But What Does It Mean for Me?

I’ve gotten a couple questions along the lines of: What do the crisis, the recession, and the recovery (of the banking sector) mean for ordinary people? I don’t think there’s any systematic way to answer this question, so I will simply offer some observations and guesses.

The material standard of living will not improve much for a while. Median real household income in the U.S. had already been stagnant for a decade, peaking in 1999 and spending all of this decade slightly below that level. The current recession is sure to drive that number down. Unemployment is up around 10% and seems likely to continue rising (unemployment is a lagging indicator, since businesses will first give existing employees more hours before they hire new workers), which will constrain wage growth (which was already constrained, presumably by globalization, for quite some time).

Median real household net worth, which did increase significantly in the last several years, is probably back down to 1990s levels, based on a little analysis of the Fed’s Survey of Consumer Finances. For that to go up, housing prices have to up again. On that question, take a look at housing prices in historical perspective. We’re probably 30% down from the peak, but there’s no fundamental reason why housing prices have to stay where they are or go up from here. The other thing that could help out household net worth would be a rising stock market. That’s plausible, since the lower the level of the market the more likely it is to go up (all other things being equal). But I’m enough of a believer in efficient markets to think that you can’t expect more than the historical real rate of return (about 6%) – which would imply that the S&P 500 would reach its 2007 highs around 2021. (That’s assuming a 2% dividend yield and 4% real annual increase in the index itself.)

What about that economic recovery? I’m no macroeconomic forecaster – I believe some people build models with hundreds or thousands of variables – so take this for what it’s worth. Although the economy may start growing later this year, it is at a relatively low level – it will probably have contracted something like 4% when all is said and done. Now according to ordinary models, when the economy has contracted that much, there are built-in mechanisms that cause it to grow faster than its usual trend rate. For example, businesses have spare capacity, and employees can’t demand higher wages, so the marginal cost of production goes down (businesses can produce more stuff without having to invest in new factories); and if costs are lower, businesses can either lower prices to stimulate demand, or they can make higher profits with which to expand. Similarly, if the economy is slow, people and businesses aren’t investing, so there is lower demand for money, so the price of money (interest rates) falls – to the point where people start borrowing and investing again.

The question is whether we can count on these mechanisms, and there is reason for skepticism.

The idea that you can stimulate consumption by reducing prices or by increasing income presumes a rational consumer who is balancing the utility of money against the utility of the stuff he can buy. Lower the price of the flat-screen TV enough, or give the consumer more income, and he will buy it. However, I suspect that the recession has changed at least some households’ attitudes toward consumption in a discontinuous way. People have always used certain shortcuts in mental accounting; money falls into various buckets, each of which is managed according to different rules. The rapid increase in the savings rate implies that people are putting a lot more money into the “do not consume no matter what” bucket, which is not responsive to ordinary economic incentives. Put another way, the productive side of our economy may be able to climb back to its potential output, but that depends on somebody buying all that stuff – and it will be a long time before China can pick up that slack.

So if I had to guess, I would imagine we’ll see moderately high unemployment for several years, reinforced by political opposition to more fiscal stimulus and by the increasing weight given to the national debt. One consequence of the recession and the huge increase in the budget deficit (and also of the last eight years of large budget deficits) is that we can’t even get universal health coverage without a majority of the political spectrum insisting it has to be deficit-neutral. In those circumstances, it seems highly unlikely that there will be political willingness to spend money for something so mundane as reducing unemployment.

What about all these bank profits? In the short term, I don’t see bank profits particularly helping or hurting ordinary people. We certainly aren’t enjoying any of them (except insofar as we own bank stock, but the median American has relatively little stock, and it’s already fallen 35% in value). But nor are they likely to trickle down, unless you have a house in the Hamptons to sell. The banks are making a lot of money on things like fixed income trading and equity underwriting; apparently a major source of profits for the leading investment banks was underwriting equity being issued by other banks to fill their capital holes. All this cash rushing in is being used to shore up bank balance sheets to protect them against the ongoing devastation in both residential and increasingly commercial mortgages. (See Bloomberg on the need for greater provisions against bad loans; hat tip Calculated Risk.) If the banks can make money fast enough to compensate for the toxic assets they never got rid of – which is the administration strategy – then that is good in that it reduces the risk of another financial system panic. But I haven’t seen much evidence that banking profits are being used to expand lending into the real economy.

In the longer term, of course, the recovery of the banks will put the financial system exactly back where it was ten years ago, only with a few fewer banks (that is, more concentration). Hopefully we’ll also have a Consumer Financial Protection Agency, which should help protect people from particularly unsuitable financial products. Regulators will be a little more on their guard, and may have a few more powers at the margin. But the basic outlines of the system will be the same.

By James Kwak

106 thoughts on “But What Does It Mean for Me?

  1. When you say that incomes have been stagnant for at least a decade, that generalization masks a whole lotta data. For instance, over the past decade my family’s income shot through the roof, which is not surprising given our education level (high) and ages (now mid 40s, so entering peak earning).

    Over the past year, of course, all this has come unravelled. Our income is in tatters (down about 60%). We are in real danger of having our home foreclosed on (our third home, the down payment for which represented about half of our assets–all gone, now underwater by about $200K). Our investments are down by half. When, if ever, will we make up for these losses? Maybe never.

    So “stagnation” isn’t really the problem. Violent upheaval and uncertainty, even for those in the upper ranges of the food change ARE the problem.

    Now let’s shift to the macro picture: lots of people are even worse off right now. They are homeless, jobless, becoming hopeless. Those who were on the right track have been thrown off it. Then there are those who were never lucky enough to be on it to begin with. Maybe Obama’s explicitly redistributionist policies will make their lives better. I hope so. Better them than the pigs at GS.

    So, to sum up, “stagnation” is only the big picture. In the real world millions have taken huge steps backwards. A few (very few) have taken huge steps forwards. Many have had their slide halted by massive government intervention. Much uglier and messier than “stagnation.”

  2. Not sure I’m so sanguine.

    I really feel that with the impending collapse of meaningful healthcare reform, and the debacle in California, we may be approaching a political inflection point. We really may be witnessing the very visible and obvious failure of the political institutions of this country, laid bare for the whole disgusted populace to see.

    Regrettably I don’t like what I see at the other side of that inflection point. A demagogue that successfully wraps Wall Street around the necks of the political, and particularly Democratic, establishment. We already have the police state apparatus in place to remove dissenters.

    I really hoped that Obama would be successful in tackling the country’s enormous problems. He has the policy down and his heart may be in the right place. But perhaps the country’s political institutions are just too corrupt and broken to be able to deal with the problems. It was after all under similar political circumstances that Octavian took over the Roman state, and as long as you were super-rich and stayed out of intrigue the next 500 years were pretty good.

  3. When considering what will happen to ordinary people in the US you might consider also that the US financial melt-down has disrupted America’s trade and standing with the rest of the world.

    I notice that the twenty years plus of loud advocacy for American-style policies to be implemented in New Zealand has died to total silence recently. We are now much more interested in emulating Australia. The critics who felt that we were foolish to sign a Free Trade Agreement with China rather than the US are also now very quiet.

    What will it mean for the well-being of ordinary Americans if the rest of the world turns its back on the US?

  4. “What about all these bank profits? In the short term, I don’t see bank profits particularly helping or hurting ordinary people.”

    Now here is a truly mind-numbing statement. I wasn’t sure whether to laugh or cry when reading it. The fact that these profits exist at all has come about at the expense of ordinary people, both through the mechanism of taxpayer funded bailouts and increased and increasingly exploitive fees on credit card holders to name some.

    “If the banks can make money fast enough to compensate for the toxic assets they never got rid of – which is the administration strategy – then that is good in that it reduces the risk of another financial system panic.”

    I’m not sure if its fifty or sixty commentators I’ve read over the last several months who have suggested that allowing banks to use public funds and creative accounting to avoid the costs of their miscreance is especially damaging for the economy and for little people. The logic used here, which absolutizes the avoidance of pain by the owners of the system, might as well have been spun by some latter day economic Dr. Spock dead set on removing every vestige of conscience and the value of consequences in human behavior. This is all the more true given the fact that no such devices have been made available to the “ordinary people” who were the concern of this article as I recall. No, when reached by the vagaries of this crisis, these folks have been asked to navigate within the confines of a wholly different moral construct. In truth, the virtue you see in such kabookie dancing is simply the worst sort of trickle-down bilge. Could it be there’s been a job offer?

  5. Also, how serious will the measures be to combat green house gases and other sustainability issues? assuming the goal of environmental sustainability warrants serious action, will the the additional taxation on energy and the like further slow recovery?

  6. Additionally, if the policies are designed to make it easy for the banks to make money to compensate for their toxic assets, then why are they paying out huge bonuses? If the taxpayers are raped to ensure the soundness of the banks, shouldn’t the banks be saving the money they’ve been enabled to make, instead of paying it out to their employees?

    Furthermore, what about the high frequency trading profits? Those are equivalent to a tax on all other investors, from individuals to pension funds to institutions. Those profits are absolutely hurting ordinary people.

    What about the supposed help for ordinary people to re-work their mortgages? If it makes their mortgage switch from being non-recourse to recourse, then they will be quite literally enslaved if they can’t make their payments. I think that wouldn’t be so hot for ordinary people.

    What about inflation down the road? That has the potential to devastate the old, the young, the middle-aged, everyone but the banks and the government.

    Finally, I think there should be some mention of possibilites and probabilities. There is a possibility that there could be major collapses. Fine. What’s the probability? Even if it is as low as a 3% probability of a severe depression with very high unemployment and bankrupt states and food shortages and all that armageddon stuff, it is worth taking it into consideration and doing what you can to enable you to get through it. The article seems to say that things aren’t going to be too good. Well, maybe I agree, maybe I hope that’s right, but I think that ordinary people should be aware that there is some non-trivial probabilty that things could get much worse, and maybe they should get to know their neighbors, learn a new practical skill… be careful out there.

  7. My sense is that it’s about 1930 in most of the USA, with California arriving in 1931. The states are going to start cutting essential services, and people’s grandmothers will start dying for lack of support. The stresses on families are going to be stunning: formerly middle-class households will have older and younger members moving back in. Some people will be forced out of their houses and end up living in shantytowns. The stresses will affect interactions outside families and society will explode with conflict. Political chaos seems likely. Now, this could be averted. It would not be hard. But the US Senate isn’t likely to act until the rioters are literally at their doors. So I think it’s going to be a lot worse than most of us have yet imagined.

  8. I’m not near as negative. The stimulus hasn’t even barely begun to kick in yet. The thing is where will unemployment peak?? 15% unemployment in Michigan now. Others really bad. So where does the nation peak?? 14.5%?? Things start to slowly turn better 2nd quarter 2010?? All I can say about the macro-economic outlook now is, if you’re a Christian person you should pray everyday for America and your fellow citizens. Because even if we clear this hurdle, they still haven’t resolved the systemic problems and systemic risks and in a few years (like less than a decade) the whole process is apt to repeat itself in a way that will make this seem like a cocktail party with a generous host.

  9. We living through a dramatic transformation of the United States – the financial system has become the economy of the country. The enormously expensive mistakes they make in judgment are supported and paid for by the public – and thanks to the additional consolidation propped up by TARP, we’ll be forced to continue to support their mistakes and prevent their failure.

    However, the profits they make thanks to the public support and investment are their’s alone to keep.

    We’ve privatized profit and socialized loss in ways that are terribly costly for everyone outside of Wall Street. To say that unemployment will remain high for the next couple of years nixes any hope of a full recovery. Where will people earn money for things like college and retirement – let alone a stupid flat screen TV?

    In a country where the private sector has failed so completely in so many different sectors – what we see today? Enormous bonuses paid out to the people who actually caused the crisis.

    It’s a far cry from “morning in America.”

  10. What’s been interesting to me is the invisibility of all this real misery in any of the policy debates…. it’s like people are not at all concerned with this chatter of the “jobless recovery” – and seem not to realize that recovery of Wall Street with such high unemployment in much of the nation is really a terrible thing for America.

  11. That’s why we need the Olympics, Anne! Mayor Daley says so. Then we can borrow billions, stick it to the city, county and state taxpayers, and Daley can make his cronies in the development and construction communities happy.

    Machine politics is good for you!

  12. Well I hope you’re right. What worries me is that Hooverism in California is going to eat the stimulus there, and if it can happen in California, it can happen to the rest of the USA. I’m also wondering just what there is to stimulate–the USA has only weapons manufacturing left as a major manufacturing industry.

    This is all very ill-thought-out and no numbers are used. Maybe I’m just discouraged. I hope so.

  13. If you’re so educated….and you obviously feel you are…why are you in the mess you’re in? I have a graduate degree myself and yet I felt you were talking down to me.

    The problem isn’t violent upheaval and uncertainty. THE PROBLEM IS LEVERAGE. You spent too much money chasing the good life and even now you can’t bring yourself to admit it. You’re wounds were self-inflicted, Marie.

    I don’t have this problem, because while people like you at the top of the food chain were buying million dollar homes they couldn’t afford, I bought something I could afford and paid it off. My income is commission based and is down 50% this year. BFD. I can live fine on 50% of what I used to make, because UNLIKE YOU, I am not overleveraged.

    Stop blaming others for your problems, Marie. You baked your own cake. Now eat it.

  14. There are no bank profits. Those numbers they reported were only made possible because the banks and the administration and congress strongarmed the FASB into suspending mark to market accounting rules.

    Had the banks reported the last 2 quarters the way they used to report, there would have been no profits. The whole thing is a fiction, a farce and it has the seal of approval of your government.

    Some of your readers appear to be having a very difficult time understanding that the Obama administration is doing exactly what the Bush administration did, which is to say they are obfuscating, lying and cheerleading a recovery that simply doesn’t exist. We have plateaued at about 75% of the old normal. We will remain here for 2-4 quarters before we begin the sickening plunge to rock bottom. This is virtually assured for the following reasons:

    1. When you have a crisis caused by too much debt in the system, the only way to get past the crisis is to either pay the debt off or destroy it through default. The debts are simply too big to pay off. The asset values don’t support it, so that leaves default. BOYS AND GIRLS, THE ADMINISTRATION AND ITS HANDLERS (THE BANKS) ARE NOT GOING TO ALLOW DEFAULT AND MARK TO MARKET IS THE PROOF.

    2. Not only are we not paying off the debt, we are adding more in the form of government deficit spending, quantitative easing etc. In short, we are not fixing the problem, we are continuing to pump the bubble ever greater.

    This cannot end well. This myth of bank profits that everyone believes is silly. You can easily verify this for yourself if you choose to, instead of feeding biases that make you feel self-righteous because they reinforce what you are already inclined to believe.

    Your government is lying to you. Your government is screwing you. You’re going to wake up one morning broke and a whole lot more angry than you are now, unless of course you decide to sober up and use your mind for something other than trying to figure out how to score your next hit.

  15. I’m a Christian Ted, and I pray, but not for what you pray for. Jesus was born in a leased barn and never owned a home, let alone a 401K. He didn’t have a financial planner, an iPhone or a bank account.

    So I have to believe that Jesus would probably find the angst over our current mess, a mess brought on by GREED (one of the seven deadly ones) a bit comical.

    Read the Beatitudes, Ted. Read the Sermon on the Mount. Get to know Jesus as he was. He didn’t care about prosperity, not one bit. If you get to know Jesus and what he believed, you will be free of this mess. It simply will not matter to you. Then, instead of wringing your hands and worrying about systemic risk, you can focus on the millions of people around the globe who went to bed hungry last night, and woke up hungrier this morning.

  16. You’re right, Anne. It’s just another day in America. If you haven’t read it yet, I highly recommend “The Creature From Jekyll Island”. Read it and you will understand why Obama’s Keynesian economic policies (obfuscate, bailout, cheerlead) are exactly the same as Bush’s before him. You will find out who’s really running your country.

  17. Since we are going there, I’ll pile on. Like Roger, Anne and The Raven above, I am quite confident things are different than before crisis’. in my opinion, we are witnessing The End Of The American Empire…. it is classic in history… British, French, Spanish, Austrian, Dutch… all the way back to Roman and before. The dominant empire (economically and militarily) overextends itself(personal, corporate, state and national debt), fails to acknowledge the systematic corruption (wall street owning the FED, TBTF), economic malinvestment (export of manufacturing base, oversized financial sector) and an uncanny ability to NOT see the forest for the trees (pump a trillion or two via TARP, ARRA without addressing the fundamental problem and pump the DOW on greenshots and false banking profits).

    The world, while it has it’s own problems, will not ultimately let us inflate our way out of this situation. Reserve currency status will be lost, the dollar will plunge and we will loose our ability to control interst rates. Whether it ends as SDR or the Yuan, or some combination, the loss of the reserve staus will hail the inevitable transition.

    The party is starting to get ugly, and will get more so before it ends.

  18. Roger, thanks so much for your insight.

    You are saying the huge profits reported by the Zombie banks are a case of false accounting. They are not using mark-to-market accounting. Therefore these large bonuses are undeserved ($770,000 average in GS) and a continuation of bad practice and evidence of further institutional failure.

    Nassim Taleb says there is $40-$70 trillion in debt globally and there needs to be a massive, immediate and organized deleveraging to “convert debt to equity” to mitigate the danger built (what Per calls the AAA-bomb) built into the economy.

    SJ’s call to take the TBTF banks through a bankruptcy process is one step in this deleveraging.

    For Main Street, the innovation Taleb has proposed is that the banks, eg, reduce a $7000 monthly mortage payment to $1000 and the lender assume 70% equity in the home.

    When I first came across the phrase — pre-emptive bankruptcy — I enjoyed the richness in black comedy in this phrase. But there is no laughing matter underway. Pre-emptive bankruptcy may be a best case scenario.

  19. I don’t know Marie’s circumstances, but I understand them from my own perspective. I’ve worked in technology fields as an entrepreneur since 1991. At the end of 2000, I had a decent chunk of savings built up from successful stock options and excellent prospects. Not enough on which to retire, but no financial worries. Yes, I was certainly helped by the tech bubble, but I was on this course well before that bubble began to expand.

    I was working at a startup that had just finished developing a B2B product that would save a business potentially 50% of their network costs. We had companies that were ready to sign purchase orders as soon as we had the funds to ramp up production. But, the economic climate at the time was such that no VC’s were going to sign any deals and as a result, the company failed. (There was other bad luck associated with this, such as the accidental death of the angel investor, which made it a lot more difficult to get in the door at VC firms.)

    I thought I had prepared properly for this… I thought I had enough savings, and I thought I had enough skills to stay employed, but it turns out that wasn’t the case. From October, 2001 to May, 2004, I burned through all the savings (much of them evaporated in market losses) as I could only find spot contracts in an industry that contracted significantly. Today, I’ve sort-of re-invented myself with an MBA, at great expense. I’m between positions (laid off two weeks ago, last-in/first-out), the last one paid 20% more, adjusted for inflation, than my starting salary in 1984. While I’ve got strong leads, until I get an offer letter, I don’t have a new position.

    I have a lot of sympathy for Marie. I did everything that people say one should do to be a “success.” I worked hard… I spent my “free” time learning new skills (I have not had any employer paid training since 1987.) I saved. I built a network. I got a second advanced degree. Yet I am approaching 50 with no savings, and earning a little more than I did when I graduated with an MS in computer science in 1984.

    One of the bigger problems we have in our society is that we don’t have a good system for people who are the losers when the “rules” change. Comments like yours do not help.

  20. considering global warming and the economy are two major issues in the world right now, I am going to say a lot of people care.

  21. To add to Rogers comment here,

    Sometimes I wonder where some of these anti-health care reform Americans are coming from. There are children in Africa and Asia who don get vaccinated against polio. Then there are these people who complain because they say health reform will mean you don’t get on-demand service for Lasik surgery. (huh?)

    What planet are we living on?

  22. Yes, Taleb advocates a massive, systematic debt-to-equity conversion. I wish Baselinescenario would devote a whole post to discus that: the pros and cons of debt-to-equity.

    I think debt-to-equity is an old technique for dealing with insolvent companies but extending it to houses would be new. How would this work? If a bank owns equity in your house, presumably it would be able to sell it. If I buy equity in someone else’s house, would I be able to tell them how to mow the lawn so my investment doesn’t lose money?

    One reason Taleb pushes this debt-to-equity thingy is that he fears hyperinflation.

  23. Another word for this could be — renting. — So these lenders would have a kind of hybrid ownership and get to collect rent on homes they would mostly-own. In such a scenario, eg, pension funds would be the new landlords because they took the risk (and not AIG and GS et al.)

    I think Taleb may fear both hyper-inflation and hyper-deflation.

    I am all for a discussion on conversion of debt-to-equity on Baseline.

  24. I raised just this topic, from a slightly perspective, this morning in my Blog. To quote:

    “It was fascinating to hear from a recent call [back to England] just how many changes are taking place as a result of the economic pressures on society.

    People are shunning restaurants but taking a strong interest in home cooking. Thus the sale of vegetable seeds has blossomed (sorry about the pun!) together with recipes, and the like.

    Many are very scared at losing their jobs so voluntary job change has slumped.

    The annual Summer holiday migration has been not to Spain or other European hot spots but to places within the United Kingdom. So travel agencies and airlines have been suffering but English tourism benefiting.

    There is a blitz mentality in the air (as in the Second World war) with people ‘bunkering’ down in many ways. Strangely, there is almost a feeling of satisfaction of having to rise to the challenge.”

    If we are lucky then the huge changes in society that are now unstoppable will be accomplished without significant social unrest, if not ……

  25. Attention Per Kurowski:

    The Wikipedia entries on the
    Basel Committee and
    Basel II Accord are lightweight. There will be over time — millions of readers. — You are the expert on Basel. Why don’t you contribute your considerable insight to these Wiki entries !

    Here is where some of the AAA-bombs are being planted and waiting to detonate.

    -India … implemented the Basel II standardized norms on 31st March 2009
    – The European Union has already implemented the Accord … All the credit institutions will adopt it by 2008
    – Australia implemented the Basel II Framework on 1 January 2008
    – 95 national regulators indicated they were to implement Basel II, in some form or another, by 2015

  26. It’s kind of surprising to me that you didn’t say word one about energy and its role in the near-future development of the economy.

    Whether you believe the runup in oil prices last year is a product of very tight production margins (i.e. impending peak oil) or of excessive speculation fueled by too much money chasing its own tail, nothing has changed. As the economy recovers, and demand goes back up, the price is going to go back up, which is going to increase costs across the spectrum of goods and services. Heck, we’re already back at $70, about where the price was before the crazy runup to $140 started, even though consumption is still down from peak and there is probably 3-4 million barrels per day of spare production available (that’s mostly in Saudi Arabia, so it’s hard to know the reality since their oil production and resource figures are all “state secrets”).

  27. Roger has just blown his credibility with me. The book he cites is a piece of anti-Federal Reserve crankery, by a John Bircher who markets crank cancer cures.

  28. “One of the bigger problems we have in our society is that we don’t have a good system for people who are the losers when the “rules” change.”

    James, I could really relate to your comment.

    I feel this is a country consumed with resentment and hate. That is what our ideological divides really come down to, and the toll in death (I’ll stick to death and skip suffering) is really tremendous and morally sick.

    I know some conservatives who relish our health care situation – they like to express resentment and blame. One family friend recently said to me, “Anyone who wants health insurance in this country can find it.” The context was my upset about 2 friends of mine who died from lack of health insurance. They’re dead, and she enjoys dishing out the blame. Did you know tens of thousands of Americans die for lack of health insurance every year?

    There is a sickness that will really destroy the country. The truth is, the rich get richer because we the people love to kiss their behinds. And the poor get poorer because we the people love to hate and punish them. The disease is moral and it is in us. The end result is not the interminable suffering of the poor, but the end of the middle class, as we have turned our welfare over to folks who despise us from above, just as we despise those below.

    I think Obama’s heart is in the right place. I liked the campaign speech where he talked about being our brother’s keeper. On the other hand, the fact that conservatism and so much of the Christian community has become fused, is a big problem, because the Christian community has in large part been infected by resentment and hate. There is no respite in Christianity for our moral sickness, for it has entered the Church.

  29. Yes, that was definitely a factor. The reality, as near as I can tell, is that it was due to a confluence of factors, including:
    1) Declining availability and quality of supply (both leading to increased extraction cost and reduced energy profit per unit extracted)
    2) Increasing demand from the developing world (as you say)
    3) Geopolitical instability (the “fear premium)
    4) “speculation” in quotes because I don’t know how (or if) you can draw the line between speculation and market response to impending shortfalls. IF you believed that we were going to remain on the bubble/boom path indefinitely, then greatly pricing up the future cost of oil makes sense because when demand exceeds supply, you’re sitting in the catbird seat.

    All of these factors are damped down by economic contraction, and ALL of them will quickly reappear as soon as demand grows to the point where supplies become tight again. And everyone will look around like this was some kind of big surprise.

  30. Has there ever been a time when the potential losers have been protected by good rules? I doubt it.
    Just be thankful that those of us that live in democratic countries ultimately have the power to force change. Just be thankful that we have the freedom to voice opinions without fear.
    Mankind has an amazing ability to evolve and change. That’s why it has been such a successful species. Americans have an amazing ability to be a force for good and I truly don’t see anything that has changed that core belief. (Spoken as an Englishman.)

  31. @Raven: “My sense is that it’s about 1930 in most of the USA, with California arriving in 1931”

    Right on.

    @Ted K: “I’m not near as negative. The stimulus hasn’t even barely begun to kick in yet. The thing is where will unemployment peak?”

    Where can I get some of what you’re smoking? The so-called “stimulus” is nothing more than a pile of printing press money that, if it succeeds in stimulating anything, will ultimately result in hyperinflation. Who is that going to help? I’ll tell you: the banksters who have real assets who will come back and buy up everything in existence for pennies. And national unemployment “peaking” at 15%??! What planet do you think the governspent statistics come from? Not this one. Just take a look at how the labor statistics are “generated”. Better, non-governspent statistical sources suggest the national unemployment rate already exceeds 20% (have a look at http://www.shadowstats.com). The peak during the Great Depression was in 1934-35 at around 25%, so we have a ways to go yet, and that’s if things don’t get any worse than they did back when the dollar was still backed by GOLD.

    I wish I could be as optimistic as you, Ted K. I hope you’re right and I’m wrong…

  32. I dont understand why your friends are dying and ur not helping them. besides why didnt they buy insurance? Health insurance is one of the cheapest in all world. in europe u have to pay 20-40% of yr sallary every month and all get is cheap, second grade service. think before u strike

  33. “Furthermore, what about the high frequency trading profits? ”

    and what about those slow frequency trading profits?

    and what about all trading profits?

    and what about all profits?

    good we have Obama, he is going to to banish all the profits, only losers wiil be allowed to profit…hurrrrey!!!

  34. …so why there is global cooling for the last decade?

    and where is the “ice age” scare from ’70?

    and why would warming be bad if cooling wasnt?

    it is all religion and politics.

  35. “He didn’t care about prosperity, not one bit….”


    then u said:

    “… instead of wringing your hands and worrying about systemic risk, you can focus on the millions of people around the globe who went to bed hungry …”

    u contradicting yrself,
    u said we shouldnt be caring about any prosperity, improvement of human live, just be happy and dont worry,

    so which is it?

    should we care about human prosperity or not?

  36. “…In a country where the private sector has failed so completely in so many different sectors – what we see today?….”


    maybe some examples?

    in capitalism private sector can only fail by not making profits.

    what private sector has failed to make profits?

  37. “I dont understand why your friends are dying and ur not helping them….

    Uh, what’s your fantasy here? Did I tell you the specific stories? Don’t make stuff up. If you knew the circumstances, you would know this question is nonsensical.

    But you show the way people think. You resort to fantasies, if that allows you cast blame. Shame on you.

    The rest of your comment is just inane.

  38. Auto, newspaper, airline, housing, construction are just some of the troubled sectors in the US today.

    And though they’re claiming great profit, the financial sector is deeply troubled. Deeply troubled.

  39. Most wage earners have been experiencing a “jobless
    recovery” since the ’01 recession. Just look at the
    employment-population ratio historical data.

    This downturn and the expected “jobless recovery”
    is affecting more the mainstream media consumers
    than anyone else, hence we’re hearing about it this
    time around.

    Just recall the last eight years…the so-called
    “Bush Boom” and the “fundamentals are sound” mantras
    got all the media attention and anyone who was
    pointing at metrics that indicated pain for wage
    earners got labeled a “tin-foil hat” wearer and
    marginalized. This was a successful strategy because
    the mainstream media consumers (those who are not
    feeling the pain) were not to be jarred back into
    reality lest they realize what the result of their
    leverage binge would ultimately be.

    Well, as they say, “wherever you go there you are.”

    I suggest nobody shows up to vote in ’10 and, if
    the ’10 message doesn’t go through, in ’12.

  40. jan: “…so why there is global cooling for the last decade?”

    The last decade is the hottest in 400 years.

  41. I almost alwasy agree with everything you guys do, but I don´t really think that a Consumer Financial Protection Agency will help me at all. I haven´t signed up for any loans I can´t pay, and don´t ever plan to. But what will hurt me dearly is paying for the bailout of the banks, and paying for all these new agencies and their staffs, and, and. The Fed, the SEC, etc. didn´t do their jobs, end of sentence. Layering more people and budgets on top won´t change that. I like your idea of limiting the size of the bank, so that if it fails, it fails and doesn´t take the system down. That´s a much better way of doing it. The government doesn´t every do anything the most efficient way, but rather the opposite. You´ve got to spend your budget this quarter or year or it´s gone. You´re promoted not so much on results, but by building up your staff. It´s all bad, so the less of it we have, the better.

  42. Lark said:

    “…The context was my upset about 2 friends of mine who died from lack of health insurance. They’re dead, …”

    i can only comment on what u supply, so dont say now that there is something which would contradict above quote.

    either those friends were buying insurance or not, either they couldnt afford $200-$400 a month or not.

    if not, why didnt u or other friends help them?

    it is like saying my friends are starving to death because they didnt receive food stamps from government on time.

    and again, why changing the best health care system in the world just because some people dont buy any insurance, and if some of them really have no money at all, why not help them financially, what friends are for?

    we dont nationalize the whole food industry just because some people are poor or hungry – we give them “food stamps”

  43. and dont forget that lack of insurance is always sign of poor budgeting and nobody should be forced to buy anything in a free country, insurance included.

    europeans or canadians are forced to pay much more (in energy tax, lower salaries, smaller cars, longer wait time for poorer healt care, etc) then americans.

    is that what u want?

  44. Jan said, “and again, why changing the best health care system in the world”

    Much as I admire the USA, I don’t think there is any evidence to support your proposition. Indeed, I think there is plenty to support the notion that the US health system is a long way from the best.

    For example, a quick web search found this:

    ” The World Health Organization has carried out the first ever analysis of the world’s health systems. Using five performance indicators to measure health systems in 191 member states, it finds that France provides the best overall health care followed among major countries by Italy, Spain, Oman, Austria and Japan.

    The findings are published today, 21 June, in The World Health Report 2000 – Health systems: Improving performance.

    The U.S. health system spends a higher portion of its gross domestic product than any other country but ranks 37 out of 191 countries according to its performance, the report finds. The United Kingdom, which spends just six percent of GDP on health services, ranks 18 th . Several small countries – San Marino, Andorra, Malta and Singapore are rated close behind second- placed Italy”

    While that is nearly a decade old, I suspect that the USA is no closer to being #1 than it was in 2000.

  45. all of the industries u mentioned were doing quite well financially,

    “And though they’re claiming great profit, the financial sector is deeply troubled. Deeply troubled.”

    can u just make up yr mind?

    either they’re troubled or making profits?

    when u said private sector has failed what u really mean?

    yes some of them failed their stockholders but i dont see any problems with buying a car, air ticket, newspaper or house. quite contrary.

    so where is yr trouble with private sector?

  46. Jan, I live in a country where unemployment has risen to the worst level since the Great Depression.

    The financial sector of our economy exists to declare enormous profits today ONLY because it was bailed out last fall by an extraordinary intervention by the US government.

    Middle class wages have been stagnant for more than a decade while costs for college, cars and homes have increased dramatically in that same period.

    Earlier this year, American Airlines wanted to hand out fat bonuses to its execs for a 2008 performance that was grim at best – a net loss of $2.1 billion (according to their annual report.)

    As far as the financial sector, let me give you some info according to Bloomberg Markets magazine:

    “Here’s all you need to know to see who lost and who benefitted most at the Five Families of Wall Street, otherwise known as Bear Sterns Cos., Lehman Brothers, Merril Lynch, Goldman and Morgan Stanley. From the start of their 2004 fiscal year through October 20 [2008], the big stand-alone investment banks lost about $83 billion of stock market value. During the same period, they reported about $239 billion of employee compensation expense.

    So for every dollar of shareholder value destroyed, the employees got paid almost three.”

    That’s just some of my trouble with the private sector….

    Glad it’s working for you, though.

  47. Peter said:

    “..Just recall the last eight years…the so-called
    “Bush Boom” and the “fundamentals are sound” mantras…”

    yes, same with eight years of the so-called “Clinton Boom” and the “prosperity mantras…

    Clinton, Bush, Obama – there is no difference, all policians are the same, only bigger and bigger power grab…with Obama being the ultimate “uber”…

  48. ..looks like we are on the same page, although talking different language,

    but u still didnt answer my question how private sector failed u, r u having difficulty buying air tickets, car, house or get credit?
    r u saying u cant afford them?

    but i agree that thanks to government manipulation and taxation we have less employers and more bailouts,

    but that is not private sector but public.

    remember the saying: whatever u tax, u get less of it

    and whatever u subsidise u get more of it.

    so when employers (employment) are tax – we have less of it,

    and when bad bahaviour (bad banking or car manufacturing)is subsidised (bailouts, gov. loans) – we have more of it.

    but that is hardly fault of free market economy, isnt it?

  49. jan, the difference between the Clinton and
    Bush “booms” is that ordinary folk benefited from
    the Clinton “boom” but got shafted from the Bush

    Just look at all available indicators that impact
    the median citizen…during the recovery from the
    very shallow and short ’01 recession not one of
    these indicators recovered to the levels reached
    during Clinton’s time.

    Since we now have the luxury of hindsight it’s clear
    that the “Bush Boom” con job was running out of steam
    in the fourth quarter of ’05…’06 was ambivalent
    (thank God as it gave the prudent enough time to
    batten down the hatches)…then the tsunami came
    in ’07…

    And now, it’s Obama’s fault. Well, at least we stopped
    hearing how it’s all supposed to be Clinton’s fault…
    there’s a silver lining in everything bad :-)

  50. May I ask one honest question though? I think it goes in tandem with the question that started this article: what can I, a nobody with virtually no influence (read as money, of course), DO about any of this? It is going to crash. The powers that be are determined to push it to do as much. What can I possibly do beside expressing outrage and disgust while watching the entire economy circle the drain?

    Start a new currency and refuse US dollars as tender? Refuse to do business with US banks? Renounce the US government as legitimate authority and revolt?

    What actual option does the average nobody have?

  51. Peter, dont forget that how much and where the money is spent is in a hands of Congress, not president,

    so, yes Clinton was lucky to have fiscally conservative Congress led by Republicans (dont u love them when they’re in opposition to president and forced to be for small government?).]

    as u probably remember they forced him to sign wellfare reform and dozens of other budget savings cuts. and that didnt happen till ’94 after huge republicans victory – then the economy moved up, after Newt Gingrich’s Contract with America, not before.

    fortunatelly for us Clinton was busy with Monica and didnt have much time to screw the economy but gave us 9/11 with his weak responses to previous islamists attacks.

    collapse of the economy in 2000 was sewere and adding to that 9/11 we were really down.

    but thanks to giving americans back their money (Bush’ tax cuts) we recovered fairly quickly, so we reached republicans led (remember? – Congress) economy of late ’90

    and then what happened next?

    in 2006 Republicans lost the house (and more) and there goes down the economy.

    i’,m not suggesting that republicans were with no blame, oh no….but all their blame is that they went to the left and started spending money like drunken sailors, they started to influence, manipulate and regulate the economy like Democrats.

    we didnt have to wait for results too long, did we?

  52. jan, you have to prove your claim

    “Peter, dont forget that how much and where the money is spent is in a hands of Congress, not president,”

    since everything that follows in your reply is based on

    I strongly doubt you can prove your claim given that
    the final budget is _rarely_ (actually I don’t know of
    a single case and I’ve looked) much different than
    the budget a President first submits to the Congress.
    In fact, the ’94 GOP “contract with America” had
    very little effect on Clinton’s budgets…Gingrich
    didn’t go away because he chose to do so.

    If your claim can be proven then the GOP should
    stop putting forth the Reagan economy as a showcase
    of success of conservative fiscal ideas in the
    real world.

  53. i hope u r not a us citizen with such a spectacular lack of civic knowledge.

    but then why dont u just google, president is the last one to see the budget,

    Clinton knew very little about money (his own admition) so, he didnt veto republican budget too much,

    under Bush I term congress was republican, so Bush didnt veto….but should… when congress went on overdrive with spending, then in 2006 we got democratic congress with skyrocketing spending…and yes…Bush still didnt veto anything.

    so Clinton was the best president republicans could ask for (by never vetoing republican’s budget cuts)

    and Bush was the best president democrats could ask for (by never vetoing democrat’s balooning budget spendings)

    but now only sky is the limit, everything is in a hands of big government spenders!

    yes, u r right GOP should stop talking about Reagan succes, since after Reagan they only talk about it and never do what Reagan did.

  54. Jan, thank you for providing those links. I would be the first to admit that I based my first reply to you on a quick web search and anecdotal evidence.

  55. What I have done is written to my Congressmen. Although I know that each of my emails doesn’t do a thing, by itself, my hope is that enough people can combine together to make their voices heard.

    I also hope that more and more folks will realize that this crisis is non-partisan. It is the end result of years and years of both parties moving in the same direction–deficit spending and the bailout of that spending through inflation. Capture of both parties by the financial sector. Since both parties are equally to blame, equally [ir]responsible, and equally corrupt, us nobodies should move beyond party politics to fight back. Personally, I think we are given the opportunity every couple of years to throw out any and every politician who continues to spend money we don’t have and who continues to represent the financial sector instead of us nobodies. Eventually, the two parties might get the message.

    So the first thing I would suggest is to write to your Representative and your two Senators to support Ron Paul’s bill to audit the Fed.

    Next, write to stop the bailouts–no more to any company at all.

    Then, you could write about the Cap & Trade Bill to your Senators. I firmly believe that there are two primary purposes behind the bill. One, to raise money to help pay down the deficit, in effect it will be a new tax on everyone. Two, to create a new marketplace for banks to make money from. If there is any beneficial effect on global warming, it will be minimal and totally inadequate.

    So, figure out what specific issues you feel strongly about, and write.

  56. Those of you who uphold the American health care ‘system’ are aiding and abetting manslaughter. You are the definition of a bad and destructive person who lacks the courage to look at the facts, and uses fantasies to justify the deaths of innocents.

    “The United States spends the most money on medical care of all advanced industrialized countries, but it performs more poorly than most on many measures of health care quality.


    * The U.S. is 33 percent worse than the best country on mortality from conditions amenable to health care – that is, deaths that could have been prevented with timely and effective care.4
    * The infant mortality rate in the U.S. is 7.0 deaths per 1,000 live births, compared with 2.7 in the top three countries.4
    * Recent studies show that only a little more one-half (54.9 percent) of adult patients receive recommended care. The level of performance is similar whether it is for chronic, acute, or preventive care and across all spectrums of medical care — screening, diagnosis, treatment, and follow-up.6 ”

    Much more where that came from.

    But you are not about facts. You are about justifying killing Americans.

    We could have a great system. You would rather that we suffer and die, for nothing.

  57. Jan, you surely have a lot of confidence in these posters such as Lark and their little parables of lefty concern about the fellowship of man. These lefties don’t give a damn about anyone. Imploring these tools to be rational and responsible is an impossible mission, they are never going to understand why the celestrial mommy will not take care of them.

  58. “The stimulus hasn’t even barely begun to kick in yet.”

    This is true. It is also true that the bill for the stimulus has not yet been presented. A lot a big-name economists have been implying lately that Bernanke has followed a very successful strategy, but I have not seen one of them put up a balance sheet that shows the costs of gifting the big banks. That cost will be borne by Main Street for years, even as they try to recover from a recession that was deemed intolerable for bankers but OK for everybody else.

    I still believe that years from now the income redistribution and favoritism shown by the government reaction will be the distinguishing features of this era.

  59. Jan,

    You are really incorrect on some of your facts there, especially the health care claims. It is very well documented that the US has poorer health care outcomes in spite of far higher costs than other industrialized nations.

  60. Roger,

    Tried to reply to your message over the weekend only to learn that it was not posted for some curious reason. Suspect that it was deleted although I have no way of knowing for certain. It contained no ad hominem or bad language, just expressed my sentiments about politicians and lobbyists and what I saw as appropriate treatment for them in light of their behavior. One hopes that we haven’t descended into a crude form of censorship here, although, at the moment, I suspect that we might have. I’ve gotten an e-mail off to Kwak making an inquiry. Lets see if this message makes it and we’ll know for sure.

  61. wally, yr thouths are very deep,

    so listen to this:

    You are incorrect. It is very well documented that the US has the best health care outcomes thanks to higher spending than other industrialized nations.

    thats pretty as deep as yr statement but at least it makes much more sense.

    there’s a saying: u get what u pay for,

    in Europe governments spend much less on health care then people in USA (even though they collect for that porpose much more money in taxes) – simply because of gov waste plus patients are not customers, u r never a customer in a gov office…u r an annoying number like at post office or DMV.

    please, when u comment something add some logic,reason and yr own explanation, ok?

  62. wally, one more thing, following yr logic we should all want to drive Yugo or Trabant (gov made cars) – and not Caddilac or BMW because not everyone can afford Caddie or BMW,

    yaa, that make sense!

  63. WestWright, thanks but i dont think Lark is irrational or irresponsible, maybe confused.

    plus he didnt say what would be his solution, he is just unhappy with what we have right now.

    and I can understant that, i’m too for a change – my solution is:

    get the gov out of health care, allow people make their own choices, democraticaly pay attention to what people really want thru free choice ie free market.

    then, and only then we would have real true market for everybody, so everyone could decide what type of care to buy.

    much like with cars, foods, homes, clothing or anything.

    will there be some people who can afford absolutely no medical expense, people who have no friends, no community org, church, charity or anything else to help them?

    yes, I think there could be, but that is very, very tiny % of population, maybe half % maybe 1% but i doubt it.

    so we could easily buy insurance for those few extremely unlucky few, couldnt we?

    instead of nationalizing the whole industry.

    that doesnt make any sense.

    unless there is another underlayinig motif, hidden reason?

  64. Huh. Roger’s smug argument is one I’ve heard a lot lately — you dumb fools overspent and I was smart, frugal, and wise, etc., and ha-ha now you have to take the fall. You are well-positioned financially? Good for you, sir. Here’s your medal.

    While this rant has a certain tidy glibness, (and is enjoyed by those who are — by luck or design — financially secure) it is based on the assumption that Marie overreached financially (perhaps she did or perhaps she did not) and anyway that it is all her fault. May be it is. I don’t know her particulars, but I didn’t get the sense that she was whining as much as pointing out that she did a lot of things right — she has a good education, she put a lot of money down on her house — but that the simultaneous plunge in housing values, wages, and the value of her investments have put her on the precipice. Yes, people have made mistakes, but there is the very real fact that the system has been run into the ditch and a lot of innocent, hard-working people have been trashed, while the people at the wheel are continuing to get richer.

  65. Eric, you were fine until you got to Cap & Trade. If you think the financial meltdown is a problem just wait until we feel the full effects of climate meltdown! The financial meltdown is a harbinger of what is to come if we do not turn the tide on global warming. Ron Paul has some valuable things to contribute, but certainly not on Cap & Trade. The only things wrong with the Cap & Trade Bill are the give aways to the energy companies, much like the give aways to the investment banks. And BTW, if we are to have any hope of turning the tide on global warming, we will need a solid and truthful investment community to invest in the most important investment of our lives and certainly the 20th and 21st centuries. Yes, if the investment banks had been a worthwile participant in our society these last 20 years they would have recognized global warming as the threat it is and steered investments in that direction. We need investment in real products that will reduce our carbon discard and energy use and not in phony financial products. This of course leads us right back to Congress and that they are owned by the corporations. Ralph Nader told us that in 2000, but no one took him seriously. Or knew it was true but did nothing. Yes, I write my Congress people and I think it does some good. I do get responses. And everyone reading this blog should write their Congress people and TELL them how they should vote. They need your help. Especially on the CFPA. If there is anything that both Dems and Reps should agree on is the CFPA. However, I’m afraid that Cap & Trade and Health Care Reform are relegating CFPA to the shadows. Congress needs to hear from you! Do we need a federal amendment that allows for initiative, referendum, and recall?

  66. Maybe people should pray even if they are not Christian? Or is praying only a Christian thing?

  67. Anne, you write: We living through a dramatic transformation of the United States – the financial system has become the economy of the country.

    Is there some way to maintain a separation/firewall between the financial world/culture and the mainstream economy? Was this ever the case? Is this what got broken?

  68. jan: “in capitalism private sector can only fail by not making profits.”

    I think you hit the nail on the head. Capitalists don’t get it! There is more to existence than making financial profit! Capitalism can certainly fail in ways other than not making profit. GS and JPMorgan have failed us over the last eight years and yet they showed a profit last week! “Life, Liberty, and the Pursuit of Happiness.” What did I miss here? I don’t see “profit” in that very famous quote. Did someone take it out when I wasn’t looking? I’m all for free enterprise, but I’m not for lying, cheating, and theft.

  69. William, I am not against working to reduce carbon emissions. I am a nature lover tree hugger from way back. I’ve done wilderness canoe trips, backpacking, orienteering. My point is that the Cap & Trade Bill is a scam.

    Please see:
    Nathan Lewis
    Powering the Planet

    for a really smart look at the carbon problem, and what we really need to do to address it. Then you will understand why I said that the Cap & Trade Bill is totally inadequate. By the way, this talk will probably scare the bejeebers out of you, it did me.

  70. william, i dont know if u r talking about privately owned companies without gov input or quasi private like AIG, GS or JPM, FredieMac etc

    ur implying some criminal activities in those banks but i dont hear much of any investigation going on there, besides who cares? – if somebody cheated in those companies they obviously will be punished, like in any other business.

    and explain how exactly those banks failed us (and who is “us”? – they didnt fail me) when they exactly did what they were suppose to do – lend money!

    and not long ago everybody was happy!


    greedy people took money from banks, then they dont want to return back – and i”m suppose to be upset?

    upset at whom? banks? u must be kidding.

    if at anybody we should be upset at people who are cheating those banks and not paying them back!

    if i come to u and ask u for some money, i shoudnt be upset at u when i cant return it, or should i?

    but no, i dont feel sorry for bankers, they knew what they were doing, its their business to be profitable, not mine!

    i dont care if they lost money, thats their (capitalists) money, so since u dont like them u should be celebrating, unless u foolishly speculated with or thru them. i didnt.

    in a free market (without gov input) no company can be bail out by force. capitalism means freedom to succeed and freedom to fail.

    capitalism means complete seperation of gov and economy.

    but if private comp is able to convince gov to invest in it – then they must be very good for government (taxpayers) otherwise they wouldnt invest, would they?

    and as to “life, liberty and pursuit of happiness” – stop and think.

    fundamentally our life cannot be sustained without production, everything our life requires has to be produced (food, clothing, shelter, madicine – everything),

    to produce it means to think (try to do that without it!), for that u have to be free (nobody can force mind to think), all sorts of socialists, communists, fascists tried that – we know the results,

    both of those attributes, life and liberty, fundamentally have in common freedom to keep/dispose yr property, fruits of yr labor (production) – of yr thinking,

    for that what we need the most is strong sense of property rights – and that is best taken care under capitalism, no questions about it, agree?

    then, and only then we can talk about pursuit of happiness,

    freedom to pursuit happiness – not right to happiness.

    if ur confuse what GS or JPM are doing, read this:



    …and then tell us what else then profits, people (companies) should be after?

    do u go to work because u love humanity, society, yr God? ..no…u work because u want to prosper, make more, live better.

    same goes with day laborer, phisician, baker, singer, banker, driver etc.

    if u dont understand that, then yes, ur missing a lot.

  71. It used to be common sense, not glib, that you lived
    within your means. But not everyone listened to those who went through the depression. The proper response should have been to let the bad banks fail and sell off their assets for what they were truly worth to viable banks. This is called capitalism. In a similar vein, people who couldnt see the train coming (except for the uneducated ) and didnt move, shouldnt be looking for a handout in the form of wealth redistribution. This is called socialism. Those uneducated that didnt see the train should be made to work for the handouts they feel entitled to. That is called dignity. CCC camps anyone???

  72. If you read what I said, frank, you will note that I did not say that living within your means is glib. What I said is I am tired of those folks who have come out of this economic train wreck relatively unscathed — whether by genius or dumb luck — giving self-satisfied lectures to people who have — whether by stupidity or bad luck — encountered problems. And yes, perhaps the proper response may have been to let some people and institutions fail, but keep in mind that this would have possibly had a lot of collateral damage in the shape of financial smartypants like yourself. Had this been the case, I would gladly offered you a hand up instead of jeering at you. This is called compassion, which is in very short suppl these days.

  73. Thank you for this fine article. The question is most certainly the bottomline question to so many of us!

    The comments are so good, I have bookmarked this article to come back to, since I am at work and cannot read all of them now, respectfully.

    I have known fine success with teams great and small and , when there is a problem, the fix is two-sided:
    one: directly confront and correct the issue,

    TWO: restore the shattered morale from the crisis, so that all involved are renewed and empowered to pick it up and win again…administration of Vitamins of a sort, and the right fitness exercises.

    This absence of vitamins is part of the reason we have had the stagnancy you talk about, in the article….we meet the crisis, and fix the injury, but , by that time, the whole scene has come down a bit…to regain the happy norm and get on with it all, in a winning way means that such vitamins and charm of a sort are needed…and there has been, instead, the time-honored sport of “talking ourselves to death” instead.

    This ignorance of the soul of of it is why the high-activity fixes are not producing the stellar effects we would like to see.

    Things like the Economic Incentive payment probably saved actual lives in their effect on the public passions and energies, but that is not what I am talking about.

    I am not sure, myself, what would be the right ingredients of such vitamins. Part practicum and part esteem-building, and part fun, and part patriotic activism.

    Maybe a reprise of “Up with People” , a morale-builder of the 60s/early 70s, whose catchy title was on the lips of all for a bit, and addressed the sag and malaise in the general public, at the unsatisfactory outcome in VietNam.

    Maybe getting Bin Laden would do it. It couldn’t hurt!

    All I know is “nothing comes from nothing” and people win over a thing because they FEEL like it,
    as poor as that may sound. We all need to do things, at the private and publc level to help us all FEEL like it again.

    There is probably plenty each of us can do, without it costing us anything especially, to help, within our own realms. And maybe we can think and act in ways that help regain winning ground.

    Am I making sense in this?


  74. If we put economics before ideology, arguments like “get the gov out of health care [etc.]” collapse into meaninglessness. “Health care”, broadly understood, includes a variety of preventative, therapeutic, curative, and palliative interventions, only some of which are stricly private goods in economic terms. While the price of a surgical intervention or a dose of an antibiotic can be set by the market (given scarcity and the strictly private nature of the benefit), this does not apply universally.

    Prevention, particularly disease awareness and education, including anti-smoking campaigns and related messages, is always undersupplied by the market since, for instance, Jan’s consumption of a message does not reduce the quantity of that message available to me, and because the benefits of smoking accrue broadly to Jan and the rest of us. Prevention is in economic terms a public good.

    Vaccination represents a third type, the so-called merit good. The vaccinated individual is willing to pay for protection against transmissable diseases like measles, and the consupmtion of that does of MMR vaccine reduces the supply available to others, thereby introducing scarcity and allowing the market to price the dose. The benefits of vaccination accrue, however, to everyone in the population, since by reducing by one the number of potential transmitters of disease we have reduced the likelihood of an overall outbreak. These benefits are difficult to price.

    Thus, markets are great for pricing (and ensuring supply) of private goods, but they do a poor job of supplying the rest of health care. It is precisely because of these “market failures” that government has to play a significant role in health care.

    As for Jan’s outcomes claim, it is flat out wrong in a wide range of conditions, though still true for some, particularly for some cancer outcomes, particularly breast and prostate. It should be stressed that one of the primary reasons that US breast cancer outcomes are so good is the substantial public advocacy that has raised awareness and encouraged early detection and intervention.

    In contrast the US system performs dreadfully on a range of preventable conditions, including diabetes, heart disease, and the complex basket of metabolic disorders associated with obesity. And since prevention is undersupplied by the market, our system effectively leaves us to place our hopes for improvement on a magical improvement in willpower, self-discipline, and a deep understanding of food labels.

  75. well, roger, prepare to live the rest of your miserable life on less and less income as employers will see that you live fine on 50% of your previous income and then they will ask you to live on 50% of that until they break u and then find someone who will work for that 25% while they continue to buy huge boats, huge houses, fancy cars while you suffer trying to live on Social Security.
    I don’t entirely agree or sympathize with Marie but lighten up. If she had known someone, her connections might have tipped her off to bail on her house before the market crashed.

  76. your story should be front page news james. you played by the rules and still got burned. and now they want to do away with Social Security so that you will not be able to retire at all. You will be flipping burgers at 70.
    We had it too good in this country for too long and now we are having the screws put to us. It’s like we are returning back to the dark ages.
    I’m sorry for your misfortune james.

  77. you’ve hit it right on the head taylor. what the future holds for this country is very bleak. we are in a mess where-ever you look. economy, foreign policy, social, cultural. i truly weep for the future.

  78. Failing to even understand the reference renders your comment not only wrong, but a fit object of ridicule.

  79. We can’t put economics before ideology because understanding of economics (or anything for that matter) depends on one’s philosophy (ideology).

    Broadly speaking we have to ask: are we individuals the owners of our lives or government (state) owns it?

    Your ideology clearly suggests the latter, therefore you conclude the the master (state) has a right to force each and every individual to comply with their (master’s) current ideology and we, like a cattle, should obey their rules. For our own good, obviously.

    Coming from that ideology you make many wrong conclusions, like for example with vaccination. Explain how not inoculated person is endangering inoculated one?

    Free market i.e. free choice is more then adequate to supply it. Actually only free market can deal with vaccination properly.

    Another failure of your ideology is confusing cause and effect. US breast/prostate cancer outcomes are so good (in comparison to EU) because government has relatively little influence in health care and peoples choices. Believe me, in EU public and media awareness is the same as in USA.

    What they lack is free choice (free market).

    Same goes with any quantity of any information or awareness supplied by free market versus state.

    Access to paid and free information, education and prevention under free market is astronomical in comparison to scarcity, poor quality and political whim of governmental elites.

    You’re not right assuming that I (or anybody) necessarily benefit from smoking or not – it is decision to be made by each person individually.

    To smoke or not is a private matter. In a free society nobody can be forced to live/spend time in an unventilated room with direct proximity of smokers. And that is the only objectively, scientifically proven way of the possibility of being adversely affected by “second hand” smoking.

    Other of your mistaken conclusion is in your last paragraph. To say that US system performs dreadfully on mentioned conditions is laughable, knowing that every person in USA has an easy access (compared to other people in the world) to the best and newest technology in medicine known to humans. Plus your logic is off. Who told you that obese people or people leading unhealthy lives are so only due to their ignorance and if only government told them, magically force them in to prevention, they would live healthy, happy life.

    Maybe that’s their life style?

    Maybe that’s their choice?

    As you can see everything of value in our human lives boils down to freedom, free choice i.e. free market.

    But that would be in contrast with your ideology .

    After all one’s life doesn’t belong to oneself – it belongs to society!

    So, to whom your life belongs should always be the first question when deliberating about health care, to mention just that.

  80. must disagree with Jan in that LIFE is a gift that has nothing to do with a government or political view…
    in a room with 100 people, only a few can possibly let their lives belong to a society – the rest of us find our path in it to lead fine lives, and some can’t/don’t/won’t do THAT much. Saying a life BELONGS to some other entity is SLAVERY, although the spin will buzz out the brain till we let it happen.

    Where do you think slavery came from, in the first place? Someone was convinced that it was Ok and a good idea.

    That is why the very media that gets criticized may be our salvation…we can , thru media, stay informed, and remain true to the NOTenslaved path in things.

    I am very social, in the arts, and in my church, and love life and its ways – political and church friends and caring mommies are all saying that they fear that the solutions to the pressing issues today may be a sneaky way to turn to Socialism in our Government system.

    Then, one morning, we wake up and HATE it, and it’s too late!



  81. Elle, there is a misunderstanding, I didnt say that life belongs to society, quite contrary.

    i was just saying that concluding upon NeverSummer comment, read his and mine posts entirely.

    sorry for being not so obvious.

  82. I am impressed with the pace with which you have jumped to erroneous conclusions about my “ideology”. At no point did I even suggest that the state should “own” our lives. You do your own position no favors by grossly distorting or willfully misunderstanding mine.

    My point was simply that private decisions in a market environment represent the best way to allocate goods and services, except in cases in which the nature of those goods and services is such that they are undersupplied. These are cases of market failure. Economists of the left and the right acknowledge these as realities.

    Another weakness of an unfettered market is the propensity to produce “externalities.” These represent the costs (or benefits) of an activity that affect individuals or groups not party to a transaction, and which are generally not captured in the price. You are correct that a person’s decision to smoke cigarettes is a strictly private decision, yet it may nevertheless impose costs on others, such as higher dry cleaning bills (you obviously reject “second hand smoke” as a credible risk). Why should one person be forced to pay higher costs because of another’s private decision?

    The fundamental issue here is not whether freedom is more desirable than tyranny — freedom is obviously better and your mischaracterization of my position as anti-freedom a red herring. At issue, rather, is how we as a society seek to balance the costs and benefits of competing private decisions. If I run a paper mill and privately decide to dump effluent into a river, I am imposing costs on the fisherman downstream, whose livelihoods have been threatened by damaged fish stocks. Yet their decision to fish in that river undermines my ability to profit from my paper mill. How do we reconcile this?

    I also encourage you to rethink your statements about the American healthcare system, which are simply wrong and betray a deep lack of familarity with the sector and its financing. Access to the highest quality care (the best technology “known to humans” as you say) is determined by the quality of your insurance coverage. This is clearly reflected in the outcomes data, which show substantial disparities based on income and coverage.

    Regarding the obesity epidemic, whether or not this reflects individual choices, lifestyles, poor education, or excess consumption of processed food is not the point. Rather, the burden of obestity and its sequelae is substantial, increasing healthcare costs for the rest of us while reducing workplace productivity and affecting overall economic growth. A case in point: as the burden of ill health grows, the costs of treatment rise. As a consequence, health insurance costs rise, gradually crowding out growth in wages. Over the last decade, median wage growth has been flat, but health insurance premiums have risen 6% to 12% a year. In other words, the collective effect of millions of private decisions has a had a deleterious effect on the economic welfare of millions of Americans.

    Unfortunately, Ayn Rand doesn’t offer us much guidance with regard to how best to balance the implications of one man’s private consumption decisions on the welfare or wellbeing of another.

  83. What does the federal deficit mean to you?
    Do you believe a balanced federal budget is more prudent than a federal deficit? Consider this: All six depressions in U.S. history began with a series of federal surpluses:
    1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
    1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
    1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
    1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
    1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
    1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
    Do you believe federal deficits cause recessions? Consider this: There have been 9 recessions in the past 50 years. All began with reductions in federal deficit growth and all recoveries coincided with increases in deficit growth.
    Do you believe large deficits are an unsustainable burden? Consider this: In 1971, the federal government ended the last vestiges of the gold standard. The purpose: To give itself the unlimited ability to create money. Therefore, the government can service any size debt. No debt is an unsustainable burden for the federal government.
    Do you believe federal deficits cause inflation? Consider this: Every period of significant price growth since 1969 has been associated with rising energy costs. Not one of these inflationary periods was associated with federal deficit growth.
    Do you believe federal deficits crowd out lending funds? Consider this: The government borrows to support deficit spending. So money lent to the government immediately returns to the economy for further lending. Deficits add lending money to the economy, which is why deficit spending stimulates the economy.
    Do you believe our children and grandchildren will pay for today’s deficits? Consider this: There is no historical relationship between tax rates and deficits. Tax rates are based solely on political considerations. Generally, Democrats raise tax rates and Republicans lower them, irrespective of deficits. Unless tax rates are raised and the government runs a surplus, our children and grandchildren will not pay for today’s deficits.
    Do you worry that other nations will stop buying our debt? Consider this. The U.S. government borrows by creating T-securities out of thin air, and then selling them – a two-step process. The government just as easily could create money out of thin air, and skip the borrowing process. We don’t need the other nations to buy our T-securities. In any event, nations do not buy our debt out of kindness. T-securities are a safe investment paying an acceptable return, over which we have total control.
    Given these facts, what do you believe?
    Rodger Malcolm Mitchell

  84. Jan,

    thank you for your clarification.


    Work presses today, but may comment more later.
    In the meantime, I am really enjoying reading
    what the others have said, including you.
    Food for thought.

    thanks again

  85. NeverSummer,
    when you ask what should we (who? collective? Polit Biuro?) do to force people to spend their money on things they don’t want to, you obviously imply that people’s life (or part of it, lets say 30-40% of their productive ability) doesn’t belong to them.

    This is like saying your life belongs to you but I (or my gang, party) want to decide what you spend YOUR money on, and if you don’t agree with me, too bad, I have bigger guns then you.

    I wouldn’t call that jumping to erroneous conclusions. You’re a collectivist and you (or your representative) want to “own” people, meaning their money.

    Obviously for their own good!

  86. In a free market economy all property is privately owned, so if you spoil, steal or damage somebody’s property, the proper recourse is to require you to repair that. For that purposes we have judicial system. Doesn’t matter if the damage is made to my mill, a bicycle, house or fish farm. Again, what we really need the most is strong protection of property rights i.e. capitalism.

  87. Let’s see other places in your rant where you strongly know better what is good for others.

    And could you please name the goods and services which some people (market) can not find in a market.

    How does markets can fail? After free markets are us, we the people making free choices.

    Markets never failed me.

    What you are saying is similar to what Clinton, in his second term, said when asked why he doesn’t support returning excess money from government to people (the owners), the tax cuts. He said he would support it if he knew that people would spend their money the right way (meaning his way)!

    You’re saying similar; markets (people) failed me because they don’t produce what I want.

    You’re absolutely wrong, in a free market (people) always produces what other people want to buy. People are always right in their choices.

    But I understand how people can fail you; they don’t want YOU, meaning they won’t voluntarily spend their own money on your ideas. That’s why you want to use force (government) to compel them to live their lives “the right way”, meaning your way, according to your model.

  88. And BTW, how somebody’s smoking, not in your home, can affect your dry cleaning bill?

    You can expand your knowledge on externalities here:


    You said:

    “….Access to the highest quality care (the best technology “known to humans” as you say) is determined by the quality of your insurance coverage. This is clearly reflected in the outcomes data, which show substantial disparities based on income and coverage…)

    Daa…that is very deep revelation!… maybe to you, not to any rational person.

    Quality of any product made by humans is reflected in a price. Any product.

    Name one product which is better in quality and more desired by people and at the same time cheaper then poor quality and less desirable one. Food, automobile, house?

    Regarding the obesity, again you’re showing strong desire to own people. I don’t own these people (or any other group of people) so they don’t own me their productivity.

    They’re productive (or not) for their own good, they’re not my property that I can decide what life they should live.

    Remember? We’re talking about free people, free markets.

  89. Your logic is totally off when you talk about cost, economy, productivity etc.

    If you have difficulty with it, put in place of health care any other business, than you will see if logic still holds.

    So, let’s say burden of people driving too much (!) is excessive use of brakes and other auto parts. According to your logic that should increase cost of repairs, parts etc? And as a consequence, costs rise for the rest of us ( the ones not using cars too much), gradually crowding out growth in wages….

    Of course this gibber does not make any sense!

    Excessive cost is possible only with external (out of market) manipulation, made by government’s use of force i.e. regulation, taxation, permits, favoritisms etc.

    Without government restrictions, like ban on out of state insurance purchases, to mention just one, cost of health care would be drastically lower.

    But then, people would be too happy and politicians would have difficulty to convince population how important government lawyers are. And content people are not too willing to look for a master to protect them.

    In regard to American health care, please name other country in a world with more advanced technology in medicine, so far the best (I didn’t say the cheapest – that wouldn’t make sense) technology used by millions (known to humans) is in USA.

    That is fact, not an opinion.

    Read more original Ayn Rand, and not just about her. Something more then Wikipedia. The best protection of somebody’s welfare and wellbeing is in our Constitution with its emphasis on individual (human) rights which can not exist without property rights.

    Sorry for being little harsh on you but I’m getting sick and tired of recent growth of cynicism and “spread the wealth” mentality. It reminds me of socialist Germany and USSR of 1930’s, their leaders also just wanted to spread the wealth – the end results are known too well.

  90. …sorry for repeating but couldn,t fit in one response and had to cut some…

    How does market can fail? After all free markets are us, free people making their own free choices.

    Markets never failed me. Law of supply/demand is a natural event like gravitation and like nature abhors vaccum.

  91. Regarding the obesity, again you’re showing strong desire to own people. I don’t own these people (or any other people) so they don’t owe me their productivity.

    They’re productive (or not) for their own benefit, they’re not my property that I can decide what lifestyle they should live.

    Remember? We’re talking about free people, free markets.

  92. Would you say that Rolls-Roys engines or Mercedes’ cars are not the most advanced technologicaly because not everyone can afford them, would you?

  93. Yes, capitalism would be an excellent idea; too bad we have never tried it. Instead we have financial monopoly, institutional usury, free money for zombie banks and corruption at all levels of politics. Take a look at Hayek, Ayn Rand, Henry George, the real capitalist intellectuals. Don’t confuse Goldman Sachs and citicorp and GE with free enterprise. Under free entreprise these companies would all now be in bankruptcy reorganization, where they should be. Having pull in the government is what our system is really about. Incidentally, bankruptcy is now a scam too, perhaps the biggest scam of all. The devil is in the details.

  94. There are many things to be done, all essential and none easy. I personally work with a grass roots organization called A New Way Forward (http://anewwayforward.org) and we’re fighting for fundamental reform of the U.S. financial sector which will hopefully lead to fundamental reform of the entire U.S. economy. I am curious to hear how other commenters are transforming all this disturbing thought into positive action.

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