regardless of what the jet-setters are up to. Trickle-down economics and the fact that the uber rich pay virtually nothing in taxes are both horseshit, but they are also rather beside the point in this discussion.
«families who make a household income of $150K per year and who have suffered no practical economic setbacks this year are eligible»
If they did not "get theirs" as well they would strongly object to lower income "losers" getting the $2,000. Summers is hypocritically ignoring the politics.
What the government should do perhaps is give a good chunk to everybody and tax away the excess from those who were not that affected. But that would also make many "F*ck YOU! I got mine" voters angry.
John Kenneth Galbraith once said: "The only function of economic forecasting is to make astrology look respectable." He also said: "Economics is extremely useful . . . as a form of employment for economists."
I presented a paper from Milgrom and Wilson, who just won the Nobel Prize, to my colleagues at work (tech adjacent workplace).
It highlights the pitfalls of the field. The study was an atypically robust mathematical analysis of changes in manufacturing methods, insofar as the connection to the real world was actually there, though a bit tortured and oversimplified (cue the joke about the economist looking for his keys under the streetlight). Mathematically, I would have assigned it to undergraduates as a fun 'hey, you could win a Nobel Prize too!' kind of assignment. My colleagues were pretty shocked that they could understand it so well and it took away a bit of the luster from these pronouncements from the ivory tower.
So, like all things, the profession is not as fraudulent as we would all like to believe, but this notion does exist for a reason. These people do not have robust specialized knowledge. They have access. And the purpose of the profession is to provide seemingly apolitical intellectual justification for an economy that produces ugly and exploitative outcomes, not to produce the best of all possible outcomes for the whole of society.
"And the purpose of the profession is to provide seemingly apolitical intellectual justification..."
That right there is the heart of the conceit of technocratic governance. Economists are at the forefront it it, but don't misconstrue that any other field is any better at applying technical excellence in govt decision-making. It is a supreme irony that meritocracy was coined as a derogatory term for this class of professionals, yet the current usage is not disparaging.
You know, it's said that democracy is the worst form of government excepting all the other forms of government.
In the same vein: Just because a field of study has flaws doesn't mean it's not worthwhile, it means we need to acknowledge that it's flawed. Like nutrition and exercise science, for instance.
Oddly, some of the greatest breakthroughs in hard sciences come from people outside that direct field of study, demonstrating that "robust specialized knowledge" is sometimes a hindrance: Many physicists and chemists and biologists are also essentially looking for their keys where the light happens to be. That's just human nature, it appears.
Worth Noting: there is no such thing as the Nobel Prize for Economics, it is the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel"
-- The story behind the prize provides further pitfall highlighting
But it's administered by the organization that Alfred Nobel created. So while it may not be part of the original six awards that he created, his organization has definitely adopted it as one of their own.
The Nobel Prizes are decided now by a committee of politicians who are arrogant beyond belief. See/hear Unni Turrettini discuss her book, "Betraying the Nobel," for complete insight to how prize winners are selected. (I mean, really, Obama for the Peace Prize??? He not only didn't take G.W. Bush and D. Cheney to trial for war crimes, he upped the war crimes himself!).
0% of which is relevant since the award was granted before he had taken any actions as President. I mean, your point is correct, just wanted to note the procedural insanity.
The bank provides the payment, rather than the trust fund from the Nobel estate, but the Nobel committee still administers the prize. Which is a weird thing to do If they themselves thought it was somehow illegitimate.
So many "economists" are paid to produce a narrative that conforms to the needs of their benefactors, that it hinders the credibility of the field as a whole If their narrative isn't useful to the person footing the bill, it doesn't recieve further funding or doesn't get published. Another issue (alluded to above) is that so many in the field hide behind a certain "mathiness" that in my opinion gets used to hide rather than reveal societal truths.
Actually, the vast majority of economists are paid to make sure that regulations proposed by the federal government or state governments will not unduly harm the average citizen. Another big chunk of them also prepare and analyze all of the boring ass data to get down to one number that someone cares about, like the unemployment rate. Most economists do not work for banks, nor are they allowed to go out and speak in public at any sort of organized event. Finally economics is not about revealing societal truths. It is about studying choice in the face of scarcity, and the complexity that arises from millions or billions of humans making such choices simultaneously and repeatedly.
If you go visit any well taught econ 101 class, they will tell you in explicit terms that economics is about a way of thinking, not specialized knowledge. Anyone can learn to think like an economist if they put enough time and effort into it. And yes, many economists do not also think like the scientists that they should be, but let's be honest here, economics is not the only field of science currently struggling with a reproducibility crisis nor desperate gatekeeping by the old guard of academic publishing. Those are common in just about every branch of science at this point, yes even including physics and chemistry.
The hidden bias, manifest through absurd mathematical claims, earns the field the title of fraudulent; IMHO. Though, I agree with you that occasionally something worthwhile emerges from the study of economics; a broke clock, or something like that.
You may want to look at Yanis Varoufakis, an economist aside from all others. He's the one who criticizes how economics has been taught (wrongly) for all time, and still is. He is the one for whom you are looking, the exception to the rule.
(Macro)Economist here. The blunt truth is that non-economists's opinions about macroeconomic consequences of policy actions are just as good as those of economists. Macroeconomic models people like Summers etc spent careers building have next-to-zero predictive power a year out. We have no fucking clue what will happen. Inflation may accelerate this summer regardless of $0.6-$2-$5-$10k we throw at people (and if it does, it will likely be due to rapid monopolization due to Covid response), or it may slow down.
«Macroeconomic models people like Summers etc spent careers building»
The purpose of those models is not prediction, but "internal consistency", in particular with JB Clark's fantastic "three parables" (so described by Samuelson)...
«have next-to-zero predictive power a year out.»
My professor of econometrics (a long time ago), a very good and cynical one even if he was the chief statistician of a primary central bank, used to say with a sad expression that the best predictive models were simple autocorrelated ones, and even those were beaten by a poll of business CFOs. Not much has changed since.
«The blunt truth is that non-economists's opinions about macroeconomic consequences of policy actions are just as good as those of economists. [...] We have no fucking clue what will happen.»
That is agreeable but not because of technical reasons: it is because most Economists are "sponsored", directly or indirectly, and their main role is advocacy of the interests of their "sponsors". Very few Departments of Economics Science want to give tenure to people who might put off wealthy donors.
Then there are also intrinsic technical limitations, and they have been well described by JM Keynes 80 years ago already both in the "General Theory" and specifically in his 1939 comments on Tinbergen's ambitions, but political economists can still draw realistic scenarios even if they cannot predict quantities exactly, because on a fairly coarse scale in ordinary times guesses can be somewhat reliable.
Most economic models are just stories told with math. There can be many stories that fit the same data. And stories don't make for science, the standard measure of which is predictive performance. Hence, most economic models these days are largely mental exercise to show off one's math prowess.
At longer horizons, simple autoregressive models are still king. There is more real-time data now, so, the very-near-term predictions are somewhat better than a decade or two ago, but that's about it.
While many economists are sponsored, I'm not convinced it's the primary issue. Predicting/modelling human behaviour is genuinely hard. Think quantum physics where particles also think for themselves.
I don't think political economists have any special sauce either. Maybe at very long horizons, and only those who studied history a lot.
No, it's because what happens is largely a response to unpredictable occurrences. If you would ask the economists in October 2019 if the US economy would be significantly worse off in October of 2020, most of them would have said no. But most of them also wouldn't have just guessed that we would have a global pandemic and a totally disproportionate totalitarian response to said pandemic. It's not that we can't predict how things will respond in a more or less steady state. It's that we can't predict these inherently unpredictable shocks.
Predictions in 'a more or less steady state' are just as worthless and unfalsifiable, because the 'steady state' never happens regardless of the size of the shock. Most 'smart models' are getting beat by dumb time-series methods like ARMA even in low-shock periods.
Well done Matt. I know eco pretty good and there are two rules. It's all about structure and nobody knows anything. Structure goes like this: if you build it they will come. (Kinda like the movie.) That's why tax plans are important and so are trade agreements and unnecessary regulations. We measure these sorts of things over the long haul, not next quarter's GDP.
As for nobody knowing anything, it's important to recognize that eco is still a relatively new field. These guys aren't like doctors talking about the heart. That's why arrogance is never fitting. You can pull economists to say anything and, unfortunately, they always present personal theory as undoubtable fact. The field is still changing, nothing like the heart.
Yup, they know nothing and that they think they know is invariably wrong because they’ve been stuffing their brains full with wrongheaded models since primary school. That’s why it’s easy for them to “know something” when it suits the people paying their bills. If you’re gonna pull a shit pigeon out of a hat, you may as well pull out the shit pigeon that makes you the most money and you the blame the multipliers or something when it goes totally wrong. The only thing the geniuses behind the 2008 bailout saved was bankers’s bonuses and the asset bubbles. It was an unqualified clusterfuck of a failure and the only thing that has stopped the banks imploding in 2020 has been covid and the money given to the banks again
through another round of quantitative easing. $10,000 stimulus checks would be much more effective at bailing out the real economy than more corporate bailouts to pay down debt.
I'll give you two cents on '08. The untold secret is the part played by rating agencies. If they hadn't stamped those mixed baskets with triple AAA , a lot of this could have be avoided. Unfortunately, movies and essays glance over this part because it's a known hole in capitalism. And nobody knows how to fix it. Rating agencies classify debt (e.g., big mortgages, bonds) based on the lender's ability to repay. Triple AAA means you're almost totally good for it.
Here's the sad part. Capitalism relies upon ethics. Rules and regulations along with law enforcement can't be everywhere, so it comes down to you and me. Would you cheat for a million dollars? Forego the easily achieved fame and respect you'd receive from family and friends?
Democracy is coming down to the same thing. If you were a poll worker and a ballot popped up saying both Biden and Trump, which button would you push? Biden, Trump, or discard?
Actually The Big Short (book and movie) did not gloss over the rating agencies role in the financial crisis at all. In fact, made it clear that the falling dominoes started with the ratings agency.
I was about to write the same thing (about the movie anyway, didn't read the book yet). I recall specifically the scene with Carell's character and Strong's character confront S&P over the ratings scam of trip A ratings. It was a prominent, unambiguous scene that drove the point home. https://www.youtube.com/watch?v=Vvxbc8L4s64
I thought the movie dealt with it rather quickly. And the reason is, what's the solution? I put this question to a senior VP at a brokerage house. I asked if we could continue to trust rating agencies after their role in '08? She said, well it's best they've gone back to what they do best, rate bonds.
I'm not arguing with anyone, just saying it's a hole. Rating agencies get paid by the company they're rating, so GM pays to have their bonds rated by Moody's. To Moody's, GM is the customer. In actuality, investors are the customer. So how does this three-part relationship translate? Answer: it relies upon corporate reputation based in ethics.
If you get caught cheating (rating below average quality debt as triple AAA), what's the remedy? Throw executives from Moody's in jail? Can't. The market relies on the belief that these guys can be trusted. Too large a pin to expose. That's why they gloss over / bury it within confusion. There is no legislative remedy.
In the book, "All The Devils Are Here", the authors made a specific point of relating that at some point, the ratings companies switched from being paid a yearly subscription fee by WS investment houses, to being paid by the job, which obviously opened up a huge conflict of interest, knowing that if they properly rated shit as shit, they would be replaced by someone who smelled roses whenever shit was handed to them. I don't recall the year when this change was made, but it did happen well before the 2008 crisis.
Looking at all those responsible for 2008, it seems obvious the weakest link was the ratings companies, upon which savvy investors place undue faith in their honesty and judgment, something the insider smart guys knew were less than stellar.
Yes, it's mentioned but not to the degree that it played a part. Specifically, without rating agency cooperation '08 would have been pretty hard to pull off. It wasn't just another thing. And, I believe, the reason we don't hear about this is because there is no fix. We need rating agencies but can't ensure quality. So yes, something big can sneak by.
It hardly snuck by. Plenty of people were warning that the sky was falling but capitalist shills like Summers were in denial. Capitalists live in a utopian world of unlimited resources and growth, an ever-growing pile of money, and no consequences. They’re almost right about that last point - there are no consequences for the financial elite. They’ve gamed the system so they always win. That the ratings agencies are part of the game doesn’t absolve the policy makers that set the rules from blame. They’re either dumb or immoral, but either way they’re responsible and should be punished, not rewarded.
I fully agree with you that they should be punished, but there seems to be no practicable way of doing this under the current US legal/political framework.
I contend that "voting" is pie-in-the-sky as a remedy. What's next?
Rating agencies relied on loan originators’ underwriting and had done so for years. When the bundles were all de facto US government is where fraud entered
Freddie MAC and Fannie MAE did the bundling of the mortgages. It was their job to go to loan originators and determine that the loan originators' ratings were justified by their underwriting activities. Only then could they bundle the mortgages and rate them. They skipped that first step, clearly non-feasance of duty. When they assigned AAA ratings to worthless junk, they committed fraud.
Thanks. As a Canadian, I don't totally understand Freddie and Fanny. I'll say what I know and then you can correct me. In Greenspan's book, he said US home ownership was at 62%. Here in Canada it's around 69. My understanding is that gov wanted to increase home ownership so they pressured banks to be creative with mortgage rules (e.g., no principle and low interest for 1 year).
When Alan testified before congress in the aftermath, he said what happened went contrary to everything he believed. Meaning he didn't believe home prices could crash that much. As a matter of fact, he believed home prices would rise to the extent these softer mortgage securities would be absorbed.
My thought was "bankers got too creative" and then sold off the risk (that they knew about) by pressuring rating agencies to overrate these loans. I think what you're saying is that Freddie and Fanny were government banks underwriting many of these loans. So it should have been them assuming the risk. And then what? They sold off the loans?
As a result, this wasn't a total scam put on by Wall Street, but rather an altruistic idea put on by gov that went awry. Something like that?
No, I don’t see any ethics in policy makers and thinktanks being knowingly dumb to sell the myth of capitalism and tank the real economy to enrich their friends. And you’ve created a false comparison - there is little evidence of poll workers doing the wrong thing, ample evidence of economists like Sanders doing the wrong thing and being rewarded for it.
Should have said, democracy "could" be coming down to the same thing. And it is a valid comparison. Democracy relies upon ethics and so does capitalism. Ethics has to underlie everything. We need to operate under the same understanding.
Adam Smith didn't invent our method of exchanging goods and services, he just wrote the first textbook on it. Before him, there was no economics department in a university. Adam himself, came from philosophy. He knew full well that it requires an undercurrent of good.
Anyway, there's a difference between putting forth best efforts that prove to be wrong and being unethical. I don't slam every player like Larry as being on the take.
Is it morally right to believe that bailing out poor people is morally and economically wrong? I would have called that immoral when there is plenty of evidence that monetary expansionism is just fiscal expansionism where decisions on who gets the money are made by banks and the private sector rather than government. Yes, it’s a questions of ethics, and summers has bad ethics. But ethics is involved in everything so it’s a distinction without a difference, or something.
That's a very good point Danny. Thanks for sharing.
One of the interesting things that occurred during the covid bailout was the fed's willingness to intercede in the Junk rated bond market. Talk about moral hazards. I'm not sure what to make of the fact that bond holders getting paid increased interest for the very reason that they were risky got a free pass.
I've heard about a large expansion of bond-market securities derivatives ala the MBS derivatives that took down the financial system 10 years ago. One more thing to add to the list of research topics.
Sorry Matt, it's dangerous (if you're admittedly "no economist") to pretend you know what you're talking about with respect to the $2,000 check. Would you favor $5,000 or $10,000 instead of $2,000 or $600? Do you have any inkling of what the ramifications of your choice might be? I'm with you on the Goldman Sachs - AIG scam (which is more financial trickery than economics), but when more and more of the "free" money is being shoved into savings accounts, ya gotta ask what's going on here . . . oh yes, your other favorite - inflating financial asset values for the rich while everyone else collects squat on their savings.
The point here is similar to my feelings about 2008, when a decision was made not to bail out subprime homeowners (every subprime loan could have been paid off for less than $2 trillion) because of concern for moral hazard, while many times that was spent to prop up failing banks/instruments pegged to subprime loans. Not being an economist may make me unqualified to say which course is best, but I think it’s fair to point out when decisions lack consistency.
Not being an economist is, when it comes to the economy, a grewt advantage! As the old saying goes, economists have predicted 12 out of the last 6 recessions.
You don't have to be an economist to question where the bailout money went, in 2008 and 2020. You don't have to be an economist to point out that institutional elites tend to dress up their defense of institutional bailouts with different words than Bernie Sanders used when he advocated for bailing out college debt.
Reasonable people can disagree with certain policies pursued by the Fed and Treasury during the credit crisis. My biggest criticism was holdco liquidity facilities and prefs versus opco. But I try not to get too exercised about mistakes in plans drafted on the back of a napkin at midnight.
But don't present a federal payoff of non-performing sub-prime mortgages as either a viable policy alternative or somehow less generous to the banks. It wasn't. It isn't. First, the suggestion that government actually pay off defaulting sub-prime mortgages would actually be a lot closer to a bank bailout than what the primary emergency facilities actually did. If the Fed repays the mortgage, it is economically identical to buying back the mortgage at par - above then-current market prices. That is more generous to mortgage holders - not less - than making pref investments in the lender or expanding eligible collateral at the PDCF. It is also more generous than the TALF and TLG programs. All of those facilities involve risk to the Federal government, but ultimately represent sums required to be repaid to the Federal government. They also had the benefit of not being absolute or permanent and also not pretending that the sole issue was sub-prime mortgages. The expanded PDCF didn't save Lehman because they didn't have sufficient collateral. The TLG didn't save WaMu because it isn't an actual capital injection. These programs largely protected the integrity of the payments system without protecting the owners from losses on their non-performing assets. It isn't just a pure coincidence that these programs all generated profits for the federal government. It was a feature of the facilities.
Nothing resembling that was going to happen - or even could happen - if the Feds simply repaid non-performing subprime mortgages. A policy like that would arbitrarily bestow profits - not just access to liquidity - on private label MBS holders, SPV warehouse lenders, and certain homeowners, all at the expense of a different group of arbitrary taxpayers. It also wouldn't have timely achieved the primary purpose of protecting the payments systems. When TARP was first passed it was intended to be used to purchase private-label RMBS and just about everyone in the space ran to the Fed and Treasury and explained how it would take 2 years to deploy that kind of money across tens of thousands of cusips. Those at least often had $100MM tranches. Doing the same thing on the loan level $200,000 at a time sounds like a 2010 item, not a 2008 item. The men you are criticizing are men, not gods. But they aren't complete idiots either.
"The men you are criticizing are men, not gods. But they aren't complete idiots either."
Nobody said they were either. But using your own logic, don't you think it's possible that a policy could have been implemented in 2008 which did more for individuals and families being foreclosed and evicted than it did for majority shareholders of Fortune 500 companies, "banks" like Goldman and hedge funds? If these guys were smart AND concerned with real people, that's what might have happened. But that isn't what happened and it's not what is happening this time either.
Many of the people who were being evicted in 2008 deserved to be evicted. That's not something most people want to hear nor even consider, but it's the truth. If you buy a house for more than it's worth and more than you can pay, you can't keep living there indefinitely.
Without specifics that's a meaningless statement. My beef with the evictions I'm talking about are where minorities were intentionally put in ARM and other sub-prime loans through misleading sales practices that were pushed down from virtually the majority shareholder and c-suite levels. Of course the guy at the end of the sale was also to blame, but a lot of people had become convinced by said c-suites that the market would never stop inflating, including salesmen. Unless you have numbers you want to discuss on who and how many of the evictees who were foreclosed upon deserved it, I don't really have much else to offer.
It seems as if you both agree that many people being evicted had chosen to attempt to buy more expensive homes than they could truly afford. The difference seems to be in who you want to blame.
Nate seems to want to put the onus on the homebuyer in many cases, and feels that it's not sustainable for the public to bail out such poor decisions.
You prefer to emphasize "misleading sales practices". Those could come in two major flavors: somebody, say a mortgage broker seeking higher fees, pushing somebody who could have qualified for a lower interest loan into a sub-prime higher-interest loan for which they were more than qualified. That's clearly unethical and a failure to be addressed.
The other major flavor of marketing problems is just encouraging people to take out maximal loans for overpriced property period - no matter what class of loans they use. That could be the real estate agent, the buyer's friends, the mortgage company for not turning them down, the media for emphasizing buying a home to gain access to the inflation in values, etc. Responsibility gets a lot more diffuse.
When the mortgage industry tightens up credit, they are oppressive because they are not helping poor folks enough; if they make credit more available, then they are exploiting the poor and leading them into a debt trap. The missing ingredient here is accounting for the agency of the buyer. I think we have to acknowledge Nate's concern that it's unsustainable for the government to bail out poor decisions.
(We can definitely criticize other bad government actions too; but having made a bad choice in the past doesn't make a future unsustainable policy into a good one. If you want to encourage the government to bail out homeowners on a broad scale, you'd do better to find similar bailouts which you DO support, which DID work and were positive and worth emulation, rather than pointing to past actions which only call into deeper question any currently proposed bail-outs).
Your challenge to Nate to provide numbers of "evictees deserving eviction" is not unreasonable, but you fail to similarly provide numbers for "evictees not deserving eviction". And that's understandable, everybody prefers to choose the scenario to be treated as "typical" and few want to justify why it's typical. Providing numbers is going to be hard when the difference depends on how much agency you assign to homeowners. If somebody buys a bad car because they let themselves be talked into it by the salesman, is that something the government should fix? Well, if there is outright fraud, maybe so (at least in terms of punishing and regulating, if not "making whole" the buyer). There's going to need to be a lot more careful nuancing and defining before any numbers (of deserving and undeserving) would have meaning.
I have no idea what a pref or opco is but I do know from having driven through small towns in the midwest multiple times since the '80s what the consequences of economic decisions from our experts look like and it isn't good. The people making these decisions may not be complete idiots but they do seem blind to what it's like to live as an ordinary person and most of us are that - just ordinary people. The question to me that needs to be addressed is does our government exist for the benefit of its citizens or for the benefit of its corporations and financial institutions?
You know the answer - - your 'government' IS the corporations and financial institutions, the owners, always has been. Whom else would they benefit, surely not the servant citizens, your ordinary people?
It wasn't the government's decision that caused global competition to move low-skill, high-paying jobs from the United States to other countries where they could be low-skilled low-paying jobs. That was simple market forces an improvements in the transportation industry. The government could have attempted to be protectionist, but that definitely wouldn't have worked in the long run.
Actually it was. The Gov chose to enter into trade deals that made manufacturing in the US impossible. Then sanctimonious idiots like Obama went around saying those jobs are gone forever...
Then the Bull entered the china shop and said, these deals suck. We are getting screwed by the world but China first and foremost. and BOOM, American manufacturing has been on a tear ever since Trump came into office. Make decisions based on good outcomes for the American people rather than any sort of dogma and you get good results.
What exactly is gender studies in Pakistan? How to throw acid in the face of girls more efficiently? Really? Pakistan?
To start, I'd say what we're doing isn't working so well either. The economic system we're living in is not endemic to the Earth like trees or water - it was created. It's a system that prioritizes competition and financial wealth. It increasingly leaves out more and more of our citizens. What is stopping us from creating a system that prioritizes the well being of our citizens instead? Our government through the influence of the wealthy, giant corporations that have loyalty to no one country and an out of control military supports this system - It's a choice.
That sounds very nice in the abstract. The devil is in the details of implementation. A movement to create that end goal through short sighted means could easily create an even worse situation. People who are driven by resentment, oppression narratives, disdain for objective truths, and ideology can be blind to semi-predictable real world effects. It is very much NOT true that things couldn't be any worse so any change made with good intentions must result in a better world; there are many more ways to mess things up than to improve them, and it's an easier task. Thing can get FAR worse than they are.
Rational solutions, with open debate and flexibility to reconsider and change course based on real world effects, are needed.
For example, policies which build net worth through increasing equity in housing, also have the effect of pricing many people out of housing. A policy of raising wages can have the effect of stimulating more automation and supporting fewer, but better paid, jobs. There are tradeoffs to choose from, rarely simple wins without costs (obvious or hidden).
So propose policies which you think would lead to a more humane world, and let's talk. I agree we need that, but I am wary of jumping into some scheme which is based more on superficial promises than serious analysis. The net impact is more critical than originally good intentions (much less catering to & amplifying resentments for short term votes).
I agree with a lot of what you write and was active at the time in the mix. But increasingly, I have viewed the outcomes of the “fixes” to be skewed towards institutions rather than individuals. And inevitably some institutions are able to “grift the fix.” And then my issue comes of policy design. Larry and the gang are such f*ckwits that they seem to typically write policy that benefits the best of the grifters. Ultimately that inability to effectively degrift the policy has made me shift towards saving individuals above institutions. I well know the issues but JFC he sounds like the fed talking about computing power and the lack of inflation. Argh
The Fed and the Treasury don't have spending authority. You can help banks without spending money. You have existing credit facilities with them and can change the collateralization requirements. The FDIC is already guaranteeing their deposits and they can use the TGL Program and the systemic risk authorization clause in the FDIA to expand those guarantees. The Fed's TALF program fit within pretty clearly existing authority. A couple of things they did were pretty legally dubious (e.g., the Bear Stearns acquisition assistance package), but there's no way they can just start issuing grants to bank debtors.
Without a Congressional appropriation of money, what are these institutions going to do for a guy that can't pay his mortgage? There is no way any authority they had could be stretched that far. Where they could stretch those authorities to help people, they absolutely did. Look at any history of the crisis-era FHA changes and you'll see a pretty obvious picture of government agencies putting taxpayer guarantees on the line to help people that were in every way, shape and form a riskier credit than the banks the Fed assisted.
Could Congress have intelligently done something different? Maybe, I don't know. But why don't you tell me what, with some specificity. I'll keep an open mind.
There were numerous opinions floated after the fact about what the Obama administration and Congress SHOULD or COULD have done better. This includes what could have been done AFTER the fact, not simply paying the mortgages of the original subprime home buyers.
This glut of bank-owned property was not inevitable. During the Great Depression, New Deal programs such as the Home Owners’ Loan Corporation had fought valiantly to prevent foreclosure. The HOLC bought bad loans off banks for their true value and issued new, long-term mortgages loans that kept borrowers in their homes. It also was extremely lenient with homeowners who had trouble making their payments.
“Every possible forbearance was exercised before foreclosure was authorized,” the HOLC said in its final report to Congress in 1952. In stark contrast to modern banks like Steve Mnuchin’s OneWest, which put loans in foreclosure after a borrower fell 60 days behind, the HOLC usually didn’t start the foreclosure process until a borrower had been delinquent for a year or more. In about a quarter of cases, the HOLC went even further, lowering homeowners’ monthly payments by giving them five more years to pay off the debt and lowering their interest rate in the segregated neighborhoods where it operated.
The HOLC ended up acquiring nearly 200,000 properties through foreclosure. Even in those cases, however, it did what it could to help the community. The government bank kept the homes occupied and well maintained. It employed a small army of inspectors and contractors to fix those homes and rent them out until new buyers could be found"
Or, if that just smacks of evil socialism, how about legislation that strictly limits the types of loans and predatory lending that any banking institution insured by the FDIC can make? You want access to interest free cash? Then you must abide by these new laws that state exactly what kinds of loans you are NOT allowed to peddle, under threat of criminal prosecution. LOL, right? Nah, instead we got the opposite:
I am not that familiar with what the HOLC did or didn't do, but I'd like to point out that the Great Depression lasted over a decade and your paragraph above indicates HOLC issued its final report over 20 years after it started, while you indicate it bought 200,000 properties. See what's wrong there? I'm telling you Paulson, Geithner and others specifically considered this option. Sheila Bair was the only one who thought it was viable. Everyone else concluded that there was no way the government could timely acquire a meaningful number of bad mortgages. Securitization also makes buying whole loans at non-generous prices a much more litigious and time-consuming process.
Take one look at HAMP and HARP and you know Geithner was right and Bair was wrong. Congress appropriated over $50B for HAMP and HARP. HAMP used Congressionally appropriated money to modify mortgages for anyone whose mortgage payment was more than 30% of their income. HARP used Congressionally appropriated money to let underwater, performing mortgages refi to lower rates without bringing money to the closing (this was by far the bigger problem than foreclosures by number of affected persons) but required the new refi'ed loan to be re-underwritten. These programs managed to push out less than $12B. They couldn't find enough takers to spend even the initial appropriation. It was extremely time consuming and non-productive and most of those people were better off walking away.
Then let's go back to what caused the crisis to begin with. Indeed, as you have laid out pretty concisely, actually bailing individual mortgages out would be a fraught and difficult thing to do as well as carry some long term consequences for the economy as a whole. As you said, some of these guys are pretty smart and if they WANTED to do it at the time, they could have invested a little more brainpower in how to minimize the impact to working families and/or those who had lost their jobs and were underwater in sub-prime mortgage debt. Write down a percentage of that debt and pay it directly to the banks on behalf of the borrowers is one thing - or - force the banks to somehow restructure every single sub-prime mortgage that they held in a manner that gives regular people more options than to simply lose their homes and any equity they might have had in them. Instead, as is always the case with a "disaster" (natural, economic, military caused, etc.) the firms who employ one group of these smart guys have nearly direct access to Congress and the Fed and can quickly negotiate deals before the rest of us have gotten out of bed in the morning to realize we are being evicted in a week. This happens every time and it's a core driver of the massive concentration of wealth in late stage capitalist semi-managed economies that are really just inverted totalitarian states. Now I'm off on a tangent...
But to my main point, how did this crisis begin in the first place? You'll hear plenty of politicized answers from the erstwhile "right" dealing with the CRA and Acorn, but little attention outside of a few left leaning outlets and authors (like Taibbi) was given to the end of Glass Steagall, the marketing of sub-prime loans like ARMs to people who actually qualified for standard loans in order to make a quick buck all up the food chain in the banking industry, the credit ratings agencies that artificially inflate assets they knew would end up being toxic bombs as AAA in collusion with the mortgage lenders and investment banks who are paying them for their ratings, and the general culture of greed and being above the law or too big to jail when, in cases where they did nothing "illegal" it was because their own lobbyists had written the laws and co-opted the already weak SEC and federal law enforcement. And yet nothing was done to draw back any of this nor were any laws passed to remove the massive risks inherent in the system, including re-instating Glass Steagall or something similar. Instead, as mentioned before, the big banks just called closed door meetings with the Fed and elected officials and hammered out a lifeline for themselves in virtual secrecy from the rest of us. Of course the government itself is to blame as well for the Fannie and Freddie programs (which themselves were sellouts to the same "industries"). I suppose That's what I'm concerned with now, not necessarily that people were screwed last time around. It's too late to do anything about what happened to them in the past. But there is clearly no appetite among 90% of the U.S. government to actually rein in these organizations and draft true consumer-targeted legislation to get the big banks and their peers back on the right track for the good of the 99.9% and not the 0.1%. Every time a politician floats an idea like it, the media ignores or mocks it and we start hearing about communism, socialism and anti-semitism (OK, the latter was mainly in England).
This is all a little too glib, in my opinion and covers too many topics for me to address. Let's try to focus it. Make your argument for how Glass Steagall repeal played a meaningful role in this crisis. The worst loan underwriters, like GMAC, Countrywide, WaMu weren't universal banks or derivatives dealers. They also weren't CRA lenders.
Fannie and Freddie get something of a bad rap in these discussion. Taking Southern California as an example, the median price of a home exceeded conforming loan limits pretty early in the first bubble -- by the end of 2002 if I'm recalling correctly. Most of the crazy losses weren't agency paper. They weren't subprime, either. What I find insidious about the Dem/Rep accepted narratives is they both arrive at the conclusion that loans were made to "the wrong people" -- either with a liberal spin (predatory lenders!) or the right wing spin (those broke ass people had no right to be buying houses!).
I myself don’t have a specific counter at all. Probably a lack of imagination.
But I do wish that policy design could “means test” institutions. Your points are all well composed and concise yet sufficiently comprehensive. Thanks for the good-natured discussion. I’d like your thoughts on pros/cons of breaking up Google/Amazon since I feel that debate is only going to intensify.
Yes, indeed, it's fair. What's unfair is to invoke the supposed expertise of economists as a bar to ordinary people talking about public affairs that affect and afflict them most directly.
As I note in another comment, "economics" as currently taught is really just one school of the stuff (neoclassical) and has been thoroughly discredited. If you have a degree in this macro garbage from most major universities, congratulations! You have been indoctrinated.
What should be mystifying to ordinary, sober taxpayers with any interest in the matter is why such reverence is accorded to the discipline and why, for heaven's sake, it is reputed to be the most rigorous of the social sciences when actual economic history again and again proves its macro models to be worse than worthless.
You may want to look at Yanis Varoufakis, an economist aside from all others. He's the one who criticizes how economics has been taught (wrongly) for all time, and still is. He is the one for whom you are looking. Cheers, Rob
I don’t know anyone that reveres economists. When they aren’t making ridiculous predictions like the internet being a glorified fax machine they are surfing child porn. We all know who I am taking about.
Government shouldn’t be in the business of picking winners or losers. It should be in the business of making sure that the playing field is level for everyone.
I mainly agree with this idea in principle. The trouble comes when the government officials responsible for ensuring this "level playing field" rotate from the government to private industry, continuously, repetitively.
So government wasn't protecting banks from their own mistakes in 2008? A level playing field would have let more institutions drown. I do not personally think that would have been a good idea (letting them fail), but what was done is in no way about a level playing field. When banks need help, bail them out. When people need help, bail the people out!
Screw that! The banks should never have been bailed out. They should have failed and the executives all jailed and sued for every penny they have.
Arrest the tyrannical governors that are destroying jobs and livelihoods and open the economies so I don’t have to work yet another week of each year to pay for someone else’s bailout.
You realize there is no such thing as government funded, right? It is all tax payer funded and the producers in the middle like me are the ones that get fleeced. The Uber rich and poor don’t pay shit!
Yes, every dime the govt spends comes from taxes. Bonds are simply loans based on ***future taxes***. That's why in this country govt bonds are considered the safest possible investment. The only other way the govt can raise money is by selling (or leasing) publicly-owned assets (e.g. spectrum or off-shore oil).
I see your point, but isn't there a moral component worth considering? By and large, the banks themselves caused the meltdown. And by and large the homeowners did not. Yes, I think the banks should not have been allowed to fail. Instead, they should have been nationalized, and individual bankers at the highest levels should have been prosecuted.
If failing to loan prudently was at the core of the banking problems, then nationalizing (and politicizing) banks is an even worse solution than what the dumb bastards did.
The banks should have been allowed to fail. Sure, that would have been painful - such lessons are. It is the vain attempt to prevent people from learning painful lessons that is the rot in our system.
Letting banks fail sounds fair, but produces a lot of problems that spread through the economy far and wide. If we had a laissez faire economy, of course the banks would fail, but our real economy is nothing like that theoretical construct, free-market capitalism. It has not been like that for a long time. In our present American system all the big stakeholders can make enough noise to get saved by the government -- banks, large corporations, unions and so on. That leaves the non-stakeholders, the people with little or no (or negative) net worth. They have no lobbyists and therefore they end up absorbing a generous share of the big players' losses.
Only certain categories of people are allowed to learn painful lessons. Certain others -- from already rich and well-connected families -- are protected from learning these painful lessons.
I'd like to believe that one or two dozen really greedy and ignorant financiers can't bring down the world economy.....but I'd be wrong in that belief. Put those people at the right positions at the right time and they certainly can.
What I DO NOT believe is that there are any number of smart and noble men who can prevent this sort of disaster. It takes the structure of institutions, markets, and mutually defined trust instruments to avoid chaos all the time....but it will always happen some of the time. We just need to learn from those mistakes and try to do better next time, although entropy basically ensures that whatever we fix over here will likely create the environment for potential harm over there.
False. When one bank fails the entire banking system tends to fail. We very, very narrowly avoided that disaster with the Lehman debacle.
The banks should not have been allowed to fail, but their shareholders should have been wiped out (many were anyway) and the banks sold for their assets. The mortgage lenders who were responsible for the poor underwriting were mostly dealt with this way, it was the investment banks hoovering up those poorly underwritten loans and turning them into investment rated securities (and the insurance companies providing counterparty derivatives to insure against their failure) that became the systemic problem. We had never seen or contrived of this sort of securitized speculation before, which is why it caught everyone's risk models by surprise when it went belly-up.
Dodd-Frank gave Treasury, the Fed, and regulators more power to resolve these sorts of issues without systemic risk: Giving the federal government the authority to take over a poorly capitalized investment bank and wind it down without causing systemic harm and ensuring that banks of a size that could cause systemic issues remained appropriately levered (i.e. the "stress testing" regimen).
"By and large, the banks themselves caused the meltdown. And by and large the homeowners did not."
There were a lot of homeowners taking out ARM loans they didn't fully understand, thinking they could always refinance into a fixed rate in the future. That happened to be what their mortgage servicer was telling them too, but if their mortgage servicer said he'd give them $5000 to jump off a bridge would they just blindly do it? Probably not.
You also have people effectively lying about their incomes and their wealth to secure loans when their credit was absolute shit due to previous defaults, massive credit card debt, etc. Yes, underwriting standards are supposed to catch that, but that doesn't mean that "homeowners did not" help to cause the meltdown by borrowing money they literally could never afford to pay back within their lifetimes. You had janitors with two mortgages on two different homes who never lived in either -- they were "investment" properties that they were "flipping".
Was that everyone? No. But, similarly, plenty of credit unions and small commercial banks did everything right and got hammered by the undertow of all the bad actors in the system. To state that "banks = evil" and "homeowners = helpless" is just to simple a story....but it's certainly the story that Matt seems to write.
Just look at the headline of this op-ed, for instance.
Don't forget that these home buyers also believed they could sell their houses within a few years for more than they had paid, thus wiping out the loan. Recent history of prices that always rose and never fell led them to believe such would be the case forever. In every bull market the younger players think exactly the same. You cannot expect home buyers to be more prudent than those who speculate in an up market, especially considering that they were planning to live in their investment. Only lenders have the knowledge of history and the rules of their firm to guide them in such unpredictable waters.
Do you really believe that Nationalized banks would to a better job than independent banks? Government interference caused the 2008 crisis. The government running the banks would be the opposite of a solution.
The truth is that I'm not qualified to have a useful opinion on this. That said, I've lately been thinking that the survival of capitalist infrastructure is helpful to people because if food and other goods became unavailable, tremendous numbers of people would suffer. I am not as concerned about moral anything -- only the most good for the most number of people. I do find it remarkable that our economic system keeps going to the extent that the holiday season supposedly gained in sales over last year! Greed has many bad effects, but it is impressively persistent in making money. By contrast, according to what I've read, when the Soviet Union began to fall apart, the food stores there were empty and people were hungry all the time.
Generally, the government has a much better record of picking winners and losers, batting about .500. In the private sector, OTOH, about 80% of new enterprises fail within in 18 months.
Overall, the federal government bats about .500 picking investment winners and losers, which is better than the private sector, where 80% of new enterprises fail within 18 months of launch.
This is an immoral argument. The “government” has no Constitutional role in interfering in markets and when allowed to do so picks winners based on corrupt criminal incentives(bribes and pay offs).
I've recently been feeling liberated by the idea that I don't need to (and actually cannot) have an opinion on some extremely important issues because I have zero knowledge of those fields. Macroeconomics is a good example.
(I used to try to learn everything about everything, but for some reason have not achieved that goal. Now I am increasingly grateful to be able to say to myself and others, "I have no idea.")
You don't need to be an economist to know that means testing a response to a pandemic that has harmed well off and poor alike is a bad idea. The person who used to make $400,000 a year but was forced by the government to shut down and is now facing eviction has just as much claim to a government handout as a poor person in a similar situation, and significantly greater claim to it than somebody working minimum wage who hasn't lost their job or seen any changes in their hours during the pandemic. We've had 60 years to help poor people do better, and now is not the time to suddenly change our policy and become super worried about how they are doing. The response should be targeted towards people who have lost their jobs as a result of the pandemic or have been forced by the government to shut their businesses down, regardless of their previous income. That means that some people who were very well off will get significant stimulus checks while poor people who have been relatively unaffected would get nothing. At least half of the country will HATE that idea.
I wonder why not pay every household and then means test through a invertly graduated repayment reduction as part of filing your 2020 Income Tax. Sure some PE guys may get to keep but wouldn’t the result be highly effective?
And we hear very little of why over a decade that cash returns have been negative. There are no more safe havens, just grifts.
For savers, there is a fraction 1/10 of 1% post-covid, makes you want to save a shitload there. The markets are not indications of wealthy people's feelings (Ball, 2020), and do not account for risk or underlying health of any company. Debts are passed onto individuals as a form of social shaming/sadism. And the bond market is going hell in a hand basket.
The wealthy are at war with us, and millions have no clue. No healthcare during a pandemic. Pay to play vaccines. Higher Education still charging students 30 year inflated tuition costs on the back of no healthcare. Regulation sleeps with the fishes, and Politicians get 2 hours to read 5000 page bills to vote on.
Actually political economists know quite a bit, and "sell-side" Economists know also something, but most will just find some sophistry to support the interests of their sponsors. Even when not ignorant, they are biased by vested interests.
Indeed, and Barbara Ehrenreich wrote a specific book about that: "Nickel and Dimed: On (NOT) Getting By in America". A number of businesses and rentiers make big profits by knowing that poor people are short of savings and cash and thus charge them disproportionately more for smaller purchases and fees when they have troubles etc.
This!! I suggested Ehrenreich for the book review. Most shocking to me was how many corps would only pay out salaries on debit cards, whether you had a checking account or not. Then when you used the debit card to make purchases, fees were deducted. The larceny and usury is devastating.
What do you expect when 70% of the country is financially illiterate? Our public indoctrination centers(schools) don’t teach what needs to be taught. Don’t even get me started on civics. It is even worse.
I see no connection between the stimulus checks(which I do not need, and which I will give to those that do, in one way or another), which go to making up the shortfall in income and would be used for the day to day necessities of the working class, and the inflating of financial assets, which the Fed, on its own, well before the CARES Act, was busily administering to, and the Act itself, which saw a large portion of the SB loans snapped up by companies not small by any measure, and the even worse $500 billion for big business, which was really nothing but a security to be used by the Fed, leveraged at up to10 to 1.
That these recent stimulus checks to people in need(and some not, such as myself) have had a significant impact on interest rates for dumbass savers like me, is a bit of stretch, compared to the last decade of never ending "liquidity" to the financial markets, which cut out many thousands of interest I should have earned, but was denied due to lacking the proper connections inside the capitol of our democratic republic.
As for the proper amount the stimulus checks should be, I suppose we could look at what other nations have done for their citizens, look at the impact on inflation etc. and make a judgment based on that, but then those other nations have not put a priority on having over 800 military bases in over 140 countries, have not embarked on a $1.7 trillion 30 year modernization of its nuclear armaments, have not been at war for 19 straight years after a single terrorist act killed just under 3,000(less than 10% of the still ongoing pandemic), fought on borrowed money, now many trillions in total, have not increased their military spending roughly $160 billion a year from two years go, this for an agency that can neither win wars or account for its spending, and which, when all its real spending is taken into account, basically equals what all the other nations on earth spend.
Once again, we have a situation where the American people must ponder the biggest unknown in the Universe; where does our government's ineptitude end, and the corruption begin?
great post, so many things to unpack and i'm not up to the task tonight or maybe ever.
1: "a significant impact on interest rates for dumbass savers like me"
the significant thing is that savers are relentlessly messaged that we are "dumbass." pretty sure that you were being sarcastic here. can't wait for the negative interest rates
2: "where does our government's ineptitude end, and the corruption begin?"
ineptitude = corruption, corruption = ineptitude. ask the ivy league. ask hunter biden.
genuinely feely sorry for the next generation of bright young things who think getting into the right school and working hard will make a difference. the playbook has already been written by a small number of well-connected families. if you're a scion of one of them, it doesn't matter if you're inept. you'll be covered.
Look at what being a functionary of the .01% did for the Bush's. Nothing particularly special or extraordinary about them, but they rose to the highest levers of political power with the most of modest of abilities.
Prescott and Big George did serve in wars to bolster both their careers. However, the lack character (good or bad) along with the lack of talent of their offspring is telling; considering all the advantages they had as children of elite functionaries.
To be indifferent to others is the greatest strength of any past, present and future functionary. I don't think it takes much talent or skill, but it seems a Ivy League education has a way of detaching their alumni from his/her empathy or regard for those less fortunate.
I listened to a famous Harvard professor tell a huge class, maybe 300 students, exactly that...that they will be the leaders; over and over and over he told them, they were the elite, the controllers, the deciders. I felt like vomiting.
They're still building new buildings. In my town, they're knocking down old and beloved Art Deco and humbler but still functional edifices to erect gigantic condo/student housing complexes.
The Pentagon is a black hole for tax payer money. That said, they do know how to win wars. They just are not allowed to do so because the longer the war, the more tax payer money they get and the richer the politicians (the ones that don’t allow them to win the wars) get.
For example, Trump allowed the Pentagon to obliterate Obama’s ISIS army and then when he told them to pull out because the job was done, the Pentagon and grifting politicians had a meltdown. Ditto for the endless war in Afghanistan.
I've been retired since 2015, my income is below the maximum allowed for married couples to receive the stimulus. Throughout my life, I've lived below my means, and saved and invested prudently, paying off my 30 year mortgage in just over 14 years. When you've gone over 14 years without making a mortgage payment, and had the same car for 20 years, have no need for the latest whatever being made, saving is pretty easy.
I'm pretty sure that $75 K figure is for single people, but in any case, my retirement is less than that, and I'm married.
“More and more of the ‘free’ money is being shoved into savings accounts”? Really? That’s news to my broke-ass. My $1200 check went right into my checking account and then right back out. And I suspect that that’s the case with most people. All of this esoteric economic theory is just that: theory. Motherfuckers need money and 600 bucks is a fucking joke, particularly when poorly-run financial/investment firms got billions. Let Goldman, Sachs and all the rest burn.
MFers need a job. Point your anger where it belongs, at the governors not allowing you to work because of a virus that 99.8% of working age people will survive.
Ha. Ha. Ha.... Fuck off, dude. “The governors” aren’t at fault here, federal government needed to come up with a plan eight months ago and they didn’t. And they still haven’t. Even IF “The Governors” “allowed” me to get a job (whatever that means), I wouldn’t go out and work. Covid’s out of control right now.I don’t understand how you dipshits are going,”Yeah, but most people survive!” and think that “surviving” is good enough. Most people do survive, yes. But a lot of those survivors are now afflicted with all kinds of long-term health issues. I don’t want those.
Some deaths are being attributed to the bat flu, sure, but from a statistical perspective those are the same people who would die from heart disease or diabetes: overall death rates for 2020 are no worse than 2019; the covid death rate is illusory.
Meanwhile, in some parts of this country, "the land of the free and the home of the brave," people are getting out, working, going about their lives and doing just fine. Unless you're stuck with one of those fascist governors who's maintaining a lockdown, your choice to stay home is on you.
Larry Summers calls himself an economist and gets paid by rich people to say things they want to hear said by someone who calls himself an economist. I have seen no evidence that he is any more knowledgeable than Taibbi, only that his priorities are different. I like Taibbi's priorities better. Summers is a monster.
True as far as it goes, I guess. But when we're in a national health situation where many people simply aren't being allowed to work, what's the alternative? Printing free money generally isn't good, but huge masses of people starving and rioting because they can't pay rent and buy food is worse.
... it IS worse, isn't it? Or has 2020 truly taken us through the looking glass?
(Side note: I understand that savings are, economically speaking, inefficient. But at an individual level, they're pretty important in case of... emergencies like this. And maybe the current situation should've taught us we need to build some more resilience into the system, even if it costs a little bit of efficiency.)
Yes, huge masses of people starving and rioting because they can’t pay rent and buy food is worse than printing free money for said starving and rioting people. The fact that that’s even a question to you just illustrates to me how fucking stupid people like you are. Yes, we should feed people in a pandemic. Yes, we should forgive rent when unemployment is out of control and people have no income. How is that even a question to you?
Ramifications? You mean the dreaded deficit? Or people not having incentive to improve their prospects? What if the ramification was people paying off debts? I suspect the banks don't like this last one in particular.
Well we just had the first anti war President in decades and allegedly 81 MILLION people voted for the other guy, a career grifter with dementia that didn’t even campaign. It appears, if you buy the vote count, that a majority of Americans want endless wars.
Are you unaware that this money is only going to people that make less than $75K a year? You think those people can put it away for savings?
What concerns me is our legislative and judicial branch allowing these authoritarian, draconian, unConstitutional lockdowns to continue. I have been reading conspiracy theories about these executive(federal & state) emergency powers for decades and now they are all coming true. The only thing remaining is being carted off to a FEMA camp. Literally everything else has come true in the last 12 months.
The airlines received $50 billion in the CARES act and laid off 50k people months later. The fired employees will take that $2000 and pay rent and buy groceries and maybe put a small amount in their savings after their other bills. Those employees will be circulating that $2000 around maybe 5 or 6 businesses...maybe more. Giving money directly to people puts actual money in to the economy. Thinking our governments deficit is ran the same way as your check book is wrong. There is no need to worry about the taxes tomorrow because the US creates the money that is used. So even if CHINA asked for trillions of dollars to pay off our debt tomorrow we could just create the fucking money because its fake. Blame Nixon if you don't like the funny money of it all because he took us off the gold standard.
I don't know a single person who put their last stimulus in their savings account?! I'll just pretend you don't know what your reading about....you must be running in the Larry Summers crowd.
I am retired with multiple pensions, all of which are inflation-protected and pass to my wife on my (quite soon) demise. We have been following a long-term plan to pay off debt incurred on behalf of an adult child's medical costs, and increasing our savings. We don't run in the Larry Summers crowd, but our plan is working. We put half of our stimulus into the long-term plan and gave the other half away to a food bank. We live a modest life, but don't need a stimulus check. We want as much innovation as possible to get people back to work. I've advised perhaps two dozen companies on how to function with remote work.
Yes. Chronically-ill 43-year-old child has caused repeated refusal of promotion or transfer to improve income. When hospitalizations started her husband left her and pulled insurance. We went through a bit over $1M, borrowed $400K on lines of credit. $65-75K/year, all went to restoring assets and paying off debt. We're rich, because we have what we want.
Ever heard of means testing? That was kind of built into these stimulus packages on the front end. My wife and I don't qualify for the checks, but if we did we'd give the money away or use it to pay down debts. That said, we're not even close to rich; barely above middle-middle class in terms of our purchasing power and many like us have lost their jobs to the pandemic. Complaining about larger stimulus checks to those who DON'T need them is fine - I think there should be a streamlined application process of some kind, but it would have to be privately managed for reasons of sheer scope and that brings with it a bunch of different problems. The government has been cut back so much by now that they couldn't manage the undertaking (by design, if you're a "small gov't" Republican/Libertarian - who I should add rarely complain about the make-work, transfer of wealth program known as the "Defense" Department). But again, if I had to fill out a streamlined application like the ones businesses were offered in the last stimulus package because i wanted a check that I didn't have to pay back, I'd be fine with it. Another thing is you might be confusing the different parts of these packages. The loans that were supposed to go to suffering small businesses were the most often abused part of the whole deal. If you think $2,000 checks to the RIGHT people is a bad idea but not the bailout of Wall Street and Corporate America, then you're just off base. Do you have any evidence for stimulus money NOT going to families in need and instead going to well off persons who didn't need it?
My wife and I got only a partial payment in the first round due to our combined income, . . we gave most of it to her parents (who are retired and could use the money) and some of it to our local rescue mission. We will be fine without more "stimulus," though not approaching "rich." I'd much rather have more relaxed means testing that allows some folks who don't "need it to survive" get a few extra bucks than to squeeze harder on those who really do need the money. If we get checks this time around, we intend to give it away again. I know there are people who really desperately need help.
Good man. I did the same with my $1200, but kept my hands off my wife's share of our combined $2400 check, easy to do since we have separate accounts at our credit union. I gave some to our daughter, increased my gifts to charity and gave much bigger tips to those working at our local restaurants
Funny that you think the marginal number of federal government parasitic bureaucrats that have not been hired in the last four years has any impact on the treasury printers ability to print checks. The last time I checked the military was part of the federal government. If we are going to have a big bloated, corrupt, unmanageable federal government then we are going to have a big military as well. The military is part of the money game that makes politicians rich.
IF the big bloated corrupt government and especially the military wasn't captured by big business and structured more like the northern European or even Australian or New Zealand's semi-welfare state with more accountability, then it probably wouldn't be big, bloated and corrupt. But we're stuck with the Constitution and the legislators, regulators and in some cases judiciary that have been co-opted to turn many agencies into giant self licking ice cream cones and make work programs.
"Funny that you think the marginal number of federal government parasitic bureaucrats that have not been hired in the last four years has any impact on the treasury printers ability to print checks. "
Funny that you apparently lack for reading comprehension skills if that was the main takeaway you got from my comment.
It wasn’t the main takeaway. I agree with your other points. Just not that cutting, or not growing, what is already a bloated, corrupt, unmanageable federal government has any impact on its ability to cut checks or vet those that receive them.
Bigger doesn’t equal better when it comes to bureaucrats. History has proven that the more money and people the worse government performs. It literally has no incentive or ability to work efficiently.
A friend who runs a small business took one look at the PPP "loans" and said NFW. Wait until you hear about how that gets treated - as taxable income for the business that still has to pay back the loan. It's a double-hit.
Your friend should have taken more than one look, or a longer one, because if the PPP money was used to pay workers and not laying them off, it was tax free, just like the $1200 stimulus checks were.
Interesting. I, too, have a friend w/ a SB who took a PPP loan and she said it's not to be paid back. Maybe your friend got in on the program later than others when different types of banks/loans were involved? I'll have to ask her about it again.
Economist, "All these variables make my economic model look fraudulent. Well, I'll just have to throw them out. Bingo! Presto! Another Guesto! We got another economic miracle on our hands. Hope the public don't mind bailing us out in about 5 years."
I hate to comment on someone's physical appearance and anyone can look unattractive at any moment, but I love the headline photo. The hanging gut and neck fat spilling out of the collar as he lazily leans back, almost as if he's waiting for a tray of Hors d'oeuvres in the court of Versailles, really says it all. Somehow makes it challenging to call him an "Empty Suit".
I steer clear of calling people ugly unless they're morally repugnant too. Call it the Sarah Huckabee Sanders Principle. Since Summers is a fuckboy of the highest order. calling him any and all petty and hateful names is something we're morally obligated to do. Sorry. Those are the rules.
The point that Matt Taibbi is making is not that what Summers says is wrong or right, it is that when it comes to bailing out big business or especially Wall Street the likes of Summers scream MORE! MORE! FOR ALL OF THEM! MORE! MORE! but only when it comes to "losers" they start making distinctions between this and that category, whether those distinctions are pointless or not.
BTW properly speaking the government should *compensate* those who have lost income because the government shutdown some sectors of the political economy regardless of their level of income: if a cook lost their $20,000/year wage because of shutdown, they should be compensated with something not far from $20,000 and similarly if the owners of some restaurants saw their business profits fall from $3,000,000 to $1,000,000 a year they should be compensated with something not far from $2,000,000.
The government because of the public interest caused them both damage, and in an ideal world that damage should be compensated for using public funds.
«especially Wall Street the likes of Summers scream MORE! MORE! FOR ALL OF THEM! MORE! MORE!»
During the 2008-2009 bailouts they argued that *all* financial corporates should get a lot of Treasury and Fed cash, to avoid singling out and stigmatizing those that were more bankrupt than the others.
Was just going to point that out. This was the policy that allowed banks like Goldman to argue the bailouts were forced on them (actually they’d have failed without multiple rescues).
Matt, I'm not a fan of Summers, but he does ask a good question - what is the limiting principle?
We were, before all the money spent this year, paying about $500 billion per year in interest on money already borrowed. That isn't quite the defense budget, but it is inching toward it. We have added to that greatly this year. In the case of this year, it was necessary. But all of this money will be paid back with interest. I'm 57, it won't mostly be paid back by me. You mentioned "many times that" was paid to prop up financial institutions - and I think you were referencing the $2 trillion that would have paid off home loans. I don't think that is correct. The TARP money approved was $700 billion and all the funds loaned to those institutions was paid back. That doesn't make it a good idea, but it didn't cost the taxpayer in the long run. This will - again, necessarily so. But I don't know that indiscriminately giving $2000 per person is a good idea.
I live in the middle of the country. Most people I know who did not have their employment interrupted are doing at least as well as 2019. We are doing better. We are making the same amount and there is less to spend money on. My wife is a nurse, and was furloughed for three weeks when elective procedures were postponed - and she got, after the additional unemployment benefits, a little less than she would have had she been working. I think people who have lost their jobs or can't work should get $5000 and people who have had their business closed should get a relief loan of up to $100,000 that would be forgiven if the business reopened and people like me should get nothing.
I think we often do things mostly to make ourselves feel better that we are doing something and we don't think too hard about what will really help people.
"That isn't quite the defense budget, but it is inching toward it."
Does anyone ever consider reducing the defense budget? It seems to be an immutable principle against which all other considerations are to be judged.
Which country is about to invade the US? Which has the intent and capability to do so? Get back to me with these answers if you intend to justify the current "defense" budget.
First I’ll respond to your response below where you ask if there is any reason the defense budget shouldn’t be reduced - no. You are absolutely correct in your assessment and you are going to get hit by all sorts of “Summeresque” weaseling to support the obscene war machine. I remember when the communist block was falling, the Soviets pulled out of Afghanistan, and there was talk of a “peace dividend” coupled with complaints of the military’s excessive spending - $800 toilet seats were discussed a bit. Then Iraq was given the go ahead (or not “clearly dissuaded” if you buy the BS) to invade Kuwait and the Iraq/Afghanistan plan was put into place and dutifully followed by Clinton as he sucked most Democrats into being warhawks. Bush II was merely the next stage.
And no - no country is a military threat to the U.S. That is a non-starter. Besides getting destroyed by nuclear weapons why worry about building nuclear weapons when microscopic organisms and unseen agents can do the job? The U.S. military exists to overthrow nations and subsidize the shipping costs and guard US business interests.
The militarization of the American mind over the last 30 years has been insane. Quite literally.
Was any country a threat to the Roman Empire at its peak? why did they spend so goddamn much on their military if not to maintain their empire? Same with great Britain. Empires are expensive to maintain, and they are maintained through military power.
Last I checked the Roman and British Empires didn’t have 14 Ohio Class nuclear submarines each armed with enough firepower to obliterate any nation on Earth constantly patrolling the oceans of the world and with more than one always within range of any target on the planet.
It is ironic you mention the Roman Empire since it is commonly understood that an inability to pay for its army was one of, if not THE, cause of its fall. History tells us the spent “so goddamn much on their military” in abject error and at the expense of its citizens.
At it’s peak the US military had over 30,000 military warheads - a number that was impossible, LITERALLY IMPOSSIBLE, to ever deploy. Don’t tell me the military-industrial-congressional-complex won’t spend the United States into its own downfall.
It’s almost never been about invasion and mostly to do with maintaining a hidden empire. Read “How to Hide An Empire” by Immerwahl. America has an unreal number of outposts and island redoubts throughout the world, originally created by the mining of guano, which morphed into naval bases and militarily outposts. There’s something comically metaphorical about it.
Ian Fleming's "Dr. No" was all about Dr. No trying to get a guano monopoly. The novel was far crazier, yet somehow truer to reality, than the Hollywood Bond film adaptation.
Fleming was the decaying British Empire's Philip K. Dick. People who persist in viewing Bond as an admirable he-man protagonist, a sexy model to emulate, don't get this. He's a manipulated prole; a "blunt instrument." O. F. Snelling and Kingsley Amis call this stuff out in their detailed analyses of the Bond novels.
Bond was indeed a “ blunt instrument”-but your average lefty still doesn’t like to admit that the USSRs decline into SMERSH was an inevitable consequence of forced industrial socialism.
That's interesting, I just read up on how they swapped bauxite in for guano.
I haven't read any of the books but I consider Quantum of Solace to be very underrated. One of the things I like about it is how it's actually about a real issue in the contemporary world (water monopolies) instead of some superweapon / soap opera plot line. Sounds like they were attempting to get back to the kind of grounded international plot lines that would resonate with people who read the news.
Of course audiences panned it, so then it was back to stupid soap opera plots for the rest of the franchise.
I think the greater concern is civil war, which would then make the US far more exposed to an external threat. I could be wrong, but it seems the main cause of the tension is the widening wealth disparity and erosion of the middle class. Of course the main issues peddled by the media are race and gender related, but this is all a ploy to keep the masses from focusing on the real problem (the revolving doors in DC made up of corporate lobbyists, defense contractors, and corporatists disguised as politicians).
You do realize the bargain basement value of the US military right? I give that it may be morally reprehensible to many people, but to argue that our military dominance of the globe doesn't benefit the average American significantly is absolute nonsense. I'm all for holding the military accountable for the money they spend, and tracking down a few of these trillion-dollar slush funds, but reducing the size and scope of the military (which is what most people are actually talking about when they say reduce the budget) will come with very heavy consequences that basically no one ever considers.
Grisha: it's not the US that's being defended, it's the treaty obligations to defend 67 other countries, in practice 68 with Israel.
It's also defending the global commons, that is the shipping and air lanes.
We have to tear up the treaties and alliances that mandate the budget.
(Which BTW is only 15% of the USG budget, which people miss).
The latter is wise and laudable, the former is the madness of leaving mediocrities in charge of what their grandparents built.
Look at the size of NATO and please realize it barely qualifies as half what we're defending.
Now is their Empire building here? Well yes...but by venal mediocrities.
They don't want war of course, not with a real power.
They just want 'Great Power Competition" and the associated importance.
I have dreams where the great grandson of a WW2-er undersecretary to the Assistant Secretary starts nuclear War at 4 AM one day by accidentally bumping up against another idiot stepson on the other side - this is a summary of WW1 1914 BTW.
1914 is what happens when your kids take over the family firm.
All that is needed for catastrophe is for cunning leaders like Putin who won't take the bait to be succeeded by a mediocrity and we stumble into a nuclear 1914, one that makes even less sense than the first one.
But understand I don't insist on actual literal nepotism to meet that description, so we can start in 1993.
Bush 43 you know would have avoided war except for 9/11, which changed everything. He ran on that, and without that the neocons could have never pushed him into any of the following folly. He was indeed pushed into Iraq.
A lot of bad things that were happening became institutionalized under the Clintons, for instance 'reinventing government'. At that point we now have a private contactor government that actually delivers the benefits and services in all respects - including and especially govt benefits/dole/handouts via Financial Companies such as JP Morgan, etc - this on top of the Vogon bureaucracy of rather dull bureaucrats who could no longer run things..
This doubles the size of the actual real government while building in a fatal marriage of interests private and public. Old fashioned people call this conflict of interest, but that's only if you believe morals conflict with interest.
Well, morals lose that war.
But what I did mean originally was the mad extension east of NATO, an alliance that should have gone the way of the Warsaw Pact. The intervention into Yugoslavia, the adding of the Baltics to NATO [some damn fool thing in the Baltics is the next 1914]. The guarantees to Ukraine in exchange for their nukes - which should have stayed there....sorry. But see above paragraph for the 'reinventing' of government...you see...the worst of all of it was getting involved in the Rape of Russia - the Clintonites washed the money from the Oligarchs over here....speaking of Larry Summers. <<
Stanley Fisher.
Victoria Nuland. Fuck the EU because Ukraine is OURSS!!! $$ Later of course.
An engine of corruption was created and institutionalized in the 1990s.
it continued afresh after 9/11.
You see for instance my dears we never looted Iraq.
Or Afghanistan.
Oh no.
We looted the American Taxpayer, but did it overseas.
We created regulatory free puppet countries that trillions in US$ was sent without any real oversight and much looking the other way.
I should mention the uniformed military is not in on it, but we are not blind.
Mute yes- it's called discipline.
What do you think Ukraine was all about? Mini Russia, keep the Grift going.
$$ gets sent to Ukraine, kicked back after being laundered as 'aid' then back to many besides and before dear Hunter. That's why they shit themselves.
Not a server. A small replay of the Russian Rape of the 1990s, smaller but hardly unprofitable.
Putin is hated because he stopped it, he's feared because he knows and has the goods on them, Trump was terrifying because he might look into it.
Fortunately for them Trump is Barker not Biter.
You see our government overseas aid functions as sort of a private Dawes plan...but the money comes from the public purse, is laundered overseas in our various concerns, then back to the appropriate people in DC, NYC, etc.
It's the ideal form of government for the governing: socialized costs, privatized profits.
Which doesn't mean some idiot at 4 AM doesn't blow up the world.
OTOH if America is about to blow up [it is] then blowing up the world as diversion looks better.
I see you have bought into the generational propaganda. Yet another way to keep the people divided and at each other’s throats. Of course the best propaganda is spread by the people.
In real terms, the defense budget has been reduced. In 2015, it was $596b, which was 3.27% of GDP. In 2016, it was $600b or 3.21% of GDP. In 2017, it was $605b or 3.11% of GDP. There isn't another major part of the budget which is going down similarly. And it tends to go to Americans and American companies
The Pentagon's budget is now $740 billion, funny you stopped at the year 2017 when giving the Pentagon's share of the GDP. Second, that budget is not all the military spending, as things like our nuclear weapons costs are in the Energy Dept. the Coast Guard in The Interior(my memory, could be somewhere else), and so on. Then we have the matter that you are starting from an already large budget, one that funds over 800 military bases in over 140 countries, is embarking on a 30 year, $1.7 trillion "modernization" of our nuclear weapons(last used in 1945), and which will undoubtedly cost far more than that over a 30 year span, and lastly, has been fighting a fruitless, pointless, unwinnable war on a tactic for 19 years after less than 3000 people died were killed in a single terrorist attack, a number dwarfed by the pandemic, which is nowhere near over, all this on borrowed money, now well into the trillions.
The size of that budget is one required to project empire, not to protect the nation, and indicates a serious misallocation of both funds and technology when any rational examination of the world reveals just one nation in a position to challenge the US, and that is The People's Republic of China, a challenge that is economic in nature, not military, though telling that to our elite is as futile as getting one of them to have a family member serve in the institution they place so much faith in, as long as it is staffed by people they don't and wouldn't choose to know.
"Second, that budget is not all the military spending, as things like our nuclear weapons costs are in the Energy Dept. the Coast Guard in The Interior(my memory, could be somewhere else), and so on."
Don't forget that virtually of the CIA's budget is buried in the Pentagon budget and is completely unaccountable. The fact that many actual DOD programs are themselves unaccountable contributes to the general miasma of unaccountability.
If you call attention to this fact, certain sectors will call you "unpatriotic."
I suppose we could also rightfully add the interest on the debt accrued on various weapons systems and past wars, and the fact the State Dept. also has a military component, as I recall from reading one of the accounts of our various dismal ME forays.
A couple of years ago, I read that the US had 11 of the world's 21 active aircraft carriers, a military component that is purely offensive in nature, and since that time, the PRC, which had one at that time, that one a cobbled together ship from the Ukraine, now has 2 and is building a 3rd, while the US has either built or is finishing 2 more, giving us 13 of the world's 25.
Every now and then, I just imagine living on a block where one family, which has 5% of the block's population, makes about 22% of the total income of that block and spends nearly as much on guns as the rest of the block combined, still feels justified in attacking others on that block due to security concerns, and then wonders why others look at them askance.
What, exactly, do people have against blowing the living shit out complete strangers in other parts of the world?
I'd bet that the color scheme of every bone rattling, viscera shredding explosion contains a little red, a little white & just a smidge of blue.
As far as the CIA goes, I have to say I'm quite proud to pay my small share of tax dollars to have my perceptions managed & my propaganda spoon fed to me.
Sometimes, late at night, I sit on my back porch whistling while I dine on the latest propaganda fondue. When I'm feeling particular daring I smother it in ranch dressing & gouda cheese, crack a bottle of Ripple & Yum!
Budgets are for Chinese people to worry about anyway.
We're Americans, goddamnit, and ya can't make an empire without cracking a few spending limits, now can ya?
In the immortal words of my new best friend, Buttercup Dew, who said, quite succinctly I might ad,
" My journey to White Nationalism was a short and simple one – I simply became conscious of being white. This happened to me because my parents actually broke down & bought a mirror. Revelatory doesn't begin to describe the experience.
"It was shortly after my Race / IQ discovery that I first conceived of myself on a biological, racial level. I finally understood why my father always yelled "SHOULD HAVE BOUGHT A GODDAMN CONDOM" every time he looked at me."
I think you'll see, thanks to Mr. Dew's wisdom and piety, why defense budgets, much like balloons & expectations, need to climb ever higher.
Sadly, I'm a bit put off by all of this Larry Summers criticism.
The man looks like a bridge troll gone to seed. I imagine that he always looked like a bridge troll gone to seed. Without the copious amounts of cash the man generated for himself by puckering up and kissing the ass crack of every corporate executive and rich guy who wandered into tongue range, how do you people think the man could have gotten laid?
In truth the military itself overaccounts to an OCD level up to installation level- a base.
Ft Hood, Norfolk etc are installations.
When we say hands across America in the service it means we have dozens looking for an empty cardboard cartridge box, if its a sensitive item like night vision or God help you a weapon hundreds are searching and someone will pay heavily.
And...then... the accounting is sent up the chain - and the 984,000 civil servants in DOD lose track of it.
i assume i'm not the only one struggling with Substack's laggy software, and i am highly tolerant of and sympathetic to my fellow typo-ers and omissioners. god bless us every one.
I went online and at the site, "the balance.com", the total military budget, including all those departments associated with it, actually comes to $1.13 trillion, and, by the way, it says there are 761,000 civilians employed by the DOD.
I'd say half is still bloated; perhaps you might have read some/any of the books by Andrew Bacevich, whose reality based critiques of the inside the Beltway thinking on foreign policy are grounded in both personal experience and and an understanding of a word they seem not to recognize; "limits". I have no problem with us having the world's best military, but to have one with such an overwhelming advantage is a benefit only on paper, with no real world benefit.
The idea our country, whose % share of the world's GDP is shrinking each year, can somehow militarily garrison and control such a changing world, much less have the moral right to do so, is absurd, as surely the last 19 years of futility against military nonentities have proven to any rational and objective mind.
"surely the last 19 years of futility against military nonentities"
B..b...but we kicked the shit out of Grenada in 1983 and Panama in '89-90! You gotta go back further than 19 years for examples of decisive American military victory, my man.
I'm all in favor of any reduction going to Americans and American companies. Any pressing reason why it shouldn't be reduced -- in real terms -- still further?
Sure, it is possible, my point is the allocations of borrowed money has probably already caused payments on the interest to exceed the defense budget. In other words, you could reduce it, but it isn't the part of spending that is making other spending unaffordable. Soon, payments on the debt will be twice the defense budget. If you reduce the defense budget, the part of the budget already reducing in real terms, it isn't going to solve the problem we are talking about. Paying soldiers and sailors less money, or paying less of them isn't really going to help the economy that much or make that much of a difference on the debt. And people who work at Lockheed buy cars and clothes and pay rent and contribute to the economy as well. I just don't think you are going to find the deep well of funds for other people there.
Addendum: I was a little off on the interest payment on the debt - it was $550b last year. Which gets back to my original point. We can't afford to not be smart about relief and stimulus funds here. People who have not been hurt economically by the pandemic shouldn't get any money (like me). People who have should get more. I don't know if I will qualify for this new money, but if I get it, we will probably give it away. We don't need it. And we can't afford, with all the expensive problems we have, to give money away when it isn't needed. Which gets back to the criticism of a blanket check instead of targeted relief.
I'm not following. The defense budget goes to people in the military and people who work for defense contractors and companies that contract or sub-contract - just about all of those are Americans.
That doesn't disprove the notion that American companies and American workers are who primarily benefit from military spending. Even all the billions we give to other countries in military aid have to be purchased from American military contractors.
Not sure what that has to do with the defense budget going to American people and companies - when talking about the stimulative impact of govt budget spending on the U.S. economy right now.
"he does ask a good question - what is the limiting principle?"
The Fire Inspector asks the question "How did this fire get started?" but he tends to wait until they've put out the fire before he poses the query.
The economy is melting down for everyone but the ultra-wealthy. People are dying and more will die due to homelessness and poverty and covid before this is finished. This is economic and - possibly societal - triage.
An Inspector who gets in the way of firemen and such evacuating a building and putting the fire out would be thought a massive fool. He's got plenty of time AFTER the fire is out - or at least controlled... - to ask any philosophical or moral or academic questions like "yes, but what is 'Fire,' really?"
I'd like to make a deal with every economist - academic or armchair - and libertarian. Let's just bite the bullet and get everyone to a stable place and THEN let's have a great big wide-ranging discussion on the federal budget priorities. I think most progressives will happily re-engage the debate about the welfare state and m4a and such if the other side is willing to talk about Defense, Progressive Tax rates, and all that delicious pork that keeps the rich getting richer and our forever-war machine well-greased with dollars and bodies. Deal?
Rich guys always seem to be asking 'how much is too much?'. Well, why not 'how much is too little?'. 200? 400? 600 seems to be on the 'too little' end of the spectrum.
Your last line nailed it, guys like this is how a guy like Trump got in the Oval Office. The MSM and the Left leaning folks can blame Trump for Trump, and all those mouth-breathing idiots in the dirty fly-over states, but the reality is our “intellectual betters” are why an Orange haired maniac has had the reins the last four years.
That depends on where we source the feathers from. California condor feathers are a non-starter. Chicken feathers could work but pigeon feathers would get the most public buy-in.
We would also need to consider the ecological impact for using tar on such a large scale. Health and safety guidelines may need to be amended for those who are transporting and implementing the sentence.
It seems pretty clear that we are going to need a government funded study for this. A preliminary high level estimate is $67M for a deliverable in 24-48 months. I'll include recommendations for supply chain and public relations at no additional charge.
When we run out of bird feathers of whatever origin, I am fully in favor of "tarring and 'foaming." I find Styrofoam to be an ecologically acceptable substitute in terms of its application to politicians. There's nothing else to be done with it.
The feathering has always been an insult to injury sort of thing. Now that you mention it, substituting feathers with Styrofoam would be particularly devious. It would be like covering them in sin. The pain from hot tar is only temporary but Styrofoam is forever.
What about if - regardless of foam or feathers - we build a catapult and launch these new "birds" into different structures we've constructed out of wood and steel?
I don't think the "birds" would like it, so we'll sell the tickets to launch them on the Free Market using an auction to smooth things over.
You’re right, but Summers was Treasury Secretary to Hillary’s husband, and about as pure an embodiment of Clintonism as there is. Even if people don’t know Summers by name, they’re familiar with the ideas, or at least the impact of those ideas. I should have mentioned this, too, but Summers is sort of a Zelig of the financial crisis era. He was in office for the repeal of Glass-Steagall, he bungled regulatory warnings about derivatives, and before he came back to government to advise on the bailout era, he loaded up with speaking gigs from banks. He represents a lot of what drove people nuts about the mainstream response to the crisis. So yes, it’s true he wasn’t on the minds of many by name - I should have clarified that it’s the idea of the guy that’s recognizable.
Back when PBS Frontline was doing journalism, they did a great episode called “The Warning,” which was about Brooksley Born’s (CFTC) battles with Clinton and his economic team over regulating derivatives. Summers was a principle villain in the piece — along with Rubin and Greenspan.
Repealing Glass-Steagall didn't change a damn thing. You ought to know this, Matt, because you've been covering this stuff for 15 years. There's nothing about Glass-Steagall that would have prevented the financial crisis -- having it in place could potentially have made it worse.
As far as regulating derivatives markets: So...you have a bunch of banks trading derivatives they don't understand, you have insurance companies selling derivatives they don't understand....but you think that had we put a bunch regulators in place, regulating derivatives that literally nobody can understand that it would have prevented a massive macroeconomic catastrophe? I mean, please, spare me. That's literally nonsense. And laying all that nonsense at the feet of Larry Summers is even more nonsense. I'm not a fan of Summers, but at least he's still intellectually curious about how the macroeconomy works. I don't see Matt Taibbi publishing white papers on secular stagnation, which I'm not sure you even read, because it doesn't fit the archetype you put Summers into.
You rail on short sellers too, Matt, except that the people who called the ball on mortgage market were the ones with the stones to short it, massively, and ride out he carrying costs until it was profitable. I guess your preference is that Michael Burry and John Paulson become SEC regulators instead, but I think that's also nonsense: You're just removing the profit motive and incentive for anyone to identify the mistakes of others. Regulators would have had to understand the entire secondary market for mortgages and mortgage securities to head it off in a regulatory fashion, yet the people who discovered the issues (Steve Eisman, Gregg Lippmann) focused specificaly on the micro aspects of the securities trades. Eisman and Lippmann also happen to be trained economists. Weird, right?
Perhaps Charlie Ledley and Jamie Mai (who, like Burry, studied the macro effects and hedged them) would have caught this, but two kids operating out of the Berkley dorm room aren't probably going to ever have a post near the top of any of the financial regulators in the country, are they?
In hindsight, everything looks preventable. The causes of World War I seem absolutely stupid and infantile when looked at from the future. So do the decisions made by Andrew Mellon during the 1929 stock market crash. But that's because we know more now than anyone did then.
You need more Nassim-Taleb in your life and way less Marty McFly.
«Repealing Glass-Steagall didn't change a damn thing.»
That is just propaganda: at the very least it eliminated restrictions on bank takeovers across state lines, and this has two massive consequences:
* It eliminated the small bank lobby as a countervailing power to that of the "national champion" banks of NY and CA, making Wall Street the only source of "sponsorship" for so many representatives and senators.
* By eliminating most small banks it meant that most lending was done by local branches of those "national champion", driven by sales targets, and by a policy of securitizing the loans.
«but you think that had we put a bunch regulators in place, regulating derivatives that literally nobody can understand that it would have prevented a massive macroeconomic catastrophe?»
Why have the SEC or the CFTC or the Fed or the OCOTC, or any other regulation? Eliminate all regulators, and just and hand over a trillion dollars a years to Wall Street to reward their being being "best and brightest"! :-)
The point of having derivative regulation is not so much to prevent issues, but to reduce their size. Perhaps if the CFTC or the state betting regulators had been allowed to do their job they could not have prevented the failures, just like the FHLBB, subject to intense deregulatory pressure by politicians, could not prevent the S&L scams, but in many cases a regulator can slow down the buildup of problems, reduce the total size of the problem when it manifests, and can help fix the problem more easily because of industry knowledge.
The lack of derivatives regulation allowed a truly massive problem to build up, and made its resolution much more expensive. The countries most afflicted were those celebrated for their "light touch" regulation, inspired by the propaganda from people like Summers, Rubin, Greenspan.
Repealing Glass-Steagall didn't eliminate small banks. Financialization and mass securitization of secondary market mortgages and commercial loans was the main driver of that, when it was supposed to help them. This sort of financialization was also the main driver of overleveraged banks, because AIG and other insurers were default swaps on securities (without knowing what was in them) for pennies on the dollar.
The main driver of all of that? Loose monetary policy, low inflation, and far more money swimming around in the pockets of qualified investors than they knew what to do with (also known as income/wealth inequality).
You claim that regulation of derivatives would have reduced the number and size of the swaps market. Based on what evidence, exactly? AIG's own quants and executives (who were personally liable for the financial representation of their books, per SOX) didn't know the size of the risks they were taking on, didn't know the massive amounts of counterparty risk they had. Maybe some regulator would start asking questions about it....but I'm not sure how you can design a regulation around the kinds of derivative risk hedging that was going on from 2003-2007, because nobody really understood the whole market, they only really understood their portion of it.
Only AFTER do we see what a fucked up mess it all was and how it could be prevented and I think that the prevention measures should be simple (capital requirements, regulatory scrutiny of well defined instruments) and not complex (regulating derivatives and counterparty risk).
Better to create mechanisms for unwinding bad bets by greedy, foolish people than to try and prevent people from acting foolish and greedy.
«Repealing Glass-Steagall didn't eliminate small banks.»
Oops, I slipped here, it was the McFadden act as extended by the Bank Holding Company act. They were effectively repealed pretty much at the same time as Glass-Steagall was.
«Financialization and mass securitization of secondary market mortgages and commercial loans was the main driver of that»
Perhaps you are too young or rather unfamiliar with the USA banking system: it has state chartered and federally chartered banks, and Glass-Steagall made dependent on state regulators the takeovers of state chartered banks or the opening of branches by out of state or federal banks, and the state regulators as a rule never approved them. This meant no interstate banking, so banks remained small in most states, but also they were protected from out-of-state competition.
This gave the small state banks a lot of power against the big "national champion" banks, and a strong incentive to lobby against them to protect their independence. Eventually the Democrats, which were earlier bought by the small bank lobby, were bought by the big bank lobby...
«You claim that regulation of derivatives would have reduced the number and size of the swaps market. Based on what evidence, exactly?»
There is massive evidence that the related regulation of insurance products (and gambling) has been effective, and anyhow as to:
«but I'm not sure how you can design a regulation around the kinds of derivative risk hedging that was going on from 2003-2007, because nobody really understood the whole market»
The principle many regulatory systems use is to forbid any trading of products that are not specifically licensed, and licensing would depend on study and consultation, allowing objections to be discussed, and this would have likely been a slow process and resulted in only "safe" (burden of proof on the promoters) products being licensed and with restrictions. So those “kinds of derivative risk hedging that was going on from 2003-2007” would simply not have been licensed.
The deregulation that Wall Street purchased meant that everything was allowed in any way, under the fantasy that large businesses knew what they were doing and if they did not they would be let go bankrupt, but of course the latter was never a realistic prospect.
You're off on your history. Cross state bank takeovers have definitely been negative for our economy, but it occurred because of the Douglas amendment to theThe Bank Holding Company Act. In the late '70s several states authorized cross-border takeovers, as outlined in the act, and from there the process accelerated. When Congress finally made cross state takeovers fully legal in the '90s, it was already a common enough occurrence that not much changed. Glass-Steagall prevented banks from speculation on financial markets with their customers deposited money. It had nothing to do with cross-border banks.
It's hard to understand why talk shows keep trotting Summers out for a comment, much like my puzzlement when Fox brings Newt on to comment on politics.
‘His opponent’ was known for licking the bags of scum like Summers for money. Trump voters didn’t need to know Summers by name to vote against his kind.
You’re forgetting about the overflowing clown car that was the GOP Primary in 2016. People like to just blame it on how bad his opponent was, that way they don’t need to look any deeper.
There was only ever supposed to be one contestant in the 2016 DNC primary. I give credit to Martin O'Malley and Lincoln Chafee for showing up, in the same sense that the stage manager respects the props. I think Jim Webb and Larry Lessig were for real, but of course they had no chance.
Thankfully - as squad members increasingly abandon their election principles and fall in line with the establishment - excluding Tulsi is working out well for her.
The Federal Reserves balance sheet increased by 2 trillion in 2008 and 4 trillion during the covid crisis. The wars America has engaged in during the last 20 years have also cost trillions of dollars.
All of this is 'business as usual', but giving crumbs to the American populace is economically dangerous.
I think what Larry Summers and people like him overlook is that American workers are cash starved. We make too little money. So stimulus checks are just a way to get a tiny piece of what we’re owed by the system back into our pockets. Even if 60 % of that cash misses the “target” of the most needy, it still helps the overall economy by circulating cash into the normal economy of everyday people. That’s probably why retail Christmas spending was up this year despite the pandemic. Cash hoarding by the one percent is no way to have a healthy economy. Certainly not a democratic one. Trump does not know or understand the bloodless corporate mentality and therefore is despised by the 1 % even as they enjoy the tax breaks he gave them. This is why he will say things that resonate with average people and make them think he’s on their side - such as the $600 was a disgrace and that is should be $2000. And why not $10,000, Larry? American workers have been robbed to the tune of trillions of dollars by the rapacious corporations since Reagan declared war on them in the 1980s. Larry Summers is a shill for these thieves. However, I don’t think he is aware of being one.
The pandemic response shouldn't be about helping poor people. It should be about helping people that were directly affected by the pandemic and the ill-advised lockdowns. I know just as many previously wealthy people who are currently suffering as previously less poor people. The middle of a pandemic is no time to change policy on subsidies to the poor because now we suddenly give a fuck about them. We've had 60 years to iron that out, and we chose not to. Either Target the stimulus directly to the people affected, or don't do it.
Summers suggestion that the stimulus might "overheat" the economy proves he's a shill. It's impossible to overheat an economy with huge unemployment and near 0% interest rates.
It is possible to overheat a bubble, like the one created in the stock markets by the Fed giving trillions in grants and interest free loans to banks and corporations. Isn't it funny that Summers didn't suggest we stop giving away money to banks and corporations.
We shouldn't use the pandemic to change our policy on poverty. It should be targeted to people who have lost jobs or income as a result of the pandemic or government enforced lockdowns, regardless of whether they are rich or poor. Basing it off your previous tax returns is a terrible idea. Furthermore, you aren't owed anything by the system that you aren't already getting.
Finally, suggesting that Trump doesn't understand the bloodless corporate mentality is to completely whitewash the past 50 years of him in business. He has repeatedly failed to pay his contractors, and then leaned on them with legal proceedings until they folded. That's pretty bloodless.
That is literally not how any of this works. In fact, it’s idiotic and dangerous to suggest. It plays right into the Marxist and commissar Sanders revolution.
From 1979 to 2018 worker productivity in the US gained 69.6 % but compensation grew by just 14.8 % according to the World Almanac. Are you telling me American workers have not been cheated? In the 31 years prior to that productivity grew 108.1% and wages went up 93.2%. So it doesn’t have to work that way.
Yes, that's exactly what I'm telling you. Furthermore, that 14% is the entirety of compensation of American workers. INDIVIDUAL workers are almost assured to receive more pay as their INDIVIDUAL skills and productivity improve. IE older workers are more skillful and are paid more than young workers.
The reason that workers are not capturing the productivity improvements as a whole is because those improvements are coming on the capital side of the equation.
Prices drop because individual productivity goes up. Its simple economics. If wages were tied directly to productivity, goods would never become more available to more people (less expensive). This is basic stuff.
Your supplying your bad morality to a math problem. 2+2=unfair doesnt work in the real world so stop trying to force it.
But economists do agree that American workers have suffered from stagnant or declining real wages while execs and CEOs have seen earnings increase dramatically. Sure, sending manufacturing overseas to low wage areas has given us a price break on consumer electronics, clothing and household goods but that is not economic justice. Both Sanders and Trump have drawn support from the disaffected American working class. I think it is a real problem. Is it wise to let America split into such extremes of wealth distribution? Our political system is beginning to come apart. How is this not the "real world"?
Yes, it is wise because it is the way it has to be. Worse would be to try and control it. To build a state of reliance on the State in the name of equity. Our political system is coming apart BECAUSE we the people have given up our power and handed it over to elected officials so they can make things "more equitable". They use this power to enrich themselves and their cronies, and then folks like you say, "Well, the system is broken, we'd better give the system more power, that will surely fix it!"
Our old middle class needs to dissolve and reform as the world changes, Trumpers and Sanders supporters are one in the same, protectionist, authoritarian fools.
Robbing the working class and destroying the middle class seem to be good ways to push the electorate to extremes and towards authoritarian rule. I will agree with you that government handouts are never a long term solution but they can keep the social contract from completely breaking down. Ideally, the corporate elite will decide to lead the way towards economic justice. But with guys like Summers running around providing intellectual justification for cruelty, it’s hard to see that happening anytime soon.
Because there are no wealthy pricks in the Midwest and south? It’s time to drop this trope and really specify who and what is meant, or it’s just perpetuating ”stupid flyover state farmers” and “redneck southerners” whining to about “successful people.” This article points to it the answer.
Thanks for responding, Rex. My sentiment is that those labels you used should instead be more accurately pointed to shift away from stereotypes. Perhaps something like, “wealthy, arrogant neoliberals and bleeding heart, one percent, media darlings?” “Elite” could be seen as a compliment despite the location, and “Hollywood Liberal” is media made fear-mongering with undertones of hate of the Jewish population. I don’t think you meant that. My reference of stereotypical Midwestern and Southern names is just as bad; hence my using them to demonstrate how the use of one begets the other. Really, we should ask ourselves WWMS? (What would Matt Say?)
This was by far your worst take since I started subscribing. He's not saying screw the poor, he's saying the money would be much more effective if targeted at people who are most adversely affected by the virus shutdown. Programs in Europe generally targeted programs to businesses to keep them afloat on the condition that they maintain their employees. That seems to me to be a vastly better program, since the money keeps flowing to people but it also keeps them connected to their workplace and eases the transition back to work post covid. Summers thinks other programs are better than the one I favor. These are all different opinions but I think also part of a healthy helpful discussion. If he said something like people who lose their jobs should starve to death, he'd deserve your reaction and the storm on twitter. But he didn't and he doesn't. Just seems like you hate rich people and you'll launch an attack based on that rather than what they're saying.
No, he's saying that poor people who live check to check, (80% of the US population,) don't merit any help while the big cunts who keep him in wealth DO. The same shit as usual.
AND>>>The reason stupid Drumpf got elected in the first place.
They're tone deaf and off beat. Shit's gonna change.
It's almost completely right and if you think it's "really vulgar" you haven't read many of Scott's other comments; in terms of vulgarity, this one is mild, even feeble.
Whether this type of "wrong vulgarity" is a "winning combination" will probably be for history to judge, not, alas, you or I.
So if Scott usually uses the N word when referring to Blacks ten times per comment but only did so four times in this instance, he wouldn’t be racist? I didn’t know Scott was the standard by which these things are judged. Good to know. And he and you are unambiguously wrong. You seem to think the covid relief was supposed to be a broad based poverty relief program. But one time checks do nothing for poverty. They are excellent for riding people over during a temporary health crisis, which is what this is. Summer is offering a plan for addressing workers’ covid losses better, you, Scott and Matt seem to want it to do something else.
The problem with that analysis is who gets to decide who’s most adversely affected? Typically the poor have no advocate nor a voice and are easily thrust aside. They get crumbs while Joel Olsteen, pastor of a tax-exempt church, gets millions.
And the people who are most adversely affected are always his corporate/banking buddies who might, if they are feeling particularly generous, dribble down a few bucks to the schmucks who made it possible for the rich to hide out in their homes, unexposed to the virus.
We should have taken the same approach as many European countries and helped businesses keep people in their jobs. But people such as Pelosi kept telling everyone that doing that exact thing was heartless because we were only providing corporate welfare. So, they chose to provide a ridiculous weekly amount to those unemployed and bailed out larger businesses while letting the small businesses fail. Political drama and lies got in the way of actually helping people. Now we need to just help people get the economy going regardless of how or where they spend it and how desperately they need it.
There will be no “post Covid”. Not for at least a decade, and by then the damage will be done. One need not control the means of production if they control the supply of money and wield it as a weapon.
To be honest, I think Summer's idea of the economy overheating might be the peasants aren't cold enough this winter.
And that's not a joke. Hunger and Cold are great motivators for compliance.
We for instance kept the Germans hungry and Cold in 1945-1946 winter by policy.
You see: in their minds they didn't just win an election, they have just conquered Nazi America and it's 1945 again. Now it has to be controlled and De-Nazified, pacified. The entire Nazi racist inbred hicks theme was never hyperbole but the truth hissing out.
The actual truth is they haven't conquered the non-existent Nazi America, they've conquered tens of thousands of Bedford Falls, who's inhabitants are stunned and confused by the bizarre behavior they've just noticed. Sure it's been there awhile but it took an purloined election for Bedford Falls to notice. We shall see if it works.
I'm not an economist either but I'll bet Summer's objection to giving $2,000 checks is more about cruelty than economics. Look at his face -- hardened, dissipated and with eyes that would freeze a rattlesnake in its path. He didn't object to the billions handed out in the 5,000+ pages of this bill. There's a clue.
You don't have to "bet" on anything. The article is not hard to find or understand, really, though Matt did a terrible job, in his effort to paint it as an homage to Ebenezer Scrooge.
https://www.bloomberg.com/opinion/articles/2020-12-27/larry-summers-trump-pelosi-2-000-stimulus-checks-are-a-mistake
Yeah, those $2000 stimulus checks are particularly a mistake to give to people who own $30,000 freezers for their ultra high end ice cream.
I don't think they qualify, unless a disproportionate amount of their income goes to freezer tech. But families who make a household income of $150K per year and who have suffered no practical economic setbacks this year are eligible, which doesn't make a ton of sense compared to, say, boosting the unemployment stipend, boosting anti-poverty programs at the federal level, or providing assistance to states and municipalities which really need the money to keep afloat.
Of course, they aren't going to get it. But they didn't mind riding on the backs of the working class who delivered all those necessary packages, kept the lights, and the gas, and power on, not to mention the almighty internet. But let us all tread very lightly not to pass on TOO MUCH CASH to those people. I mean, they probably don't even own any stockl
Summers's argument is that the money would be better spent on assistance to working people who actually lost income due to covid (e.g. through unemployment assistance), and actual anti-poverty programs. That seems valid to me regardless of what the jet-setters are up to. Trickle-down economics and the fact that the uber rich pay virtually nothing in taxes are both horseshit, but they are also rather beside the point in this discussion.
GIve the money TO THE PEOPLE. Not to the "anti-poverty industry" which will siphon off 25 to 50 percent of every penny supposed to help poor people.
«families who make a household income of $150K per year and who have suffered no practical economic setbacks this year are eligible»
If they did not "get theirs" as well they would strongly object to lower income "losers" getting the $2,000. Summers is hypocritically ignoring the politics.
What the government should do perhaps is give a good chunk to everybody and tax away the excess from those who were not that affected. But that would also make many "F*ck YOU! I got mine" voters angry.
The "F*ck YOU! I got mine" voters are the voices that matter.
The DoD commiserates with the need for more discrimination when it comes to spending
Economists have no special intellect or knowledge; the entire field is filled with fallacious garbage.
You are more qualified to speak on fiscal and monetary policy than any moronic economist.
John Kenneth Galbraith once said: "The only function of economic forecasting is to make astrology look respectable." He also said: "Economics is extremely useful . . . as a form of employment for economists."
Beautifully said.
I presented a paper from Milgrom and Wilson, who just won the Nobel Prize, to my colleagues at work (tech adjacent workplace).
It highlights the pitfalls of the field. The study was an atypically robust mathematical analysis of changes in manufacturing methods, insofar as the connection to the real world was actually there, though a bit tortured and oversimplified (cue the joke about the economist looking for his keys under the streetlight). Mathematically, I would have assigned it to undergraduates as a fun 'hey, you could win a Nobel Prize too!' kind of assignment. My colleagues were pretty shocked that they could understand it so well and it took away a bit of the luster from these pronouncements from the ivory tower.
So, like all things, the profession is not as fraudulent as we would all like to believe, but this notion does exist for a reason. These people do not have robust specialized knowledge. They have access. And the purpose of the profession is to provide seemingly apolitical intellectual justification for an economy that produces ugly and exploitative outcomes, not to produce the best of all possible outcomes for the whole of society.
"And the purpose of the profession is to provide seemingly apolitical intellectual justification..."
That right there is the heart of the conceit of technocratic governance. Economists are at the forefront it it, but don't misconstrue that any other field is any better at applying technical excellence in govt decision-making. It is a supreme irony that meritocracy was coined as a derogatory term for this class of professionals, yet the current usage is not disparaging.
You know, it's said that democracy is the worst form of government excepting all the other forms of government.
In the same vein: Just because a field of study has flaws doesn't mean it's not worthwhile, it means we need to acknowledge that it's flawed. Like nutrition and exercise science, for instance.
Oddly, some of the greatest breakthroughs in hard sciences come from people outside that direct field of study, demonstrating that "robust specialized knowledge" is sometimes a hindrance: Many physicists and chemists and biologists are also essentially looking for their keys where the light happens to be. That's just human nature, it appears.
Worth Noting: there is no such thing as the Nobel Prize for Economics, it is the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel"
-- The story behind the prize provides further pitfall highlighting
https://yasha.substack.com/p/its-all-a-big-lie-there-is-no-nobel-d55
But it's administered by the organization that Alfred Nobel created. So while it may not be part of the original six awards that he created, his organization has definitely adopted it as one of their own.
The Nobel Prizes are decided now by a committee of politicians who are arrogant beyond belief. See/hear Unni Turrettini discuss her book, "Betraying the Nobel," for complete insight to how prize winners are selected. (I mean, really, Obama for the Peace Prize??? He not only didn't take G.W. Bush and D. Cheney to trial for war crimes, he upped the war crimes himself!).
0% of which is relevant since the award was granted before he had taken any actions as President. I mean, your point is correct, just wanted to note the procedural insanity.
Thanks For bringing this to my attention!!
The bank provides the payment, rather than the trust fund from the Nobel estate, but the Nobel committee still administers the prize. Which is a weird thing to do If they themselves thought it was somehow illegitimate.
A point somewhat mooted by the fact of the illegitimacy of some of the awards granted by the Nobel estate trust itself.
So many "economists" are paid to produce a narrative that conforms to the needs of their benefactors, that it hinders the credibility of the field as a whole If their narrative isn't useful to the person footing the bill, it doesn't recieve further funding or doesn't get published. Another issue (alluded to above) is that so many in the field hide behind a certain "mathiness" that in my opinion gets used to hide rather than reveal societal truths.
Actually, the vast majority of economists are paid to make sure that regulations proposed by the federal government or state governments will not unduly harm the average citizen. Another big chunk of them also prepare and analyze all of the boring ass data to get down to one number that someone cares about, like the unemployment rate. Most economists do not work for banks, nor are they allowed to go out and speak in public at any sort of organized event. Finally economics is not about revealing societal truths. It is about studying choice in the face of scarcity, and the complexity that arises from millions or billions of humans making such choices simultaneously and repeatedly.
If you go visit any well taught econ 101 class, they will tell you in explicit terms that economics is about a way of thinking, not specialized knowledge. Anyone can learn to think like an economist if they put enough time and effort into it. And yes, many economists do not also think like the scientists that they should be, but let's be honest here, economics is not the only field of science currently struggling with a reproducibility crisis nor desperate gatekeeping by the old guard of academic publishing. Those are common in just about every branch of science at this point, yes even including physics and chemistry.
The hidden bias, manifest through absurd mathematical claims, earns the field the title of fraudulent; IMHO. Though, I agree with you that occasionally something worthwhile emerges from the study of economics; a broke clock, or something like that.
You are 100% correct!
You may want to look at Yanis Varoufakis, an economist aside from all others. He's the one who criticizes how economics has been taught (wrongly) for all time, and still is. He is the one for whom you are looking, the exception to the rule.
(Macro)Economist here. The blunt truth is that non-economists's opinions about macroeconomic consequences of policy actions are just as good as those of economists. Macroeconomic models people like Summers etc spent careers building have next-to-zero predictive power a year out. We have no fucking clue what will happen. Inflation may accelerate this summer regardless of $0.6-$2-$5-$10k we throw at people (and if it does, it will likely be due to rapid monopolization due to Covid response), or it may slow down.
«Macroeconomic models people like Summers etc spent careers building»
The purpose of those models is not prediction, but "internal consistency", in particular with JB Clark's fantastic "three parables" (so described by Samuelson)...
«have next-to-zero predictive power a year out.»
My professor of econometrics (a long time ago), a very good and cynical one even if he was the chief statistician of a primary central bank, used to say with a sad expression that the best predictive models were simple autocorrelated ones, and even those were beaten by a poll of business CFOs. Not much has changed since.
«The blunt truth is that non-economists's opinions about macroeconomic consequences of policy actions are just as good as those of economists. [...] We have no fucking clue what will happen.»
That is agreeable but not because of technical reasons: it is because most Economists are "sponsored", directly or indirectly, and their main role is advocacy of the interests of their "sponsors". Very few Departments of Economics Science want to give tenure to people who might put off wealthy donors.
Then there are also intrinsic technical limitations, and they have been well described by JM Keynes 80 years ago already both in the "General Theory" and specifically in his 1939 comments on Tinbergen's ambitions, but political economists can still draw realistic scenarios even if they cannot predict quantities exactly, because on a fairly coarse scale in ordinary times guesses can be somewhat reliable.
Most economic models are just stories told with math. There can be many stories that fit the same data. And stories don't make for science, the standard measure of which is predictive performance. Hence, most economic models these days are largely mental exercise to show off one's math prowess.
At longer horizons, simple autoregressive models are still king. There is more real-time data now, so, the very-near-term predictions are somewhat better than a decade or two ago, but that's about it.
While many economists are sponsored, I'm not convinced it's the primary issue. Predicting/modelling human behaviour is genuinely hard. Think quantum physics where particles also think for themselves.
I don't think political economists have any special sauce either. Maybe at very long horizons, and only those who studied history a lot.
No, it's because what happens is largely a response to unpredictable occurrences. If you would ask the economists in October 2019 if the US economy would be significantly worse off in October of 2020, most of them would have said no. But most of them also wouldn't have just guessed that we would have a global pandemic and a totally disproportionate totalitarian response to said pandemic. It's not that we can't predict how things will respond in a more or less steady state. It's that we can't predict these inherently unpredictable shocks.
Predictions in 'a more or less steady state' are just as worthless and unfalsifiable, because the 'steady state' never happens regardless of the size of the shock. Most 'smart models' are getting beat by dumb time-series methods like ARMA even in low-shock periods.
Well done Matt. I know eco pretty good and there are two rules. It's all about structure and nobody knows anything. Structure goes like this: if you build it they will come. (Kinda like the movie.) That's why tax plans are important and so are trade agreements and unnecessary regulations. We measure these sorts of things over the long haul, not next quarter's GDP.
As for nobody knowing anything, it's important to recognize that eco is still a relatively new field. These guys aren't like doctors talking about the heart. That's why arrogance is never fitting. You can pull economists to say anything and, unfortunately, they always present personal theory as undoubtable fact. The field is still changing, nothing like the heart.
Anyway, you did a good job.
Yup, they know nothing and that they think they know is invariably wrong because they’ve been stuffing their brains full with wrongheaded models since primary school. That’s why it’s easy for them to “know something” when it suits the people paying their bills. If you’re gonna pull a shit pigeon out of a hat, you may as well pull out the shit pigeon that makes you the most money and you the blame the multipliers or something when it goes totally wrong. The only thing the geniuses behind the 2008 bailout saved was bankers’s bonuses and the asset bubbles. It was an unqualified clusterfuck of a failure and the only thing that has stopped the banks imploding in 2020 has been covid and the money given to the banks again
through another round of quantitative easing. $10,000 stimulus checks would be much more effective at bailing out the real economy than more corporate bailouts to pay down debt.
I'll give you two cents on '08. The untold secret is the part played by rating agencies. If they hadn't stamped those mixed baskets with triple AAA , a lot of this could have be avoided. Unfortunately, movies and essays glance over this part because it's a known hole in capitalism. And nobody knows how to fix it. Rating agencies classify debt (e.g., big mortgages, bonds) based on the lender's ability to repay. Triple AAA means you're almost totally good for it.
Here's the sad part. Capitalism relies upon ethics. Rules and regulations along with law enforcement can't be everywhere, so it comes down to you and me. Would you cheat for a million dollars? Forego the easily achieved fame and respect you'd receive from family and friends?
Democracy is coming down to the same thing. If you were a poll worker and a ballot popped up saying both Biden and Trump, which button would you push? Biden, Trump, or discard?
Actually The Big Short (book and movie) did not gloss over the rating agencies role in the financial crisis at all. In fact, made it clear that the falling dominoes started with the ratings agency.
I was about to write the same thing (about the movie anyway, didn't read the book yet). I recall specifically the scene with Carell's character and Strong's character confront S&P over the ratings scam of trip A ratings. It was a prominent, unambiguous scene that drove the point home. https://www.youtube.com/watch?v=Vvxbc8L4s64
This is a great scene though I doubt many understood it. Thanks. I'm keeping the link.
As I recall the film Inside job also did not gloss over the rating agencies’ role.
Inside Job is a great documentary.
I thought the movie dealt with it rather quickly. And the reason is, what's the solution? I put this question to a senior VP at a brokerage house. I asked if we could continue to trust rating agencies after their role in '08? She said, well it's best they've gone back to what they do best, rate bonds.
I'm not arguing with anyone, just saying it's a hole. Rating agencies get paid by the company they're rating, so GM pays to have their bonds rated by Moody's. To Moody's, GM is the customer. In actuality, investors are the customer. So how does this three-part relationship translate? Answer: it relies upon corporate reputation based in ethics.
If you get caught cheating (rating below average quality debt as triple AAA), what's the remedy? Throw executives from Moody's in jail? Can't. The market relies on the belief that these guys can be trusted. Too large a pin to expose. That's why they gloss over / bury it within confusion. There is no legislative remedy.
Great book and movie!
In the book, "All The Devils Are Here", the authors made a specific point of relating that at some point, the ratings companies switched from being paid a yearly subscription fee by WS investment houses, to being paid by the job, which obviously opened up a huge conflict of interest, knowing that if they properly rated shit as shit, they would be replaced by someone who smelled roses whenever shit was handed to them. I don't recall the year when this change was made, but it did happen well before the 2008 crisis.
Looking at all those responsible for 2008, it seems obvious the weakest link was the ratings companies, upon which savvy investors place undue faith in their honesty and judgment, something the insider smart guys knew were less than stellar.
Hadn't seen this before. Will pick up the book.
And I didn’t know the role of the ratings agencies was untold or secret. Just conveniently forgotten in order to recreate the convenient myths.
Yes, it's mentioned but not to the degree that it played a part. Specifically, without rating agency cooperation '08 would have been pretty hard to pull off. It wasn't just another thing. And, I believe, the reason we don't hear about this is because there is no fix. We need rating agencies but can't ensure quality. So yes, something big can sneak by.
It hardly snuck by. Plenty of people were warning that the sky was falling but capitalist shills like Summers were in denial. Capitalists live in a utopian world of unlimited resources and growth, an ever-growing pile of money, and no consequences. They’re almost right about that last point - there are no consequences for the financial elite. They’ve gamed the system so they always win. That the ratings agencies are part of the game doesn’t absolve the policy makers that set the rules from blame. They’re either dumb or immoral, but either way they’re responsible and should be punished, not rewarded.
I fully agree with you that they should be punished, but there seems to be no practicable way of doing this under the current US legal/political framework.
I contend that "voting" is pie-in-the-sky as a remedy. What's next?
There are 2 methods to organize a society: Fear of God or Gods and Fear of Man.
We have neither.
My hope is that there could be some method to organize a society that isn't based on fear, but I might be a complete mooncalf.
Cf. HST's "Kingdom of Fear"
Rating agencies relied on loan originators’ underwriting and had done so for years. When the bundles were all de facto US government is where fraud entered
Sorry, I don't understand what you're saying in the second sentence.
Freddie MAC and Fannie MAE did the bundling of the mortgages. It was their job to go to loan originators and determine that the loan originators' ratings were justified by their underwriting activities. Only then could they bundle the mortgages and rate them. They skipped that first step, clearly non-feasance of duty. When they assigned AAA ratings to worthless junk, they committed fraud.
Thanks. As a Canadian, I don't totally understand Freddie and Fanny. I'll say what I know and then you can correct me. In Greenspan's book, he said US home ownership was at 62%. Here in Canada it's around 69. My understanding is that gov wanted to increase home ownership so they pressured banks to be creative with mortgage rules (e.g., no principle and low interest for 1 year).
When Alan testified before congress in the aftermath, he said what happened went contrary to everything he believed. Meaning he didn't believe home prices could crash that much. As a matter of fact, he believed home prices would rise to the extent these softer mortgage securities would be absorbed.
My thought was "bankers got too creative" and then sold off the risk (that they knew about) by pressuring rating agencies to overrate these loans. I think what you're saying is that Freddie and Fanny were government banks underwriting many of these loans. So it should have been them assuming the risk. And then what? They sold off the loans?
As a result, this wasn't a total scam put on by Wall Street, but rather an altruistic idea put on by gov that went awry. Something like that?
No, I don’t see any ethics in policy makers and thinktanks being knowingly dumb to sell the myth of capitalism and tank the real economy to enrich their friends. And you’ve created a false comparison - there is little evidence of poll workers doing the wrong thing, ample evidence of economists like Sanders doing the wrong thing and being rewarded for it.
Should have said, democracy "could" be coming down to the same thing. And it is a valid comparison. Democracy relies upon ethics and so does capitalism. Ethics has to underlie everything. We need to operate under the same understanding.
Adam Smith didn't invent our method of exchanging goods and services, he just wrote the first textbook on it. Before him, there was no economics department in a university. Adam himself, came from philosophy. He knew full well that it requires an undercurrent of good.
Anyway, there's a difference between putting forth best efforts that prove to be wrong and being unethical. I don't slam every player like Larry as being on the take.
Is it morally right to believe that bailing out poor people is morally and economically wrong? I would have called that immoral when there is plenty of evidence that monetary expansionism is just fiscal expansionism where decisions on who gets the money are made by banks and the private sector rather than government. Yes, it’s a questions of ethics, and summers has bad ethics. But ethics is involved in everything so it’s a distinction without a difference, or something.
Fair enough. Nice speaking with you. :)
That's a very good point Danny. Thanks for sharing.
One of the interesting things that occurred during the covid bailout was the fed's willingness to intercede in the Junk rated bond market. Talk about moral hazards. I'm not sure what to make of the fact that bond holders getting paid increased interest for the very reason that they were risky got a free pass.
I've heard about a large expansion of bond-market securities derivatives ala the MBS derivatives that took down the financial system 10 years ago. One more thing to add to the list of research topics.
Sorry Matt, it's dangerous (if you're admittedly "no economist") to pretend you know what you're talking about with respect to the $2,000 check. Would you favor $5,000 or $10,000 instead of $2,000 or $600? Do you have any inkling of what the ramifications of your choice might be? I'm with you on the Goldman Sachs - AIG scam (which is more financial trickery than economics), but when more and more of the "free" money is being shoved into savings accounts, ya gotta ask what's going on here . . . oh yes, your other favorite - inflating financial asset values for the rich while everyone else collects squat on their savings.
The point here is similar to my feelings about 2008, when a decision was made not to bail out subprime homeowners (every subprime loan could have been paid off for less than $2 trillion) because of concern for moral hazard, while many times that was spent to prop up failing banks/instruments pegged to subprime loans. Not being an economist may make me unqualified to say which course is best, but I think it’s fair to point out when decisions lack consistency.
Not being an economist is, when it comes to the economy, a grewt advantage! As the old saying goes, economists have predicted 12 out of the last 6 recessions.
You don't have to be an economist to question where the bailout money went, in 2008 and 2020. You don't have to be an economist to point out that institutional elites tend to dress up their defense of institutional bailouts with different words than Bernie Sanders used when he advocated for bailing out college debt.
I’m an ecomonist
Reasonable people can disagree with certain policies pursued by the Fed and Treasury during the credit crisis. My biggest criticism was holdco liquidity facilities and prefs versus opco. But I try not to get too exercised about mistakes in plans drafted on the back of a napkin at midnight.
But don't present a federal payoff of non-performing sub-prime mortgages as either a viable policy alternative or somehow less generous to the banks. It wasn't. It isn't. First, the suggestion that government actually pay off defaulting sub-prime mortgages would actually be a lot closer to a bank bailout than what the primary emergency facilities actually did. If the Fed repays the mortgage, it is economically identical to buying back the mortgage at par - above then-current market prices. That is more generous to mortgage holders - not less - than making pref investments in the lender or expanding eligible collateral at the PDCF. It is also more generous than the TALF and TLG programs. All of those facilities involve risk to the Federal government, but ultimately represent sums required to be repaid to the Federal government. They also had the benefit of not being absolute or permanent and also not pretending that the sole issue was sub-prime mortgages. The expanded PDCF didn't save Lehman because they didn't have sufficient collateral. The TLG didn't save WaMu because it isn't an actual capital injection. These programs largely protected the integrity of the payments system without protecting the owners from losses on their non-performing assets. It isn't just a pure coincidence that these programs all generated profits for the federal government. It was a feature of the facilities.
Nothing resembling that was going to happen - or even could happen - if the Feds simply repaid non-performing subprime mortgages. A policy like that would arbitrarily bestow profits - not just access to liquidity - on private label MBS holders, SPV warehouse lenders, and certain homeowners, all at the expense of a different group of arbitrary taxpayers. It also wouldn't have timely achieved the primary purpose of protecting the payments systems. When TARP was first passed it was intended to be used to purchase private-label RMBS and just about everyone in the space ran to the Fed and Treasury and explained how it would take 2 years to deploy that kind of money across tens of thousands of cusips. Those at least often had $100MM tranches. Doing the same thing on the loan level $200,000 at a time sounds like a 2010 item, not a 2008 item. The men you are criticizing are men, not gods. But they aren't complete idiots either.
"The men you are criticizing are men, not gods. But they aren't complete idiots either."
Nobody said they were either. But using your own logic, don't you think it's possible that a policy could have been implemented in 2008 which did more for individuals and families being foreclosed and evicted than it did for majority shareholders of Fortune 500 companies, "banks" like Goldman and hedge funds? If these guys were smart AND concerned with real people, that's what might have happened. But that isn't what happened and it's not what is happening this time either.
The only respect in which they are not complete idiots is in protecting their own immediate interests.
Short term: thumbs up
Long term: ?
Many of the people who were being evicted in 2008 deserved to be evicted. That's not something most people want to hear nor even consider, but it's the truth. If you buy a house for more than it's worth and more than you can pay, you can't keep living there indefinitely.
Without specifics that's a meaningless statement. My beef with the evictions I'm talking about are where minorities were intentionally put in ARM and other sub-prime loans through misleading sales practices that were pushed down from virtually the majority shareholder and c-suite levels. Of course the guy at the end of the sale was also to blame, but a lot of people had become convinced by said c-suites that the market would never stop inflating, including salesmen. Unless you have numbers you want to discuss on who and how many of the evictees who were foreclosed upon deserved it, I don't really have much else to offer.
I'm trying to consider your view and Nate V's.
It seems as if you both agree that many people being evicted had chosen to attempt to buy more expensive homes than they could truly afford. The difference seems to be in who you want to blame.
Nate seems to want to put the onus on the homebuyer in many cases, and feels that it's not sustainable for the public to bail out such poor decisions.
You prefer to emphasize "misleading sales practices". Those could come in two major flavors: somebody, say a mortgage broker seeking higher fees, pushing somebody who could have qualified for a lower interest loan into a sub-prime higher-interest loan for which they were more than qualified. That's clearly unethical and a failure to be addressed.
The other major flavor of marketing problems is just encouraging people to take out maximal loans for overpriced property period - no matter what class of loans they use. That could be the real estate agent, the buyer's friends, the mortgage company for not turning them down, the media for emphasizing buying a home to gain access to the inflation in values, etc. Responsibility gets a lot more diffuse.
When the mortgage industry tightens up credit, they are oppressive because they are not helping poor folks enough; if they make credit more available, then they are exploiting the poor and leading them into a debt trap. The missing ingredient here is accounting for the agency of the buyer. I think we have to acknowledge Nate's concern that it's unsustainable for the government to bail out poor decisions.
(We can definitely criticize other bad government actions too; but having made a bad choice in the past doesn't make a future unsustainable policy into a good one. If you want to encourage the government to bail out homeowners on a broad scale, you'd do better to find similar bailouts which you DO support, which DID work and were positive and worth emulation, rather than pointing to past actions which only call into deeper question any currently proposed bail-outs).
Your challenge to Nate to provide numbers of "evictees deserving eviction" is not unreasonable, but you fail to similarly provide numbers for "evictees not deserving eviction". And that's understandable, everybody prefers to choose the scenario to be treated as "typical" and few want to justify why it's typical. Providing numbers is going to be hard when the difference depends on how much agency you assign to homeowners. If somebody buys a bad car because they let themselves be talked into it by the salesman, is that something the government should fix? Well, if there is outright fraud, maybe so (at least in terms of punishing and regulating, if not "making whole" the buyer). There's going to need to be a lot more careful nuancing and defining before any numbers (of deserving and undeserving) would have meaning.
Amen Cypher.
I have no idea what a pref or opco is but I do know from having driven through small towns in the midwest multiple times since the '80s what the consequences of economic decisions from our experts look like and it isn't good. The people making these decisions may not be complete idiots but they do seem blind to what it's like to live as an ordinary person and most of us are that - just ordinary people. The question to me that needs to be addressed is does our government exist for the benefit of its citizens or for the benefit of its corporations and financial institutions?
You know the answer - - your 'government' IS the corporations and financial institutions, the owners, always has been. Whom else would they benefit, surely not the servant citizens, your ordinary people?
It wasn't the government's decision that caused global competition to move low-skill, high-paying jobs from the United States to other countries where they could be low-skilled low-paying jobs. That was simple market forces an improvements in the transportation industry. The government could have attempted to be protectionist, but that definitely wouldn't have worked in the long run.
Actually it was. The Gov chose to enter into trade deals that made manufacturing in the US impossible. Then sanctimonious idiots like Obama went around saying those jobs are gone forever...
Then the Bull entered the china shop and said, these deals suck. We are getting screwed by the world but China first and foremost. and BOOM, American manufacturing has been on a tear ever since Trump came into office. Make decisions based on good outcomes for the American people rather than any sort of dogma and you get good results.
What exactly is gender studies in Pakistan? How to throw acid in the face of girls more efficiently? Really? Pakistan?
To start, I'd say what we're doing isn't working so well either. The economic system we're living in is not endemic to the Earth like trees or water - it was created. It's a system that prioritizes competition and financial wealth. It increasingly leaves out more and more of our citizens. What is stopping us from creating a system that prioritizes the well being of our citizens instead? Our government through the influence of the wealthy, giant corporations that have loyalty to no one country and an out of control military supports this system - It's a choice.
That sounds very nice in the abstract. The devil is in the details of implementation. A movement to create that end goal through short sighted means could easily create an even worse situation. People who are driven by resentment, oppression narratives, disdain for objective truths, and ideology can be blind to semi-predictable real world effects. It is very much NOT true that things couldn't be any worse so any change made with good intentions must result in a better world; there are many more ways to mess things up than to improve them, and it's an easier task. Thing can get FAR worse than they are.
Rational solutions, with open debate and flexibility to reconsider and change course based on real world effects, are needed.
For example, policies which build net worth through increasing equity in housing, also have the effect of pricing many people out of housing. A policy of raising wages can have the effect of stimulating more automation and supporting fewer, but better paid, jobs. There are tradeoffs to choose from, rarely simple wins without costs (obvious or hidden).
So propose policies which you think would lead to a more humane world, and let's talk. I agree we need that, but I am wary of jumping into some scheme which is based more on superficial promises than serious analysis. The net impact is more critical than originally good intentions (much less catering to & amplifying resentments for short term votes).
I agree with a lot of what you write and was active at the time in the mix. But increasingly, I have viewed the outcomes of the “fixes” to be skewed towards institutions rather than individuals. And inevitably some institutions are able to “grift the fix.” And then my issue comes of policy design. Larry and the gang are such f*ckwits that they seem to typically write policy that benefits the best of the grifters. Ultimately that inability to effectively degrift the policy has made me shift towards saving individuals above institutions. I well know the issues but JFC he sounds like the fed talking about computing power and the lack of inflation. Argh
The Fed and the Treasury don't have spending authority. You can help banks without spending money. You have existing credit facilities with them and can change the collateralization requirements. The FDIC is already guaranteeing their deposits and they can use the TGL Program and the systemic risk authorization clause in the FDIA to expand those guarantees. The Fed's TALF program fit within pretty clearly existing authority. A couple of things they did were pretty legally dubious (e.g., the Bear Stearns acquisition assistance package), but there's no way they can just start issuing grants to bank debtors.
Without a Congressional appropriation of money, what are these institutions going to do for a guy that can't pay his mortgage? There is no way any authority they had could be stretched that far. Where they could stretch those authorities to help people, they absolutely did. Look at any history of the crisis-era FHA changes and you'll see a pretty obvious picture of government agencies putting taxpayer guarantees on the line to help people that were in every way, shape and form a riskier credit than the banks the Fed assisted.
Could Congress have intelligently done something different? Maybe, I don't know. But why don't you tell me what, with some specificity. I'll keep an open mind.
There were numerous opinions floated after the fact about what the Obama administration and Congress SHOULD or COULD have done better. This includes what could have been done AFTER the fact, not simply paying the mortgages of the original subprime home buyers.
Something like the New Deal era HOLC for example:
https://www.freep.com/story/opinion/contributors/2019/11/17/housing-market-crash-foreclosures-enriching-real-estate-speculators/4195373002/
"The New Deal solution
This glut of bank-owned property was not inevitable. During the Great Depression, New Deal programs such as the Home Owners’ Loan Corporation had fought valiantly to prevent foreclosure. The HOLC bought bad loans off banks for their true value and issued new, long-term mortgages loans that kept borrowers in their homes. It also was extremely lenient with homeowners who had trouble making their payments.
“Every possible forbearance was exercised before foreclosure was authorized,” the HOLC said in its final report to Congress in 1952. In stark contrast to modern banks like Steve Mnuchin’s OneWest, which put loans in foreclosure after a borrower fell 60 days behind, the HOLC usually didn’t start the foreclosure process until a borrower had been delinquent for a year or more. In about a quarter of cases, the HOLC went even further, lowering homeowners’ monthly payments by giving them five more years to pay off the debt and lowering their interest rate in the segregated neighborhoods where it operated.
The HOLC ended up acquiring nearly 200,000 properties through foreclosure. Even in those cases, however, it did what it could to help the community. The government bank kept the homes occupied and well maintained. It employed a small army of inspectors and contractors to fix those homes and rent them out until new buyers could be found"
Or, if that just smacks of evil socialism, how about legislation that strictly limits the types of loans and predatory lending that any banking institution insured by the FDIC can make? You want access to interest free cash? Then you must abide by these new laws that state exactly what kinds of loans you are NOT allowed to peddle, under threat of criminal prosecution. LOL, right? Nah, instead we got the opposite:
https://www.mortgageloan.com/subprime-mortgages-are-back-with-a-new-name
I am not that familiar with what the HOLC did or didn't do, but I'd like to point out that the Great Depression lasted over a decade and your paragraph above indicates HOLC issued its final report over 20 years after it started, while you indicate it bought 200,000 properties. See what's wrong there? I'm telling you Paulson, Geithner and others specifically considered this option. Sheila Bair was the only one who thought it was viable. Everyone else concluded that there was no way the government could timely acquire a meaningful number of bad mortgages. Securitization also makes buying whole loans at non-generous prices a much more litigious and time-consuming process.
Take one look at HAMP and HARP and you know Geithner was right and Bair was wrong. Congress appropriated over $50B for HAMP and HARP. HAMP used Congressionally appropriated money to modify mortgages for anyone whose mortgage payment was more than 30% of their income. HARP used Congressionally appropriated money to let underwater, performing mortgages refi to lower rates without bringing money to the closing (this was by far the bigger problem than foreclosures by number of affected persons) but required the new refi'ed loan to be re-underwritten. These programs managed to push out less than $12B. They couldn't find enough takers to spend even the initial appropriation. It was extremely time consuming and non-productive and most of those people were better off walking away.
Then let's go back to what caused the crisis to begin with. Indeed, as you have laid out pretty concisely, actually bailing individual mortgages out would be a fraught and difficult thing to do as well as carry some long term consequences for the economy as a whole. As you said, some of these guys are pretty smart and if they WANTED to do it at the time, they could have invested a little more brainpower in how to minimize the impact to working families and/or those who had lost their jobs and were underwater in sub-prime mortgage debt. Write down a percentage of that debt and pay it directly to the banks on behalf of the borrowers is one thing - or - force the banks to somehow restructure every single sub-prime mortgage that they held in a manner that gives regular people more options than to simply lose their homes and any equity they might have had in them. Instead, as is always the case with a "disaster" (natural, economic, military caused, etc.) the firms who employ one group of these smart guys have nearly direct access to Congress and the Fed and can quickly negotiate deals before the rest of us have gotten out of bed in the morning to realize we are being evicted in a week. This happens every time and it's a core driver of the massive concentration of wealth in late stage capitalist semi-managed economies that are really just inverted totalitarian states. Now I'm off on a tangent...
But to my main point, how did this crisis begin in the first place? You'll hear plenty of politicized answers from the erstwhile "right" dealing with the CRA and Acorn, but little attention outside of a few left leaning outlets and authors (like Taibbi) was given to the end of Glass Steagall, the marketing of sub-prime loans like ARMs to people who actually qualified for standard loans in order to make a quick buck all up the food chain in the banking industry, the credit ratings agencies that artificially inflate assets they knew would end up being toxic bombs as AAA in collusion with the mortgage lenders and investment banks who are paying them for their ratings, and the general culture of greed and being above the law or too big to jail when, in cases where they did nothing "illegal" it was because their own lobbyists had written the laws and co-opted the already weak SEC and federal law enforcement. And yet nothing was done to draw back any of this nor were any laws passed to remove the massive risks inherent in the system, including re-instating Glass Steagall or something similar. Instead, as mentioned before, the big banks just called closed door meetings with the Fed and elected officials and hammered out a lifeline for themselves in virtual secrecy from the rest of us. Of course the government itself is to blame as well for the Fannie and Freddie programs (which themselves were sellouts to the same "industries"). I suppose That's what I'm concerned with now, not necessarily that people were screwed last time around. It's too late to do anything about what happened to them in the past. But there is clearly no appetite among 90% of the U.S. government to actually rein in these organizations and draft true consumer-targeted legislation to get the big banks and their peers back on the right track for the good of the 99.9% and not the 0.1%. Every time a politician floats an idea like it, the media ignores or mocks it and we start hearing about communism, socialism and anti-semitism (OK, the latter was mainly in England).
This is all a little too glib, in my opinion and covers too many topics for me to address. Let's try to focus it. Make your argument for how Glass Steagall repeal played a meaningful role in this crisis. The worst loan underwriters, like GMAC, Countrywide, WaMu weren't universal banks or derivatives dealers. They also weren't CRA lenders.
Fannie and Freddie get something of a bad rap in these discussion. Taking Southern California as an example, the median price of a home exceeded conforming loan limits pretty early in the first bubble -- by the end of 2002 if I'm recalling correctly. Most of the crazy losses weren't agency paper. They weren't subprime, either. What I find insidious about the Dem/Rep accepted narratives is they both arrive at the conclusion that loans were made to "the wrong people" -- either with a liberal spin (predatory lenders!) or the right wing spin (those broke ass people had no right to be buying houses!).
I myself don’t have a specific counter at all. Probably a lack of imagination.
But I do wish that policy design could “means test” institutions. Your points are all well composed and concise yet sufficiently comprehensive. Thanks for the good-natured discussion. I’d like your thoughts on pros/cons of breaking up Google/Amazon since I feel that debate is only going to intensify.
Yes, indeed, it's fair. What's unfair is to invoke the supposed expertise of economists as a bar to ordinary people talking about public affairs that affect and afflict them most directly.
As I note in another comment, "economics" as currently taught is really just one school of the stuff (neoclassical) and has been thoroughly discredited. If you have a degree in this macro garbage from most major universities, congratulations! You have been indoctrinated.
What should be mystifying to ordinary, sober taxpayers with any interest in the matter is why such reverence is accorded to the discipline and why, for heaven's sake, it is reputed to be the most rigorous of the social sciences when actual economic history again and again proves its macro models to be worse than worthless.
You may want to look at Yanis Varoufakis, an economist aside from all others. He's the one who criticizes how economics has been taught (wrongly) for all time, and still is. He is the one for whom you are looking. Cheers, Rob
Yes, I'm familiar with Varoufakis and take some of my cues from him. Thanks.
I don’t know anyone that reveres economists. When they aren’t making ridiculous predictions like the internet being a glorified fax machine they are surfing child porn. We all know who I am taking about.
Try Yanis Varoufakis.
Government shouldn’t be in the business of picking winners or losers. It should be in the business of making sure that the playing field is level for everyone.
I mainly agree with this idea in principle. The trouble comes when the government officials responsible for ensuring this "level playing field" rotate from the government to private industry, continuously, repetitively.
So government wasn't protecting banks from their own mistakes in 2008? A level playing field would have let more institutions drown. I do not personally think that would have been a good idea (letting them fail), but what was done is in no way about a level playing field. When banks need help, bail them out. When people need help, bail the people out!
Screw that! The banks should never have been bailed out. They should have failed and the executives all jailed and sued for every penny they have.
Arrest the tyrannical governors that are destroying jobs and livelihoods and open the economies so I don’t have to work yet another week of each year to pay for someone else’s bailout.
You realize there is no such thing as government funded, right? It is all tax payer funded and the producers in the middle like me are the ones that get fleeced. The Uber rich and poor don’t pay shit!
So you think every dime the government spends comes from taxes?
If so, why do we have Treasury Bonds and Municipal Bonds? Why do we have a federal reserve system?
Yes, every dime the govt spends comes from taxes. Bonds are simply loans based on ***future taxes***. That's why in this country govt bonds are considered the safest possible investment. The only other way the govt can raise money is by selling (or leasing) publicly-owned assets (e.g. spectrum or off-shore oil).
I see your point, but isn't there a moral component worth considering? By and large, the banks themselves caused the meltdown. And by and large the homeowners did not. Yes, I think the banks should not have been allowed to fail. Instead, they should have been nationalized, and individual bankers at the highest levels should have been prosecuted.
If failing to loan prudently was at the core of the banking problems, then nationalizing (and politicizing) banks is an even worse solution than what the dumb bastards did.
The banks should have been allowed to fail. Sure, that would have been painful - such lessons are. It is the vain attempt to prevent people from learning painful lessons that is the rot in our system.
Letting banks fail sounds fair, but produces a lot of problems that spread through the economy far and wide. If we had a laissez faire economy, of course the banks would fail, but our real economy is nothing like that theoretical construct, free-market capitalism. It has not been like that for a long time. In our present American system all the big stakeholders can make enough noise to get saved by the government -- banks, large corporations, unions and so on. That leaves the non-stakeholders, the people with little or no (or negative) net worth. They have no lobbyists and therefore they end up absorbing a generous share of the big players' losses.
Only certain categories of people are allowed to learn painful lessons. Certain others -- from already rich and well-connected families -- are protected from learning these painful lessons.
I'd like to believe that one or two dozen really greedy and ignorant financiers can't bring down the world economy.....but I'd be wrong in that belief. Put those people at the right positions at the right time and they certainly can.
What I DO NOT believe is that there are any number of smart and noble men who can prevent this sort of disaster. It takes the structure of institutions, markets, and mutually defined trust instruments to avoid chaos all the time....but it will always happen some of the time. We just need to learn from those mistakes and try to do better next time, although entropy basically ensures that whatever we fix over here will likely create the environment for potential harm over there.
False. When one bank fails the entire banking system tends to fail. We very, very narrowly avoided that disaster with the Lehman debacle.
The banks should not have been allowed to fail, but their shareholders should have been wiped out (many were anyway) and the banks sold for their assets. The mortgage lenders who were responsible for the poor underwriting were mostly dealt with this way, it was the investment banks hoovering up those poorly underwritten loans and turning them into investment rated securities (and the insurance companies providing counterparty derivatives to insure against their failure) that became the systemic problem. We had never seen or contrived of this sort of securitized speculation before, which is why it caught everyone's risk models by surprise when it went belly-up.
Dodd-Frank gave Treasury, the Fed, and regulators more power to resolve these sorts of issues without systemic risk: Giving the federal government the authority to take over a poorly capitalized investment bank and wind it down without causing systemic harm and ensuring that banks of a size that could cause systemic issues remained appropriately levered (i.e. the "stress testing" regimen).
"By and large, the banks themselves caused the meltdown. And by and large the homeowners did not."
There were a lot of homeowners taking out ARM loans they didn't fully understand, thinking they could always refinance into a fixed rate in the future. That happened to be what their mortgage servicer was telling them too, but if their mortgage servicer said he'd give them $5000 to jump off a bridge would they just blindly do it? Probably not.
You also have people effectively lying about their incomes and their wealth to secure loans when their credit was absolute shit due to previous defaults, massive credit card debt, etc. Yes, underwriting standards are supposed to catch that, but that doesn't mean that "homeowners did not" help to cause the meltdown by borrowing money they literally could never afford to pay back within their lifetimes. You had janitors with two mortgages on two different homes who never lived in either -- they were "investment" properties that they were "flipping".
Was that everyone? No. But, similarly, plenty of credit unions and small commercial banks did everything right and got hammered by the undertow of all the bad actors in the system. To state that "banks = evil" and "homeowners = helpless" is just to simple a story....but it's certainly the story that Matt seems to write.
Just look at the headline of this op-ed, for instance.
Don't forget that these home buyers also believed they could sell their houses within a few years for more than they had paid, thus wiping out the loan. Recent history of prices that always rose and never fell led them to believe such would be the case forever. In every bull market the younger players think exactly the same. You cannot expect home buyers to be more prudent than those who speculate in an up market, especially considering that they were planning to live in their investment. Only lenders have the knowledge of history and the rules of their firm to guide them in such unpredictable waters.
Do you really believe that Nationalized banks would to a better job than independent banks? Government interference caused the 2008 crisis. The government running the banks would be the opposite of a solution.
The truth is that I'm not qualified to have a useful opinion on this. That said, I've lately been thinking that the survival of capitalist infrastructure is helpful to people because if food and other goods became unavailable, tremendous numbers of people would suffer. I am not as concerned about moral anything -- only the most good for the most number of people. I do find it remarkable that our economic system keeps going to the extent that the holiday season supposedly gained in sales over last year! Greed has many bad effects, but it is impressively persistent in making money. By contrast, according to what I've read, when the Soviet Union began to fall apart, the food stores there were empty and people were hungry all the time.
Generally, the government has a much better record of picking winners and losers, batting about .500. In the private sector, OTOH, about 80% of new enterprises fail within in 18 months.
Tell me how well the govt does in picking winners in the DoD?
Overall, the federal government bats about .500 picking investment winners and losers, which is better than the private sector, where 80% of new enterprises fail within 18 months of launch.
That's not an answer - cat got your tongue?
This is an immoral argument. The “government” has no Constitutional role in interfering in markets and when allowed to do so picks winners based on corrupt criminal incentives(bribes and pay offs).
The Commerce Clause would like a word.
Economist=Haruspex
I had to look that up.
Unemployment numbers=goat entrails?
Could be, but I don't know.
I've recently been feeling liberated by the idea that I don't need to (and actually cannot) have an opinion on some extremely important issues because I have zero knowledge of those fields. Macroeconomics is a good example.
(I used to try to learn everything about everything, but for some reason have not achieved that goal. Now I am increasingly grateful to be able to say to myself and others, "I have no idea.")
99% of the time good old common sense is correct.
You don't need to be an economist to know that means testing a response to a pandemic that has harmed well off and poor alike is a bad idea. The person who used to make $400,000 a year but was forced by the government to shut down and is now facing eviction has just as much claim to a government handout as a poor person in a similar situation, and significantly greater claim to it than somebody working minimum wage who hasn't lost their job or seen any changes in their hours during the pandemic. We've had 60 years to help poor people do better, and now is not the time to suddenly change our policy and become super worried about how they are doing. The response should be targeted towards people who have lost their jobs as a result of the pandemic or have been forced by the government to shut their businesses down, regardless of their previous income. That means that some people who were very well off will get significant stimulus checks while poor people who have been relatively unaffected would get nothing. At least half of the country will HATE that idea.
I wonder why not pay every household and then means test through a invertly graduated repayment reduction as part of filing your 2020 Income Tax. Sure some PE guys may get to keep but wouldn’t the result be highly effective?
It’s dangerous to assume economists know anything these days
The U.S. government employees a battalion of PhD Economists and not one of them called the 2008 financial crisis. Fire them all.
And we hear very little of why over a decade that cash returns have been negative. There are no more safe havens, just grifts.
For savers, there is a fraction 1/10 of 1% post-covid, makes you want to save a shitload there. The markets are not indications of wealthy people's feelings (Ball, 2020), and do not account for risk or underlying health of any company. Debts are passed onto individuals as a form of social shaming/sadism. And the bond market is going hell in a hand basket.
The wealthy are at war with us, and millions have no clue. No healthcare during a pandemic. Pay to play vaccines. Higher Education still charging students 30 year inflated tuition costs on the back of no healthcare. Regulation sleeps with the fishes, and Politicians get 2 hours to read 5000 page bills to vote on.
This is crazy...
"This is crazy..."
Or, as the kids say, "Jokerfied."
One woman at SEC called it. She got fired. (Anyone remember her name? Blakely something???)
Blakesly Born
Brooksley Born
That's not their job though.
Actually political economists know quite a bit, and "sell-side" Economists know also something, but most will just find some sophistry to support the interests of their sponsors. Even when not ignorant, they are biased by vested interests.
I saw someone say on Twitter (my universe) yesterday: it’s terrifying how expensive it is to be poor.
Indeed, and Barbara Ehrenreich wrote a specific book about that: "Nickel and Dimed: On (NOT) Getting By in America". A number of businesses and rentiers make big profits by knowing that poor people are short of savings and cash and thus charge them disproportionately more for smaller purchases and fees when they have troubles etc.
This!! I suggested Ehrenreich for the book review. Most shocking to me was how many corps would only pay out salaries on debit cards, whether you had a checking account or not. Then when you used the debit card to make purchases, fees were deducted. The larceny and usury is devastating.
What do you expect when 70% of the country is financially illiterate? Our public indoctrination centers(schools) don’t teach what needs to be taught. Don’t even get me started on civics. It is even worse.
I see no connection between the stimulus checks(which I do not need, and which I will give to those that do, in one way or another), which go to making up the shortfall in income and would be used for the day to day necessities of the working class, and the inflating of financial assets, which the Fed, on its own, well before the CARES Act, was busily administering to, and the Act itself, which saw a large portion of the SB loans snapped up by companies not small by any measure, and the even worse $500 billion for big business, which was really nothing but a security to be used by the Fed, leveraged at up to10 to 1.
That these recent stimulus checks to people in need(and some not, such as myself) have had a significant impact on interest rates for dumbass savers like me, is a bit of stretch, compared to the last decade of never ending "liquidity" to the financial markets, which cut out many thousands of interest I should have earned, but was denied due to lacking the proper connections inside the capitol of our democratic republic.
As for the proper amount the stimulus checks should be, I suppose we could look at what other nations have done for their citizens, look at the impact on inflation etc. and make a judgment based on that, but then those other nations have not put a priority on having over 800 military bases in over 140 countries, have not embarked on a $1.7 trillion 30 year modernization of its nuclear armaments, have not been at war for 19 straight years after a single terrorist act killed just under 3,000(less than 10% of the still ongoing pandemic), fought on borrowed money, now many trillions in total, have not increased their military spending roughly $160 billion a year from two years go, this for an agency that can neither win wars or account for its spending, and which, when all its real spending is taken into account, basically equals what all the other nations on earth spend.
Once again, we have a situation where the American people must ponder the biggest unknown in the Universe; where does our government's ineptitude end, and the corruption begin?
great post, so many things to unpack and i'm not up to the task tonight or maybe ever.
1: "a significant impact on interest rates for dumbass savers like me"
the significant thing is that savers are relentlessly messaged that we are "dumbass." pretty sure that you were being sarcastic here. can't wait for the negative interest rates
2: "where does our government's ineptitude end, and the corruption begin?"
ineptitude = corruption, corruption = ineptitude. ask the ivy league. ask hunter biden.
genuinely feely sorry for the next generation of bright young things who think getting into the right school and working hard will make a difference. the playbook has already been written by a small number of well-connected families. if you're a scion of one of them, it doesn't matter if you're inept. you'll be covered.
Look at what being a functionary of the .01% did for the Bush's. Nothing particularly special or extraordinary about them, but they rose to the highest levers of political power with the most of modest of abilities.
Prescott and Big George did serve in wars to bolster both their careers. However, the lack character (good or bad) along with the lack of talent of their offspring is telling; considering all the advantages they had as children of elite functionaries.
To be indifferent to others is the greatest strength of any past, present and future functionary. I don't think it takes much talent or skill, but it seems a Ivy League education has a way of detaching their alumni from his/her empathy or regard for those less fortunate.
I listened to a famous Harvard professor tell a huge class, maybe 300 students, exactly that...that they will be the leaders; over and over and over he told them, they were the elite, the controllers, the deciders. I felt like vomiting.
Many more people have extended the credit and can barely pay the interest raters. Low interest rates inspires building.
Cost of 80 Means Tested Welfare programs for 2019 $771,000,000,000.
https://singlemotherguide.com/federal-welfare-programs/
(Mar 17, 2020 · 2. 24 million children use welfare every month.
(Urban Institute) Children make up the biggest percentage of welfare beneficiaries. )
Apr 18, 2019 · Overall, military spending $716 billion in 2019.
https://www.washingtonpost.com/us-policy/2019/04/18/us-military-spending-set-increase-fifth-consecutive-year-nearing-levels-during-height-iraq-war/
Wars can be controlled, women's organs can not!
War and Welfare have gone hand in hand for the last century.
You gotta get cannon fodder somehow.
That thought crossed my mind also. Look at the new population control. People just die and leave the buildings in tact.
They're still building new buildings. In my town, they're knocking down old and beloved Art Deco and humbler but still functional edifices to erect gigantic condo/student housing complexes.
Cui bono?
Outside of cost, what might be another way?
Men don't seem too swift about keeping it in their pants either : )
Totally!
The Pentagon is a black hole for tax payer money. That said, they do know how to win wars. They just are not allowed to do so because the longer the war, the more tax payer money they get and the richer the politicians (the ones that don’t allow them to win the wars) get.
For example, Trump allowed the Pentagon to obliterate Obama’s ISIS army and then when he told them to pull out because the job was done, the Pentagon and grifting politicians had a meltdown. Ditto for the endless war in Afghanistan.
If you were going to make “many thousands” one a couple of interest points then you make too much money (<$75K) to get a bailout check.
I've been retired since 2015, my income is below the maximum allowed for married couples to receive the stimulus. Throughout my life, I've lived below my means, and saved and invested prudently, paying off my 30 year mortgage in just over 14 years. When you've gone over 14 years without making a mortgage payment, and had the same car for 20 years, have no need for the latest whatever being made, saving is pretty easy.
I'm pretty sure that $75 K figure is for single people, but in any case, my retirement is less than that, and I'm married.
Kudos to you for doing it the right way. This is admirable.
“More and more of the ‘free’ money is being shoved into savings accounts”? Really? That’s news to my broke-ass. My $1200 check went right into my checking account and then right back out. And I suspect that that’s the case with most people. All of this esoteric economic theory is just that: theory. Motherfuckers need money and 600 bucks is a fucking joke, particularly when poorly-run financial/investment firms got billions. Let Goldman, Sachs and all the rest burn.
MFers need a job. Point your anger where it belongs, at the governors not allowing you to work because of a virus that 99.8% of working age people will survive.
Ha. Ha. Ha.... Fuck off, dude. “The governors” aren’t at fault here, federal government needed to come up with a plan eight months ago and they didn’t. And they still haven’t. Even IF “The Governors” “allowed” me to get a job (whatever that means), I wouldn’t go out and work. Covid’s out of control right now.I don’t understand how you dipshits are going,”Yeah, but most people survive!” and think that “surviving” is good enough. Most people do survive, yes. But a lot of those survivors are now afflicted with all kinds of long-term health issues. I don’t want those.
Might as well embrace your poverty, friend.
Some deaths are being attributed to the bat flu, sure, but from a statistical perspective those are the same people who would die from heart disease or diabetes: overall death rates for 2020 are no worse than 2019; the covid death rate is illusory.
Meanwhile, in some parts of this country, "the land of the free and the home of the brave," people are getting out, working, going about their lives and doing just fine. Unless you're stuck with one of those fascist governors who's maintaining a lockdown, your choice to stay home is on you.
Larry Summers calls himself an economist and gets paid by rich people to say things they want to hear said by someone who calls himself an economist. I have seen no evidence that he is any more knowledgeable than Taibbi, only that his priorities are different. I like Taibbi's priorities better. Summers is a monster.
True as far as it goes, I guess. But when we're in a national health situation where many people simply aren't being allowed to work, what's the alternative? Printing free money generally isn't good, but huge masses of people starving and rioting because they can't pay rent and buy food is worse.
... it IS worse, isn't it? Or has 2020 truly taken us through the looking glass?
(Side note: I understand that savings are, economically speaking, inefficient. But at an individual level, they're pretty important in case of... emergencies like this. And maybe the current situation should've taught us we need to build some more resilience into the system, even if it costs a little bit of efficiency.)
I'm a fan of savings myself. I don't care if my money isn't making somebody else more money.
Yes, huge masses of people starving and rioting because they can’t pay rent and buy food is worse than printing free money for said starving and rioting people. The fact that that’s even a question to you just illustrates to me how fucking stupid people like you are. Yes, we should feed people in a pandemic. Yes, we should forgive rent when unemployment is out of control and people have no income. How is that even a question to you?
Ramifications? You mean the dreaded deficit? Or people not having incentive to improve their prospects? What if the ramification was people paying off debts? I suspect the banks don't like this last one in particular.
Hey think of it as a tax rebate—we get precious little for our taxes (unless you count endless wars as a common good)
Well we just had the first anti war President in decades and allegedly 81 MILLION people voted for the other guy, a career grifter with dementia that didn’t even campaign. It appears, if you buy the vote count, that a majority of Americans want endless wars.
They must be a common good. You're not allowed to vote against them.
Are you unaware that this money is only going to people that make less than $75K a year? You think those people can put it away for savings?
What concerns me is our legislative and judicial branch allowing these authoritarian, draconian, unConstitutional lockdowns to continue. I have been reading conspiracy theories about these executive(federal & state) emergency powers for decades and now they are all coming true. The only thing remaining is being carted off to a FEMA camp. Literally everything else has come true in the last 12 months.
Americans might have an emergency fund? Holy shit, we really gotta put a stop to this.
The airlines received $50 billion in the CARES act and laid off 50k people months later. The fired employees will take that $2000 and pay rent and buy groceries and maybe put a small amount in their savings after their other bills. Those employees will be circulating that $2000 around maybe 5 or 6 businesses...maybe more. Giving money directly to people puts actual money in to the economy. Thinking our governments deficit is ran the same way as your check book is wrong. There is no need to worry about the taxes tomorrow because the US creates the money that is used. So even if CHINA asked for trillions of dollars to pay off our debt tomorrow we could just create the fucking money because its fake. Blame Nixon if you don't like the funny money of it all because he took us off the gold standard.
I don't know a single person who put their last stimulus in their savings account?! I'll just pretend you don't know what your reading about....you must be running in the Larry Summers crowd.
I am retired with multiple pensions, all of which are inflation-protected and pass to my wife on my (quite soon) demise. We have been following a long-term plan to pay off debt incurred on behalf of an adult child's medical costs, and increasing our savings. We don't run in the Larry Summers crowd, but our plan is working. We put half of our stimulus into the long-term plan and gave the other half away to a food bank. We live a modest life, but don't need a stimulus check. We want as much innovation as possible to get people back to work. I've advised perhaps two dozen companies on how to function with remote work.
You make less than $75K with multiple pensions?
Yes. Chronically-ill 43-year-old child has caused repeated refusal of promotion or transfer to improve income. When hospitalizations started her husband left her and pulled insurance. We went through a bit over $1M, borrowed $400K on lines of credit. $65-75K/year, all went to restoring assets and paying off debt. We're rich, because we have what we want.
Ever heard of means testing? That was kind of built into these stimulus packages on the front end. My wife and I don't qualify for the checks, but if we did we'd give the money away or use it to pay down debts. That said, we're not even close to rich; barely above middle-middle class in terms of our purchasing power and many like us have lost their jobs to the pandemic. Complaining about larger stimulus checks to those who DON'T need them is fine - I think there should be a streamlined application process of some kind, but it would have to be privately managed for reasons of sheer scope and that brings with it a bunch of different problems. The government has been cut back so much by now that they couldn't manage the undertaking (by design, if you're a "small gov't" Republican/Libertarian - who I should add rarely complain about the make-work, transfer of wealth program known as the "Defense" Department). But again, if I had to fill out a streamlined application like the ones businesses were offered in the last stimulus package because i wanted a check that I didn't have to pay back, I'd be fine with it. Another thing is you might be confusing the different parts of these packages. The loans that were supposed to go to suffering small businesses were the most often abused part of the whole deal. If you think $2,000 checks to the RIGHT people is a bad idea but not the bailout of Wall Street and Corporate America, then you're just off base. Do you have any evidence for stimulus money NOT going to families in need and instead going to well off persons who didn't need it?
The DOD is at this point a wooden whitewashed elephant utterly infested by "streamlined, more effective" private contractors.
The funny thing is that the make-work govies still have health care and retirement benefits. The make-work contractors don't; sucks to be them.
Maybe the problem is the make-work?
My wife and I got only a partial payment in the first round due to our combined income, . . we gave most of it to her parents (who are retired and could use the money) and some of it to our local rescue mission. We will be fine without more "stimulus," though not approaching "rich." I'd much rather have more relaxed means testing that allows some folks who don't "need it to survive" get a few extra bucks than to squeeze harder on those who really do need the money. If we get checks this time around, we intend to give it away again. I know there are people who really desperately need help.
Good man. I did the same with my $1200, but kept my hands off my wife's share of our combined $2400 check, easy to do since we have separate accounts at our credit union. I gave some to our daughter, increased my gifts to charity and gave much bigger tips to those working at our local restaurants
Funny that you think the marginal number of federal government parasitic bureaucrats that have not been hired in the last four years has any impact on the treasury printers ability to print checks. The last time I checked the military was part of the federal government. If we are going to have a big bloated, corrupt, unmanageable federal government then we are going to have a big military as well. The military is part of the money game that makes politicians rich.
IF the big bloated corrupt government and especially the military wasn't captured by big business and structured more like the northern European or even Australian or New Zealand's semi-welfare state with more accountability, then it probably wouldn't be big, bloated and corrupt. But we're stuck with the Constitution and the legislators, regulators and in some cases judiciary that have been co-opted to turn many agencies into giant self licking ice cream cones and make work programs.
"Funny that you think the marginal number of federal government parasitic bureaucrats that have not been hired in the last four years has any impact on the treasury printers ability to print checks. "
Funny that you apparently lack for reading comprehension skills if that was the main takeaway you got from my comment.
It wasn’t the main takeaway. I agree with your other points. Just not that cutting, or not growing, what is already a bloated, corrupt, unmanageable federal government has any impact on its ability to cut checks or vet those that receive them.
Bigger doesn’t equal better when it comes to bureaucrats. History has proven that the more money and people the worse government performs. It literally has no incentive or ability to work efficiently.
A friend who runs a small business took one look at the PPP "loans" and said NFW. Wait until you hear about how that gets treated - as taxable income for the business that still has to pay back the loan. It's a double-hit.
Your friend should have taken more than one look, or a longer one, because if the PPP money was used to pay workers and not laying them off, it was tax free, just like the $1200 stimulus checks were.
Interesting. I, too, have a friend w/ a SB who took a PPP loan and she said it's not to be paid back. Maybe your friend got in on the program later than others when different types of banks/loans were involved? I'll have to ask her about it again.
Economist, "All these variables make my economic model look fraudulent. Well, I'll just have to throw them out. Bingo! Presto! Another Guesto! We got another economic miracle on our hands. Hope the public don't mind bailing us out in about 5 years."
What's your point ?
@ Greg- What is your fucking point? Your very own point, please? "Shoved into savings accounts"? You must be joking.
I hate to comment on someone's physical appearance and anyone can look unattractive at any moment, but I love the headline photo. The hanging gut and neck fat spilling out of the collar as he lazily leans back, almost as if he's waiting for a tray of Hors d'oeuvres in the court of Versailles, really says it all. Somehow makes it challenging to call him an "Empty Suit".
"a cauldron-bellied Harvard economist in a $3000 Zegna suit"
I love it when Matt goes full HST.
This is why I pay the $5/month
Possibly a stupid question, but what's HST?
Hunter S. Thompson
Can't stand his writing style but can respect his accolades.
Good question IDKE
Hunter S Thompson
All that’s missing is skeet-shooting a few peasants. Pull!
I steer clear of calling people ugly unless they're morally repugnant too. Call it the Sarah Huckabee Sanders Principle. Since Summers is a fuckboy of the highest order. calling him any and all petty and hateful names is something we're morally obligated to do. Sorry. Those are the rules.
Anytime I see someone with a pasty, ultra-flabby neck hanging down below a barely defined chin, I think "Real life 'Bob's Burger's' character."
See also: David Axelrod.
"Somehow makes it challenging to call him an "Empty Suit".
It's challenging because he's a Full Suit.
The point that Matt Taibbi is making is not that what Summers says is wrong or right, it is that when it comes to bailing out big business or especially Wall Street the likes of Summers scream MORE! MORE! FOR ALL OF THEM! MORE! MORE! but only when it comes to "losers" they start making distinctions between this and that category, whether those distinctions are pointless or not.
You gotta means-test the losers.
BTW properly speaking the government should *compensate* those who have lost income because the government shutdown some sectors of the political economy regardless of their level of income: if a cook lost their $20,000/year wage because of shutdown, they should be compensated with something not far from $20,000 and similarly if the owners of some restaurants saw their business profits fall from $3,000,000 to $1,000,000 a year they should be compensated with something not far from $2,000,000.
The government because of the public interest caused them both damage, and in an ideal world that damage should be compensated for using public funds.
«especially Wall Street the likes of Summers scream MORE! MORE! FOR ALL OF THEM! MORE! MORE!»
During the 2008-2009 bailouts they argued that *all* financial corporates should get a lot of Treasury and Fed cash, to avoid singling out and stigmatizing those that were more bankrupt than the others.
Was just going to point that out. This was the policy that allowed banks like Goldman to argue the bailouts were forced on them (actually they’d have failed without multiple rescues).
hahaha the winners never get "means-tested."
Matt, I'm not a fan of Summers, but he does ask a good question - what is the limiting principle?
We were, before all the money spent this year, paying about $500 billion per year in interest on money already borrowed. That isn't quite the defense budget, but it is inching toward it. We have added to that greatly this year. In the case of this year, it was necessary. But all of this money will be paid back with interest. I'm 57, it won't mostly be paid back by me. You mentioned "many times that" was paid to prop up financial institutions - and I think you were referencing the $2 trillion that would have paid off home loans. I don't think that is correct. The TARP money approved was $700 billion and all the funds loaned to those institutions was paid back. That doesn't make it a good idea, but it didn't cost the taxpayer in the long run. This will - again, necessarily so. But I don't know that indiscriminately giving $2000 per person is a good idea.
I live in the middle of the country. Most people I know who did not have their employment interrupted are doing at least as well as 2019. We are doing better. We are making the same amount and there is less to spend money on. My wife is a nurse, and was furloughed for three weeks when elective procedures were postponed - and she got, after the additional unemployment benefits, a little less than she would have had she been working. I think people who have lost their jobs or can't work should get $5000 and people who have had their business closed should get a relief loan of up to $100,000 that would be forgiven if the business reopened and people like me should get nothing.
I think we often do things mostly to make ourselves feel better that we are doing something and we don't think too hard about what will really help people.
"That isn't quite the defense budget, but it is inching toward it."
Does anyone ever consider reducing the defense budget? It seems to be an immutable principle against which all other considerations are to be judged.
Which country is about to invade the US? Which has the intent and capability to do so? Get back to me with these answers if you intend to justify the current "defense" budget.
First I’ll respond to your response below where you ask if there is any reason the defense budget shouldn’t be reduced - no. You are absolutely correct in your assessment and you are going to get hit by all sorts of “Summeresque” weaseling to support the obscene war machine. I remember when the communist block was falling, the Soviets pulled out of Afghanistan, and there was talk of a “peace dividend” coupled with complaints of the military’s excessive spending - $800 toilet seats were discussed a bit. Then Iraq was given the go ahead (or not “clearly dissuaded” if you buy the BS) to invade Kuwait and the Iraq/Afghanistan plan was put into place and dutifully followed by Clinton as he sucked most Democrats into being warhawks. Bush II was merely the next stage.
And no - no country is a military threat to the U.S. That is a non-starter. Besides getting destroyed by nuclear weapons why worry about building nuclear weapons when microscopic organisms and unseen agents can do the job? The U.S. military exists to overthrow nations and subsidize the shipping costs and guard US business interests.
The militarization of the American mind over the last 30 years has been insane. Quite literally.
Was any country a threat to the Roman Empire at its peak? why did they spend so goddamn much on their military if not to maintain their empire? Same with great Britain. Empires are expensive to maintain, and they are maintained through military power.
Last I checked the Roman and British Empires didn’t have 14 Ohio Class nuclear submarines each armed with enough firepower to obliterate any nation on Earth constantly patrolling the oceans of the world and with more than one always within range of any target on the planet.
It is ironic you mention the Roman Empire since it is commonly understood that an inability to pay for its army was one of, if not THE, cause of its fall. History tells us the spent “so goddamn much on their military” in abject error and at the expense of its citizens.
At it’s peak the US military had over 30,000 military warheads - a number that was impossible, LITERALLY IMPOSSIBLE, to ever deploy. Don’t tell me the military-industrial-congressional-complex won’t spend the United States into its own downfall.
You have to tear up the treaties and defense alliances, which should be done anyway; that is the justification for the defense budget.
And I am a veteran, and serve.
We should have ended NATO 25 years ago.
It’s almost never been about invasion and mostly to do with maintaining a hidden empire. Read “How to Hide An Empire” by Immerwahl. America has an unreal number of outposts and island redoubts throughout the world, originally created by the mining of guano, which morphed into naval bases and militarily outposts. There’s something comically metaphorical about it.
Ian Fleming's "Dr. No" was all about Dr. No trying to get a guano monopoly. The novel was far crazier, yet somehow truer to reality, than the Hollywood Bond film adaptation.
Fleming was the decaying British Empire's Philip K. Dick. People who persist in viewing Bond as an admirable he-man protagonist, a sexy model to emulate, don't get this. He's a manipulated prole; a "blunt instrument." O. F. Snelling and Kingsley Amis call this stuff out in their detailed analyses of the Bond novels.
Bond was indeed a “ blunt instrument”-but your average lefty still doesn’t like to admit that the USSRs decline into SMERSH was an inevitable consequence of forced industrial socialism.
That's interesting, I just read up on how they swapped bauxite in for guano.
I haven't read any of the books but I consider Quantum of Solace to be very underrated. One of the things I like about it is how it's actually about a real issue in the contemporary world (water monopolies) instead of some superweapon / soap opera plot line. Sounds like they were attempting to get back to the kind of grounded international plot lines that would resonate with people who read the news.
Of course audiences panned it, so then it was back to stupid soap opera plots for the rest of the franchise.
I think the greater concern is civil war, which would then make the US far more exposed to an external threat. I could be wrong, but it seems the main cause of the tension is the widening wealth disparity and erosion of the middle class. Of course the main issues peddled by the media are race and gender related, but this is all a ploy to keep the masses from focusing on the real problem (the revolving doors in DC made up of corporate lobbyists, defense contractors, and corporatists disguised as politicians).
I really think our elected politicians need to be considered part of the media/entertainment world. The power is not in their hands.
Seriously.
They seem to have a revolving door with all the various news organizations well enough.
I'll believe in the threat of civil war when I see it actually happening.
Stuff like the alleged Whitmer kidnap operation doesn't rise to that level.
You do realize the bargain basement value of the US military right? I give that it may be morally reprehensible to many people, but to argue that our military dominance of the globe doesn't benefit the average American significantly is absolute nonsense. I'm all for holding the military accountable for the money they spend, and tracking down a few of these trillion-dollar slush funds, but reducing the size and scope of the military (which is what most people are actually talking about when they say reduce the budget) will come with very heavy consequences that basically no one ever considers.
Please tell me about how the US military beat the Taliban in Afghanistan after 20 years. I'm steepling my fingers.
Can't wait until this Powerful Force Like No Other conquers outer space after spending two decades failing to beat people who can't afford shoes.
True, but they can step up.
Or miss us when we’re gone.
Grisha: it's not the US that's being defended, it's the treaty obligations to defend 67 other countries, in practice 68 with Israel.
It's also defending the global commons, that is the shipping and air lanes.
We have to tear up the treaties and alliances that mandate the budget.
(Which BTW is only 15% of the USG budget, which people miss).
The latter is wise and laudable, the former is the madness of leaving mediocrities in charge of what their grandparents built.
Look at the size of NATO and please realize it barely qualifies as half what we're defending.
Now is their Empire building here? Well yes...but by venal mediocrities.
They don't want war of course, not with a real power.
They just want 'Great Power Competition" and the associated importance.
I have dreams where the great grandson of a WW2-er undersecretary to the Assistant Secretary starts nuclear War at 4 AM one day by accidentally bumping up against another idiot stepson on the other side - this is a summary of WW1 1914 BTW.
1914 is what happens when your kids take over the family firm.
All that is needed for catastrophe is for cunning leaders like Putin who won't take the bait to be succeeded by a mediocrity and we stumble into a nuclear 1914, one that makes even less sense than the first one.
"1914 is what happens when your kids take over the family firm."
From a US-centric perspective, 2000 is also what happens when your kids take over the family firm.
"Now is their Empire building here? Well yes...but by venal mediocrities.
They don't want war of course, not with a real power."
All correct.
I'm USA so totally US centric.
But understand I don't insist on actual literal nepotism to meet that description, so we can start in 1993.
Bush 43 you know would have avoided war except for 9/11, which changed everything. He ran on that, and without that the neocons could have never pushed him into any of the following folly. He was indeed pushed into Iraq.
A lot of bad things that were happening became institutionalized under the Clintons, for instance 'reinventing government'. At that point we now have a private contactor government that actually delivers the benefits and services in all respects - including and especially govt benefits/dole/handouts via Financial Companies such as JP Morgan, etc - this on top of the Vogon bureaucracy of rather dull bureaucrats who could no longer run things..
This doubles the size of the actual real government while building in a fatal marriage of interests private and public. Old fashioned people call this conflict of interest, but that's only if you believe morals conflict with interest.
Well, morals lose that war.
But what I did mean originally was the mad extension east of NATO, an alliance that should have gone the way of the Warsaw Pact. The intervention into Yugoslavia, the adding of the Baltics to NATO [some damn fool thing in the Baltics is the next 1914]. The guarantees to Ukraine in exchange for their nukes - which should have stayed there....sorry. But see above paragraph for the 'reinventing' of government...you see...the worst of all of it was getting involved in the Rape of Russia - the Clintonites washed the money from the Oligarchs over here....speaking of Larry Summers. <<
Stanley Fisher.
Victoria Nuland. Fuck the EU because Ukraine is OURSS!!! $$ Later of course.
An engine of corruption was created and institutionalized in the 1990s.
it continued afresh after 9/11.
You see for instance my dears we never looted Iraq.
Or Afghanistan.
Oh no.
We looted the American Taxpayer, but did it overseas.
We created regulatory free puppet countries that trillions in US$ was sent without any real oversight and much looking the other way.
I should mention the uniformed military is not in on it, but we are not blind.
Mute yes- it's called discipline.
What do you think Ukraine was all about? Mini Russia, keep the Grift going.
$$ gets sent to Ukraine, kicked back after being laundered as 'aid' then back to many besides and before dear Hunter. That's why they shit themselves.
Not a server. A small replay of the Russian Rape of the 1990s, smaller but hardly unprofitable.
Putin is hated because he stopped it, he's feared because he knows and has the goods on them, Trump was terrifying because he might look into it.
Fortunately for them Trump is Barker not Biter.
You see our government overseas aid functions as sort of a private Dawes plan...but the money comes from the public purse, is laundered overseas in our various concerns, then back to the appropriate people in DC, NYC, etc.
It's the ideal form of government for the governing: socialized costs, privatized profits.
Which doesn't mean some idiot at 4 AM doesn't blow up the world.
OTOH if America is about to blow up [it is] then blowing up the world as diversion looks better.
Remember - they don't fight. They send others.
I see you have bought into the generational propaganda. Yet another way to keep the people divided and at each other’s throats. Of course the best propaganda is spread by the people.
In real terms, the defense budget has been reduced. In 2015, it was $596b, which was 3.27% of GDP. In 2016, it was $600b or 3.21% of GDP. In 2017, it was $605b or 3.11% of GDP. There isn't another major part of the budget which is going down similarly. And it tends to go to Americans and American companies
The Pentagon's budget is now $740 billion, funny you stopped at the year 2017 when giving the Pentagon's share of the GDP. Second, that budget is not all the military spending, as things like our nuclear weapons costs are in the Energy Dept. the Coast Guard in The Interior(my memory, could be somewhere else), and so on. Then we have the matter that you are starting from an already large budget, one that funds over 800 military bases in over 140 countries, is embarking on a 30 year, $1.7 trillion "modernization" of our nuclear weapons(last used in 1945), and which will undoubtedly cost far more than that over a 30 year span, and lastly, has been fighting a fruitless, pointless, unwinnable war on a tactic for 19 years after less than 3000 people died were killed in a single terrorist attack, a number dwarfed by the pandemic, which is nowhere near over, all this on borrowed money, now well into the trillions.
The size of that budget is one required to project empire, not to protect the nation, and indicates a serious misallocation of both funds and technology when any rational examination of the world reveals just one nation in a position to challenge the US, and that is The People's Republic of China, a challenge that is economic in nature, not military, though telling that to our elite is as futile as getting one of them to have a family member serve in the institution they place so much faith in, as long as it is staffed by people they don't and wouldn't choose to know.
"Second, that budget is not all the military spending, as things like our nuclear weapons costs are in the Energy Dept. the Coast Guard in The Interior(my memory, could be somewhere else), and so on."
Don't forget that virtually of the CIA's budget is buried in the Pentagon budget and is completely unaccountable. The fact that many actual DOD programs are themselves unaccountable contributes to the general miasma of unaccountability.
If you call attention to this fact, certain sectors will call you "unpatriotic."
I suppose we could also rightfully add the interest on the debt accrued on various weapons systems and past wars, and the fact the State Dept. also has a military component, as I recall from reading one of the accounts of our various dismal ME forays.
A couple of years ago, I read that the US had 11 of the world's 21 active aircraft carriers, a military component that is purely offensive in nature, and since that time, the PRC, which had one at that time, that one a cobbled together ship from the Ukraine, now has 2 and is building a 3rd, while the US has either built or is finishing 2 more, giving us 13 of the world's 25.
Every now and then, I just imagine living on a block where one family, which has 5% of the block's population, makes about 22% of the total income of that block and spends nearly as much on guns as the rest of the block combined, still feels justified in attacking others on that block due to security concerns, and then wonders why others look at them askance.
I'm amazed that the PRC is dumb enough to be investing in aircraft carriers, if it still is. This is Merrimack/Monitor-level shit in 2021.
Never underestimate the cupidity of a defense contractor, regardless whence they might hail.
What, exactly, do people have against blowing the living shit out complete strangers in other parts of the world?
I'd bet that the color scheme of every bone rattling, viscera shredding explosion contains a little red, a little white & just a smidge of blue.
As far as the CIA goes, I have to say I'm quite proud to pay my small share of tax dollars to have my perceptions managed & my propaganda spoon fed to me.
Sometimes, late at night, I sit on my back porch whistling while I dine on the latest propaganda fondue. When I'm feeling particular daring I smother it in ranch dressing & gouda cheese, crack a bottle of Ripple & Yum!
Budgets are for Chinese people to worry about anyway.
We're Americans, goddamnit, and ya can't make an empire without cracking a few spending limits, now can ya?
In the immortal words of my new best friend, Buttercup Dew, who said, quite succinctly I might ad,
" My journey to White Nationalism was a short and simple one – I simply became conscious of being white. This happened to me because my parents actually broke down & bought a mirror. Revelatory doesn't begin to describe the experience.
"It was shortly after my Race / IQ discovery that I first conceived of myself on a biological, racial level. I finally understood why my father always yelled "SHOULD HAVE BOUGHT A GODDAMN CONDOM" every time he looked at me."
I think you'll see, thanks to Mr. Dew's wisdom and piety, why defense budgets, much like balloons & expectations, need to climb ever higher.
Sadly, I'm a bit put off by all of this Larry Summers criticism.
The man looks like a bridge troll gone to seed. I imagine that he always looked like a bridge troll gone to seed. Without the copious amounts of cash the man generated for himself by puckering up and kissing the ass crack of every corporate executive and rich guy who wandered into tongue range, how do you people think the man could have gotten laid?
The mind boggles.
"The man looks like a bridge troll gone to seed. I imagine that he always looked like a bridge troll gone to seed."
I imagine that he came out of his mother's womb looking like a bridge troll gone to seed. A tiny baby bridge troll in a Zegna suit, suffused by mucus.
In truth the military itself overaccounts to an OCD level up to installation level- a base.
Ft Hood, Norfolk etc are installations.
When we say hands across America in the service it means we have dozens looking for an empty cardboard cartridge box, if its a sensitive item like night vision or God help you a weapon hundreds are searching and someone will pay heavily.
And...then... the accounting is sent up the chain - and the 984,000 civil servants in DOD lose track of it.
They can’t add. This is the audit failure.
"virtually *all* of the CIA's budget"
i assume i'm not the only one struggling with Substack's laggy software, and i am highly tolerant of and sympathetic to my fellow typo-ers and omissioners. god bless us every one.
If we want to just protect the nation we can cut it in half.
We need air, sea and space above all, the land forces can be cut- but the treaties must be abrogated first.
I went online and at the site, "the balance.com", the total military budget, including all those departments associated with it, actually comes to $1.13 trillion, and, by the way, it says there are 761,000 civilians employed by the DOD.
I'd say half is still bloated; perhaps you might have read some/any of the books by Andrew Bacevich, whose reality based critiques of the inside the Beltway thinking on foreign policy are grounded in both personal experience and and an understanding of a word they seem not to recognize; "limits". I have no problem with us having the world's best military, but to have one with such an overwhelming advantage is a benefit only on paper, with no real world benefit.
The idea our country, whose % share of the world's GDP is shrinking each year, can somehow militarily garrison and control such a changing world, much less have the moral right to do so, is absurd, as surely the last 19 years of futility against military nonentities have proven to any rational and objective mind.
"surely the last 19 years of futility against military nonentities"
B..b...but we kicked the shit out of Grenada in 1983 and Panama in '89-90! You gotta go back further than 19 years for examples of decisive American military victory, my man.
I'm all in favor of any reduction going to Americans and American companies. Any pressing reason why it shouldn't be reduced -- in real terms -- still further?
Addendum: when I say "American companies," I deliberately exclude Lockheed Martin, Raytheon, BAE, etc.
I am more in favor of Mom-'n'-Pop kind of stuff. I'm a small thinker.
Sure, it is possible, my point is the allocations of borrowed money has probably already caused payments on the interest to exceed the defense budget. In other words, you could reduce it, but it isn't the part of spending that is making other spending unaffordable. Soon, payments on the debt will be twice the defense budget. If you reduce the defense budget, the part of the budget already reducing in real terms, it isn't going to solve the problem we are talking about. Paying soldiers and sailors less money, or paying less of them isn't really going to help the economy that much or make that much of a difference on the debt. And people who work at Lockheed buy cars and clothes and pay rent and contribute to the economy as well. I just don't think you are going to find the deep well of funds for other people there.
Addendum: I was a little off on the interest payment on the debt - it was $550b last year. Which gets back to my original point. We can't afford to not be smart about relief and stimulus funds here. People who have not been hurt economically by the pandemic shouldn't get any money (like me). People who have should get more. I don't know if I will qualify for this new money, but if I get it, we will probably give it away. We don't need it. And we can't afford, with all the expensive problems we have, to give money away when it isn't needed. Which gets back to the criticism of a blanket check instead of targeted relief.
"Tends to" go to Americans? Hilarious!!
I'm not following. The defense budget goes to people in the military and people who work for defense contractors and companies that contract or sub-contract - just about all of those are Americans.
Read Hedges War is A Force That Gives Us Meaning yet?
That doesn't disprove the notion that American companies and American workers are who primarily benefit from military spending. Even all the billions we give to other countries in military aid have to be purchased from American military contractors.
Not sure what that has to do with the defense budget going to American people and companies - when talking about the stimulative impact of govt budget spending on the U.S. economy right now.
"he does ask a good question - what is the limiting principle?"
The Fire Inspector asks the question "How did this fire get started?" but he tends to wait until they've put out the fire before he poses the query.
The economy is melting down for everyone but the ultra-wealthy. People are dying and more will die due to homelessness and poverty and covid before this is finished. This is economic and - possibly societal - triage.
An Inspector who gets in the way of firemen and such evacuating a building and putting the fire out would be thought a massive fool. He's got plenty of time AFTER the fire is out - or at least controlled... - to ask any philosophical or moral or academic questions like "yes, but what is 'Fire,' really?"
I'd like to make a deal with every economist - academic or armchair - and libertarian. Let's just bite the bullet and get everyone to a stable place and THEN let's have a great big wide-ranging discussion on the federal budget priorities. I think most progressives will happily re-engage the debate about the welfare state and m4a and such if the other side is willing to talk about Defense, Progressive Tax rates, and all that delicious pork that keeps the rich getting richer and our forever-war machine well-greased with dollars and bodies. Deal?
Deal?
Rich guys always seem to be asking 'how much is too much?'. Well, why not 'how much is too little?'. 200? 400? 600 seems to be on the 'too little' end of the spectrum.
$600 isn't even a monthly rent payment for most people living in urban areas. This is bad comedy.
I don't think Larry Summers would acknowledge a "too little" as logically existing, since clearly from his point of view $0.00 is not too little.
Your last line nailed it, guys like this is how a guy like Trump got in the Oval Office. The MSM and the Left leaning folks can blame Trump for Trump, and all those mouth-breathing idiots in the dirty fly-over states, but the reality is our “intellectual betters” are why an Orange haired maniac has had the reins the last four years.
Yeah, because they're a bunch of cunts who'd sell your ass to keep themselves out of hock.
Look at this cunt at a nice little snack table with Jeffrey Epstein.
Jesus. Why can't we get to the point of tarring and feathering already and be done with it?
That depends on where we source the feathers from. California condor feathers are a non-starter. Chicken feathers could work but pigeon feathers would get the most public buy-in.
We would also need to consider the ecological impact for using tar on such a large scale. Health and safety guidelines may need to be amended for those who are transporting and implementing the sentence.
It seems pretty clear that we are going to need a government funded study for this. A preliminary high level estimate is $67M for a deliverable in 24-48 months. I'll include recommendations for supply chain and public relations at no additional charge.
I've got some old pillows that have a mix of foam and feathers. Just let me know where and when they are needed.
When we run out of bird feathers of whatever origin, I am fully in favor of "tarring and 'foaming." I find Styrofoam to be an ecologically acceptable substitute in terms of its application to politicians. There's nothing else to be done with it.
The feathering has always been an insult to injury sort of thing. Now that you mention it, substituting feathers with Styrofoam would be particularly devious. It would be like covering them in sin. The pain from hot tar is only temporary but Styrofoam is forever.
What about if - regardless of foam or feathers - we build a catapult and launch these new "birds" into different structures we've constructed out of wood and steel?
I don't think the "birds" would like it, so we'll sell the tickets to launch them on the Free Market using an auction to smooth things over.
Recycling would be a prudent solution. I'm definitely in favor of fast tracking this.
I suggest that most people who voted for DJT in 2016 were thinking about his opponent, not about Larry Summers.
You’re right, but Summers was Treasury Secretary to Hillary’s husband, and about as pure an embodiment of Clintonism as there is. Even if people don’t know Summers by name, they’re familiar with the ideas, or at least the impact of those ideas. I should have mentioned this, too, but Summers is sort of a Zelig of the financial crisis era. He was in office for the repeal of Glass-Steagall, he bungled regulatory warnings about derivatives, and before he came back to government to advise on the bailout era, he loaded up with speaking gigs from banks. He represents a lot of what drove people nuts about the mainstream response to the crisis. So yes, it’s true he wasn’t on the minds of many by name - I should have clarified that it’s the idea of the guy that’s recognizable.
Back when PBS Frontline was doing journalism, they did a great episode called “The Warning,” which was about Brooksley Born’s (CFTC) battles with Clinton and his economic team over regulating derivatives. Summers was a principle villain in the piece — along with Rubin and Greenspan.
Repealing Glass-Steagall didn't change a damn thing. You ought to know this, Matt, because you've been covering this stuff for 15 years. There's nothing about Glass-Steagall that would have prevented the financial crisis -- having it in place could potentially have made it worse.
As far as regulating derivatives markets: So...you have a bunch of banks trading derivatives they don't understand, you have insurance companies selling derivatives they don't understand....but you think that had we put a bunch regulators in place, regulating derivatives that literally nobody can understand that it would have prevented a massive macroeconomic catastrophe? I mean, please, spare me. That's literally nonsense. And laying all that nonsense at the feet of Larry Summers is even more nonsense. I'm not a fan of Summers, but at least he's still intellectually curious about how the macroeconomy works. I don't see Matt Taibbi publishing white papers on secular stagnation, which I'm not sure you even read, because it doesn't fit the archetype you put Summers into.
You rail on short sellers too, Matt, except that the people who called the ball on mortgage market were the ones with the stones to short it, massively, and ride out he carrying costs until it was profitable. I guess your preference is that Michael Burry and John Paulson become SEC regulators instead, but I think that's also nonsense: You're just removing the profit motive and incentive for anyone to identify the mistakes of others. Regulators would have had to understand the entire secondary market for mortgages and mortgage securities to head it off in a regulatory fashion, yet the people who discovered the issues (Steve Eisman, Gregg Lippmann) focused specificaly on the micro aspects of the securities trades. Eisman and Lippmann also happen to be trained economists. Weird, right?
Perhaps Charlie Ledley and Jamie Mai (who, like Burry, studied the macro effects and hedged them) would have caught this, but two kids operating out of the Berkley dorm room aren't probably going to ever have a post near the top of any of the financial regulators in the country, are they?
In hindsight, everything looks preventable. The causes of World War I seem absolutely stupid and infantile when looked at from the future. So do the decisions made by Andrew Mellon during the 1929 stock market crash. But that's because we know more now than anyone did then.
You need more Nassim-Taleb in your life and way less Marty McFly.
«Repealing Glass-Steagall didn't change a damn thing.»
That is just propaganda: at the very least it eliminated restrictions on bank takeovers across state lines, and this has two massive consequences:
* It eliminated the small bank lobby as a countervailing power to that of the "national champion" banks of NY and CA, making Wall Street the only source of "sponsorship" for so many representatives and senators.
* By eliminating most small banks it meant that most lending was done by local branches of those "national champion", driven by sales targets, and by a policy of securitizing the loans.
«but you think that had we put a bunch regulators in place, regulating derivatives that literally nobody can understand that it would have prevented a massive macroeconomic catastrophe?»
Why have the SEC or the CFTC or the Fed or the OCOTC, or any other regulation? Eliminate all regulators, and just and hand over a trillion dollars a years to Wall Street to reward their being being "best and brightest"! :-)
The point of having derivative regulation is not so much to prevent issues, but to reduce their size. Perhaps if the CFTC or the state betting regulators had been allowed to do their job they could not have prevented the failures, just like the FHLBB, subject to intense deregulatory pressure by politicians, could not prevent the S&L scams, but in many cases a regulator can slow down the buildup of problems, reduce the total size of the problem when it manifests, and can help fix the problem more easily because of industry knowledge.
The lack of derivatives regulation allowed a truly massive problem to build up, and made its resolution much more expensive. The countries most afflicted were those celebrated for their "light touch" regulation, inspired by the propaganda from people like Summers, Rubin, Greenspan.
Repealing Glass-Steagall didn't eliminate small banks. Financialization and mass securitization of secondary market mortgages and commercial loans was the main driver of that, when it was supposed to help them. This sort of financialization was also the main driver of overleveraged banks, because AIG and other insurers were default swaps on securities (without knowing what was in them) for pennies on the dollar.
The main driver of all of that? Loose monetary policy, low inflation, and far more money swimming around in the pockets of qualified investors than they knew what to do with (also known as income/wealth inequality).
You claim that regulation of derivatives would have reduced the number and size of the swaps market. Based on what evidence, exactly? AIG's own quants and executives (who were personally liable for the financial representation of their books, per SOX) didn't know the size of the risks they were taking on, didn't know the massive amounts of counterparty risk they had. Maybe some regulator would start asking questions about it....but I'm not sure how you can design a regulation around the kinds of derivative risk hedging that was going on from 2003-2007, because nobody really understood the whole market, they only really understood their portion of it.
Only AFTER do we see what a fucked up mess it all was and how it could be prevented and I think that the prevention measures should be simple (capital requirements, regulatory scrutiny of well defined instruments) and not complex (regulating derivatives and counterparty risk).
Better to create mechanisms for unwinding bad bets by greedy, foolish people than to try and prevent people from acting foolish and greedy.
«Repealing Glass-Steagall didn't eliminate small banks.»
Oops, I slipped here, it was the McFadden act as extended by the Bank Holding Company act. They were effectively repealed pretty much at the same time as Glass-Steagall was.
«Financialization and mass securitization of secondary market mortgages and commercial loans was the main driver of that»
Perhaps you are too young or rather unfamiliar with the USA banking system: it has state chartered and federally chartered banks, and Glass-Steagall made dependent on state regulators the takeovers of state chartered banks or the opening of branches by out of state or federal banks, and the state regulators as a rule never approved them. This meant no interstate banking, so banks remained small in most states, but also they were protected from out-of-state competition.
This gave the small state banks a lot of power against the big "national champion" banks, and a strong incentive to lobby against them to protect their independence. Eventually the Democrats, which were earlier bought by the small bank lobby, were bought by the big bank lobby...
«You claim that regulation of derivatives would have reduced the number and size of the swaps market. Based on what evidence, exactly?»
There is massive evidence that the related regulation of insurance products (and gambling) has been effective, and anyhow as to:
«but I'm not sure how you can design a regulation around the kinds of derivative risk hedging that was going on from 2003-2007, because nobody really understood the whole market»
The principle many regulatory systems use is to forbid any trading of products that are not specifically licensed, and licensing would depend on study and consultation, allowing objections to be discussed, and this would have likely been a slow process and resulted in only "safe" (burden of proof on the promoters) products being licensed and with restrictions. So those “kinds of derivative risk hedging that was going on from 2003-2007” would simply not have been licensed.
The deregulation that Wall Street purchased meant that everything was allowed in any way, under the fantasy that large businesses knew what they were doing and if they did not they would be let go bankrupt, but of course the latter was never a realistic prospect.
You're off on your history. Cross state bank takeovers have definitely been negative for our economy, but it occurred because of the Douglas amendment to theThe Bank Holding Company Act. In the late '70s several states authorized cross-border takeovers, as outlined in the act, and from there the process accelerated. When Congress finally made cross state takeovers fully legal in the '90s, it was already a common enough occurrence that not much changed. Glass-Steagall prevented banks from speculation on financial markets with their customers deposited money. It had nothing to do with cross-border banks.
It's hard to understand why talk shows keep trotting Summers out for a comment, much like my puzzlement when Fox brings Newt on to comment on politics.
He's part of the club, just like Brennan and Clapper on national security. It's all good - if you're on the inside.
Specifically, what about the piece do you disagree with?
DJT only won because of his opponent
Bill's peccadilloes were just a warm up act for the true moment of humiliation in Hillary's life, losing to Trump.
‘His opponent’ was known for licking the bags of scum like Summers for money. Trump voters didn’t need to know Summers by name to vote against his kind.
You’re forgetting about the overflowing clown car that was the GOP Primary in 2016. People like to just blame it on how bad his opponent was, that way they don’t need to look any deeper.
There was only ever supposed to be one contestant in the 2016 DNC primary. I give credit to Martin O'Malley and Lincoln Chafee for showing up, in the same sense that the stage manager respects the props. I think Jim Webb and Larry Lessig were for real, but of course they had no chance.
Jim Webb and Tulsi Gabbard are two peas in a pod-thus having no chance in the woke corpocracy that is the modern D party.
It's funny how Tulsi somehow doesn't count as part of "The Squad" in the media narrative, despite being a woman POC who backed Bernie Sanders. Huh.
Because she spoke out against the DNC's obvious corruption. They don't like anyone saying mean, accurate things about them.
If it's accurate, is it really mean? To me, "mean" implies deliberate malice. It was more like candor.
Thankfully - as squad members increasingly abandon their election principles and fall in line with the establishment - excluding Tulsi is working out well for her.
I think Tulsi kind of doesn't give a shit about playing the idpol card. Haven't seen her do it yet. I could be wrong; time will most probably tell.
Tulsi is a ME combat vet-she probably zapped a few of The Squad-Detroit and Minneapolis branches-distant relatives.
The Federal Reserves balance sheet increased by 2 trillion in 2008 and 4 trillion during the covid crisis. The wars America has engaged in during the last 20 years have also cost trillions of dollars.
All of this is 'business as usual', but giving crumbs to the American populace is economically dangerous.
I think what Larry Summers and people like him overlook is that American workers are cash starved. We make too little money. So stimulus checks are just a way to get a tiny piece of what we’re owed by the system back into our pockets. Even if 60 % of that cash misses the “target” of the most needy, it still helps the overall economy by circulating cash into the normal economy of everyday people. That’s probably why retail Christmas spending was up this year despite the pandemic. Cash hoarding by the one percent is no way to have a healthy economy. Certainly not a democratic one. Trump does not know or understand the bloodless corporate mentality and therefore is despised by the 1 % even as they enjoy the tax breaks he gave them. This is why he will say things that resonate with average people and make them think he’s on their side - such as the $600 was a disgrace and that is should be $2000. And why not $10,000, Larry? American workers have been robbed to the tune of trillions of dollars by the rapacious corporations since Reagan declared war on them in the 1980s. Larry Summers is a shill for these thieves. However, I don’t think he is aware of being one.
Summers isn't missing anything. He is saying, "fuck the poor" in fancy-pants language.
The pandemic response shouldn't be about helping poor people. It should be about helping people that were directly affected by the pandemic and the ill-advised lockdowns. I know just as many previously wealthy people who are currently suffering as previously less poor people. The middle of a pandemic is no time to change policy on subsidies to the poor because now we suddenly give a fuck about them. We've had 60 years to iron that out, and we chose not to. Either Target the stimulus directly to the people affected, or don't do it.
You are arguing a strawman there.
I'm most certainly not. I'm arguing something different than Summers. It's really not that hard to figure out.
A strawman is when you put words in the other guy's mouth. That's what you did.
No one said we shouldn't help those that the pandemic affected.
You need to get back on your meds and calm down.
Summers suggestion that the stimulus might "overheat" the economy proves he's a shill. It's impossible to overheat an economy with huge unemployment and near 0% interest rates.
It is possible to overheat a bubble, like the one created in the stock markets by the Fed giving trillions in grants and interest free loans to banks and corporations. Isn't it funny that Summers didn't suggest we stop giving away money to banks and corporations.
We shouldn't use the pandemic to change our policy on poverty. It should be targeted to people who have lost jobs or income as a result of the pandemic or government enforced lockdowns, regardless of whether they are rich or poor. Basing it off your previous tax returns is a terrible idea. Furthermore, you aren't owed anything by the system that you aren't already getting.
Finally, suggesting that Trump doesn't understand the bloodless corporate mentality is to completely whitewash the past 50 years of him in business. He has repeatedly failed to pay his contractors, and then leaned on them with legal proceedings until they folded. That's pretty bloodless.
I disagree only to the extent that I think Summers is well aware of being a shill for the thieves. Can't prove it! Maybe in his own mind he is a hero.
That is literally not how any of this works. In fact, it’s idiotic and dangerous to suggest. It plays right into the Marxist and commissar Sanders revolution.
From 1979 to 2018 worker productivity in the US gained 69.6 % but compensation grew by just 14.8 % according to the World Almanac. Are you telling me American workers have not been cheated? In the 31 years prior to that productivity grew 108.1% and wages went up 93.2%. So it doesn’t have to work that way.
Yes, that's exactly what I'm telling you. Furthermore, that 14% is the entirety of compensation of American workers. INDIVIDUAL workers are almost assured to receive more pay as their INDIVIDUAL skills and productivity improve. IE older workers are more skillful and are paid more than young workers.
The reason that workers are not capturing the productivity improvements as a whole is because those improvements are coming on the capital side of the equation.
Prices drop because individual productivity goes up. Its simple economics. If wages were tied directly to productivity, goods would never become more available to more people (less expensive). This is basic stuff.
Your supplying your bad morality to a math problem. 2+2=unfair doesnt work in the real world so stop trying to force it.
But economists do agree that American workers have suffered from stagnant or declining real wages while execs and CEOs have seen earnings increase dramatically. Sure, sending manufacturing overseas to low wage areas has given us a price break on consumer electronics, clothing and household goods but that is not economic justice. Both Sanders and Trump have drawn support from the disaffected American working class. I think it is a real problem. Is it wise to let America split into such extremes of wealth distribution? Our political system is beginning to come apart. How is this not the "real world"?
Yes, it is wise because it is the way it has to be. Worse would be to try and control it. To build a state of reliance on the State in the name of equity. Our political system is coming apart BECAUSE we the people have given up our power and handed it over to elected officials so they can make things "more equitable". They use this power to enrich themselves and their cronies, and then folks like you say, "Well, the system is broken, we'd better give the system more power, that will surely fix it!"
Our old middle class needs to dissolve and reform as the world changes, Trumpers and Sanders supporters are one in the same, protectionist, authoritarian fools.
Robbing the working class and destroying the middle class seem to be good ways to push the electorate to extremes and towards authoritarian rule. I will agree with you that government handouts are never a long term solution but they can keep the social contract from completely breaking down. Ideally, the corporate elite will decide to lead the way towards economic justice. But with guys like Summers running around providing intellectual justification for cruelty, it’s hard to see that happening anytime soon.
I have four suggestions and I'm not an economist:
1. Stop the lockdowns.
2. Quit sending money to foreign countries.
3. End pork spending.
4. Term limits.
I'm sure Harvard will be calling to offer me a job any minute.
Harvard? Run for office. SPOILER ALERT: You'll lose.
"Dead on" Matt. Summers is just like every other East Coast and Hollywood liberal I have ever met.
Because there are no wealthy pricks in the Midwest and south? It’s time to drop this trope and really specify who and what is meant, or it’s just perpetuating ”stupid flyover state farmers” and “redneck southerners” whining to about “successful people.” This article points to it the answer.
Hard to respond to this, since your comment is all over the place in terms of sentiment. Oh well.
Thanks for responding, Rex. My sentiment is that those labels you used should instead be more accurately pointed to shift away from stereotypes. Perhaps something like, “wealthy, arrogant neoliberals and bleeding heart, one percent, media darlings?” “Elite” could be seen as a compliment despite the location, and “Hollywood Liberal” is media made fear-mongering with undertones of hate of the Jewish population. I don’t think you meant that. My reference of stereotypical Midwestern and Southern names is just as bad; hence my using them to demonstrate how the use of one begets the other. Really, we should ask ourselves WWMS? (What would Matt Say?)
This was by far your worst take since I started subscribing. He's not saying screw the poor, he's saying the money would be much more effective if targeted at people who are most adversely affected by the virus shutdown. Programs in Europe generally targeted programs to businesses to keep them afloat on the condition that they maintain their employees. That seems to me to be a vastly better program, since the money keeps flowing to people but it also keeps them connected to their workplace and eases the transition back to work post covid. Summers thinks other programs are better than the one I favor. These are all different opinions but I think also part of a healthy helpful discussion. If he said something like people who lose their jobs should starve to death, he'd deserve your reaction and the storm on twitter. But he didn't and he doesn't. Just seems like you hate rich people and you'll launch an attack based on that rather than what they're saying.
No, he's saying that poor people who live check to check, (80% of the US population,) don't merit any help while the big cunts who keep him in wealth DO. The same shit as usual.
AND>>>The reason stupid Drumpf got elected in the first place.
They're tone deaf and off beat. Shit's gonna change.
"Shit's gonna change."
Will it? I despair, the game is so cleverly rigged, keeping the have-nots frightened, stressed and -- blaming themselves.
That is just completely wrong and really vulgar too, not a winning combination.
Wrong and vulgar ... was a winning combination for Trump.
Pity you addressed the colorful language instead of Scott's broader point.
It's almost completely right and if you think it's "really vulgar" you haven't read many of Scott's other comments; in terms of vulgarity, this one is mild, even feeble.
Whether this type of "wrong vulgarity" is a "winning combination" will probably be for history to judge, not, alas, you or I.
lest anyone be confused, i completely endorse vulgarity. 1st amendment
So if Scott usually uses the N word when referring to Blacks ten times per comment but only did so four times in this instance, he wouldn’t be racist? I didn’t know Scott was the standard by which these things are judged. Good to know. And he and you are unambiguously wrong. You seem to think the covid relief was supposed to be a broad based poverty relief program. But one time checks do nothing for poverty. They are excellent for riding people over during a temporary health crisis, which is what this is. Summer is offering a plan for addressing workers’ covid losses better, you, Scott and Matt seem to want it to do something else.
The problem with that analysis is who gets to decide who’s most adversely affected? Typically the poor have no advocate nor a voice and are easily thrust aside. They get crumbs while Joel Olsteen, pastor of a tax-exempt church, gets millions.
And the people who are most adversely affected are always his corporate/banking buddies who might, if they are feeling particularly generous, dribble down a few bucks to the schmucks who made it possible for the rich to hide out in their homes, unexposed to the virus.
Except that's not what Summers is arguing for, even if you really, really wish it were so that Matt's article would make any sense.
Of course it is. You parse out all the bullshit and that's ALWAYS what is amounts to.
Did you read the article in Bloomberg? It doesn't seem like it.
I've read enough about Larry Summers over the past 50 years to write an obituary for the son of a bitch.
So no. Ok. 'nuff said. Have a swell day!
We should have taken the same approach as many European countries and helped businesses keep people in their jobs. But people such as Pelosi kept telling everyone that doing that exact thing was heartless because we were only providing corporate welfare. So, they chose to provide a ridiculous weekly amount to those unemployed and bailed out larger businesses while letting the small businesses fail. Political drama and lies got in the way of actually helping people. Now we need to just help people get the economy going regardless of how or where they spend it and how desperately they need it.
There will be no “post Covid”. Not for at least a decade, and by then the damage will be done. One need not control the means of production if they control the supply of money and wield it as a weapon.
No fair reading the article that spawned this missive!
To be honest, I think Summer's idea of the economy overheating might be the peasants aren't cold enough this winter.
And that's not a joke. Hunger and Cold are great motivators for compliance.
We for instance kept the Germans hungry and Cold in 1945-1946 winter by policy.
You see: in their minds they didn't just win an election, they have just conquered Nazi America and it's 1945 again. Now it has to be controlled and De-Nazified, pacified. The entire Nazi racist inbred hicks theme was never hyperbole but the truth hissing out.
The actual truth is they haven't conquered the non-existent Nazi America, they've conquered tens of thousands of Bedford Falls, who's inhabitants are stunned and confused by the bizarre behavior they've just noticed. Sure it's been there awhile but it took an purloined election for Bedford Falls to notice. We shall see if it works.
"Brr, I'm chilled. Throw another peasant on the fire, Jeeves."
See: Biden's bizarre and repeated "dark winter" rhetoric.
Pfff. I'm trying my level best to NOT look at Biden or Harris right now.
self-care, etc