Who is Carlos Slim?

The US increasingly displays characteristics that we have seen many times in middle-income “emerging markets” – new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged.  But this raises the question: who exactly is going to dominate our economic and political landscape moving forward?

In most emerging markets, a major crisis means that some powerful people and their firms fall from grace.  After the Asian Financial Crisis (1997-98), some of the biggest Korean chaebol disappeared or broke up, numerous Thai bankers lost their top positions, and there was a discreet reshuffle among the Malaysian business elite.  Russian oligarchs rise and fall with the price of oil; the process in Ukraine is similar, although somewhat murkier.

With every sharp turn of the cycle, new people rise to the front – taking advantage of low asset prices and the fact that most people struggle to borrow on reasonable terms.  In Mexico, after the crisis of 1994-95, Carlos Slim consolidated his position in telecoms and used this as a launching pad to become one of the world’s richest people.

Three sets of players look positioned to do the same in the US today, mostly based on the amazing set of “carry trades” available if you have access to large amounts of cheap short-term funding (e.g., along the yield curve, from dollars into other currencies, and – arguably – into equity in some parts of the world).

First, obviously nothing can stop Goldman Sachs and JP Morgan.  With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat.  The weakness of other big banks is further icing on their cake.  GS and JPM are symbols will loom large over the national and international economy for a long time to come, with the main threat (to them) coming from their rather too blatant market share in many products.

Second, the surviving big hedge funds will do very well (partial list).  They can move fast, they have no regard for anything other than profit, and they will not be effectively regulated.  Their access to credit runs through the biggest banks and this can be a double-edged sword – expect more instability in the future from hedge fund-bank dynamics (as Morgan Stanley found out last fall).

Third, foreign players with sovereign backing are also going to clean up.  Their credit access comes not from the Fed (although our low rates help their funding costs), but from the fact that they control or are controlled by creditworthy government elites.  These foreigners will be relatively diverse (European and Asian, with perhaps some others in the mix) and they have learned to be discreet within the United States.  But a great deal of the speculative business to be had is cross-border, with a funding leg in the US and a high-risk asset piece in emerging markets; they are in great position to do this.

Top people in the Obama administration now begin to understand what they have wrought.  The body language becomes uncomfortable when you bring up this topic and they are eager to discuss alternative ways forward.

But we are entering a new, more global era of state capture, and the US government (or, more precisely, its credit) was handed over – rather meekly – during the past 12 months.

Many states have been taken over by bankers; there is no shame in fighting and losing against what Jefferson called the “monied aristocracy.” But few governments, even the weakest, have handed over the keys as quietly as we did.  As Lloyd Blankfein said, to an aide, on their way to the greatest sales job in the history of the republic, “You’re getting out of a Mercedes to go to the New York Federal Reserve.  You’re not getting out of a Higgins boat on Omaha beach.”

The winners among our financial elite are very far from the Greatest Generation, but they are the Best Paid Generation for a reason.

By Simon Johnson

146 thoughts on “Who is Carlos Slim?

  1. I see no way that the US can escape social unrest on a scale we haven’t seen in a generation. Having the first black president, even if he appeared competent, honest, non-captured, which he doesn’t and if economics times were good, he would still alienate and anger elements of the far right. The next few years in American life will be interesting and or frightening depending on one’s perspective.

  2. I guess it’s good to ask why we handed over the keys so quietly, although it’s become a little like the situation in the book “The lord of the flies.”

  3. It’s still just a house of sand, even more fantastic and flimsy than it was two years ago.

    However many times they reflate the bubble, each time it will be harder, with less “wealth” to do more reflation work and more political resistance to overcome. Each time the next crash will come sooner and be more devastating.

    The return on investment, speaking figuratively the “net energy”, will soon be impossibly bad.

    Speaking literally, energy and other resources, upon which the economy ultimately stands or falls just as it always did (although there too the economists still deny it), are entering terminal depletion relative to what would be necessary to continue the debt/”growth” march.

    So as hideous as the world is today, I’m not very worried about the world domination of the bankers lasting very long.

    I’d say if we look ten years down the line the real corporatist threat is the dictatorship of Blackwater-type outfits (open or through puppets).

    How many divisions does Goldman have? In the end they’ll be like Al Capone’s bookkeepers.

    That’s assuming the people never rouse themselves to take back America.

  4. This quote was taken originally from businessinsider website and I found it at Rortybomb. The quote was made by Austan Goolsbee who is on Obama’s economic team:

    “Look, we enter the government essentially in a hotel that is on fire. We’re throwing people from the windows into the pool to save their lives and this is the evaluation of the Olympic diving committee: Well, the splash was too big.”

    That’s a gem of a quote. Let’s take a couple steps back and remember how people were feeling when they looked at the horizon a few months ago. We do have some things to be thankful for. Am I happy with executive compensation for bank CEOs (among others)?? No. Am I happy with the moral hazard the bailouts created/added to the system?? No. Am I happy with the new laws (or lack thereof) they have enacted to assure us this bank crisis won’t happen again?? No. But they have done some good things. There have been some small steps in the right direction.

    Here is a separate interview done by Maria Bartiromo with Austan Goolsbee over at The Atlantic magazine/website talking about some of Obama’s policies. Again the link was from Derek Thompson at The Atlantic website.

  5. SJ writes: “a great deal of the speculative business to be had is cross-border, with a funding leg in the US and a high-risk asset piece in emerging markets”

    This suggests in America, the financial sector will continue to dominate economic activity. While innovation and economic growth will be in the emerging markets riding a speculative wave funded by the Federal Reserve.

  6. Excellent article Simon.

    Here’s some perspective on the outrageous oligarchs’ bounty enjoyed under the current reality at just one company-Goldman Sachs.

    The 2009 Goldman Sachs BONUS POOL is $23 Billion. Not salaries and benfits, merely BONUSES. Goldman Sachs employs roughly 25,000 people worldwide.

    How much is $23 Billion?

    Below is a list of ALL 2009 expenditures by ALL government entities from ALL funding sources for ALL services in the following states. Meaning, ALL state, county, regional, and municipal government spending funded by ALL federal, state, county, and municipal funding sources. Includes costs for Pensions, healthcare, education, welfare, protection, transportation, general government, other spending, and interest.

    In essence, the figures below represent the aggregate cost to run the below STATES and provide all services for their entire respective populations, for a YEAR, 2009.

    Mississippi 2009 $30.2 Billion, 3,000,000 people
    Iowa 2009 $26.2 Billion, 3,000,000 people
    GOLDMAN BONUS 2009 $23.0 Billion, 25,000 people
    Utah 2009 $23.0 Billion, 2,600,000 people
    Nevada 2009 $22.3 Billion, 2,600,000 people
    Kansas 2009 $22.2 Billion, 2,800,000 people
    New Mexico 2009 $21.4 Billion, 2,000,000 people
    Nebraska 2009 $20.1 Billion, 1,800,000 people
    Arkansas 2009 $19.9 Billion, 2,900,000 people
    Hawaii 2009 $14.4 Billion, 1,300,000 people
    Alaska 2009 $13.4 Billion, 700,000 people
    West Virginia 2009 $13.3 Billion, 1,800,000 people
    Maine 2009 $11.0 Billion, 1,300,000 people
    Idaho 2009 $10.9 Billion, 1,500,000 people
    Rhode Island 2009 $10.7 Billion, 1,100,000 people
    New Hampshire 2009 $ 9.9 Billion, 1,400,000 people
    Delaware 2009 $ 9.4 Billion, 900,000 people
    D.C. 2009 $ 9.0 Billion, 500,000 people
    Wyoming 2009 $ 8.3 Billion, 500,000 people
    Montana 2009 $ 8.2 Billion, 1,000,000 people
    Vermont 2009 $ 6.5 Billion, 600,000 people
    South Dakota 2009 $ 6.2 Billion, 800,000 people
    North Dakota 2009 $ 5.6 Billion, 600,000 people

    The 2009 Goldman Sachs’ bonus pool of $23 Billion, by itself, would rank as the 30th largest aggregate state expenditure in the United States in 2009, if Goldman were a state. Goldman Sachs’ bonus pool of $23 Billion is as large, or much larger in many cases, than the 2009 aggregate expenditures of 20 states.

    Goldman Sachs’ 2009 bonus pool of $23 Billion, enjoyed by AT MOST 25,000 people is the exact amount expended by all governments in in the state of Utah in 2009 to provide all services to its 2,600,000 people, for one full year. Parsed another way, the Goldman Sachs $23 Billion 2009 bonus pool could single handedly fund the entirety of all government expenditures in the three states of Montana, Vermont, and Wyoming required to provide all services to their collective 2,100,000 citizens in 2009. The Goldman Sachs $23 Billion 2009 bonus pool could literally fund all government expenditures for all services for all 600,000 people in the state of North Dakota for FOUR YEARS, and still leave $600,000,000 in spending money…..

    Obscene doesn’t even begin to describe the siuation.

  7. this were the first two news items’ headlines in today’s NYTimes Newsletter:

    Deficit Hits $1.4 Trillion, Complicating Stimulus Plans

    Bailout Helps Fuel a New Era of Wall Street Wealth

    maybe one should try to get a patch of land for planting some potatoes somewhere

  8. From Ron Paul’s speech in 2000

    At the close of the Constitutional Convention in Philadelphia on September 18, 1787, a Mrs. Powel anxiously awaited the results, and as Benjamin Franklin emerged from the long task now finished, asked him directly: “Well Doctor, what have we got, a republic or a monarchy?” “A republic if you can keep it” responded Franklin.
    The term republic had a significant meaning for both of them and all early Americans. It meant a lot more than just representative government and was a form of government in stark contrast to pure democracy where the majority dictated laws and rights. And getting rid of the English monarchy was what the Revolution was all about, so a monarchy was out of the question.
    The American Republic required strict limitation of government power. Those powers permitted would be precisely defined and delegated by the people, with all public officials being bound by their oath of office to uphold the Constitution. The democratic process would be limited to the election of our leaders and not used for granting special privileges to any group or individual nor for defining rights.

    The Americans turned out to be too gullible, malleable and lazy to keep the Republic.

  9. I am just listening to “This Week” from last Sunday and they mentioned that Pakistan is getting jealous at the amount of aid Afghanistan is getting.

    That makes me wonder how the citizens of aid-receiving states feel when they hear the multiple times bigger figures involved in Bank-Bail-Outs – BBOs?

    at my old work place it would have sounded something like this: for their robber banks they have all the money in the world but when it comes to helping … there are no funds for it.” And this is the tone in a country which hasn’t received aid in a long time …

  10. correction:
    And this is the tone in a country which wasn’t in need of aid in a long time … (but is still kind of receiving some by Americans carrying most of the military burden)

  11. BTW, the Mexicans I discussed it with last summer in Zacatecas hate Carlos Slim, and believe, probably with some justice, that he stole the Mexican telephone company as part of a “privatization” deal.

    Looks like it’s a good time to invest in Euro-denominated bonds. Croak!

  12. It appears, Greenspan and Bernanke saw the build up to the 2008 financial crisis as evidence of the “great moderation”. A free market had created unsurpassed growth, based on leverage ratios as high as 1:100, “safely” hedged in AAA-rated bonds, purchased by the most-conservative risk-averse investors, lured by the promise of an additional basis point or two.

    There is some hope for sanity when SJ writes: “Top people in the Obama administration now begin to understand what they have wrought.”

  13. I am sure by now everyone has read Matt Taibbi’s (Rolling Stone) scathing connect-the-dots piece on Goldman. The appointment of Storch as Enforcement Operations Unit Chief is just another converging probability pointing to tacit collusion between Goldman and Washington. YOu cannot convince me that there is not one person more qualified that the 29yr old Storch in the entire U.S. or the world for that matter.

    I remind Mark G. that Rolling Stone has never approached “far right.”


  14. I would feel safer if SJ had named these “top people in the Obama Administration” or provided evidence that these same individuals are doing something more than getting Congress to reduce bank overdraft fees and to make mortgage documents more transparent.

  15. Did not say SJ had a responsiblity to reveal his sources. Just said I would feel safer if we knew who they were so we could hold their feet to the fire. Sorry but I didn’t realize regulation is a stealth function of government as is intelligence or war.

  16. The ones I talk to seem to really resent the fact that he’s of Lebanese extraction, and he owns their country. And their country is tearing itself to shreds.

    Needless to say, Prof. Johnson, this post was greatly appreciated. You can’t get at the worms unless you open the can.

  17. Jessica, assuming they are politicians. The next election cycle is already in gear and “they” will need donations, fund raising and campaign volunteers. Ie, get the people you really want into office.

  18. “Many states have been taken over by bankers; there is no shame in fighting and losing against what Jefferson called the “monied aristocracy.” But few governments, even the weakest, have handed over the keys as quietly as we did.

    There’s that “we” again. Your wikipedia entry was updated recently and now points to evidence that you have american citizenship. If so, welcome aboard, but do you? Would you mind sharing a little about why you chose to become american, if you did? Did you foreswear your British citizenship?

  19. SJ said these top people are “in the Obama administration,” therefore, I assume they are appointees and not elected politicians and have the potential to serve until the next presidential election in 2012. Believe me, my comment was not intended to insult Simon Johnson. I am a fan.

    2 other points: It is nearly impossible to defeat incumbents and we women should leave the micturating contests to the men—they are much better equipped.


  20. I had to google a definition of “micturating” (lol). It seems to me they way forward is a political process and pushing for accountability. Pitch forks and torches strikes me sometimes as (testosterone driven?) chest beating. I have pacifist tendencies.

    But really. Pauleson gave $700 billion to his banking buddies and they don’t have to disclose what they did with the money? Huh!!! What planet are we living on?

    Your Baseline pal

  21. One more and then I’ll shut up a little.

    Look, the situation is dire. In paranoid world the Simon’s and the James’s could be working for the bad guys, and might not even know it. How do we get beyond notabanker’s “shouting from the mountaintops”?

    It may well involved something like the War Powers Act, or an something like when the British invoked anti-terrorism law to freeze Icelandic banking activity.

    Is this the first step? Identify the 10 most powerful people in each country, round them up, and send them to Guantanamo for (humane) interrogation and reeducation? Not just the figureheads. Go beyond the Slims and the Soros’s and the Petersons.

    Maybe this can help to identify them? A blog intended as a tool to identify enemies of the people. Lawyers are invited to participate and help identify legal courses of action.


  22. Goldman’s the place to work! I hope the best and the brightest talent is reading this. Go to Goldman young man!

  23. Is this a form of surrender to neo-mercantilism? The outcome is very like that.

    To misquote Teresa Nielsen Hayden, I deeply resent the way world finance makes me feel like a paranoid conspiracy theories.

  24. During Russian collapse, everyone bought a Dascha (country house with a few acres to grow potatoes). I think Americans will soon learn.

  25. Hi Pal,

    I certainly agree with you about pushing for accountablility which is what I mean by “holding feet to fire” and I have never proposed revolution of any sort. SJ sees an oligarchy in the banking sector and I see an oligarchy in both banking and the legislative branch. Term limits is the solution to the oligarchy in Congress, but not one legislator will vote himself/herself out of office. I honestly think new regulation will go the way of past regulation: when Goldman wants a variance they need only ask Treasury.

  26. The fact they are the 10 most powerful people makes me think that you can’t just round them up and stick them in Gitmo.

  27. Ok, that’s a characteristically saucy Goolsbee bon mot, but you’re going to have to tell me, what the hell is he talking about? Who got tossed in the pool? And what is the pool anyway? And who is the “Olympic diving committee”? (And Austan, I’d really try and avoid Olympic references for a while. Not a happy topic in the West Wing these days, I’m sure.)

    But seriously, isn’t his comment tantamount to an admission that the incoming administration was simply unready to assume responsibility for the crisis? Lehman had collapsed (along with the DJI) months before. Bear Stearns nearly a year before. Did they think that 200,000 jobs a month were being created? Or that foreclosures had ceased? We heard so much about the first rate “team of rivals” being brought in and learned that preliminary transition work was begun in July. If the hotel was really on fire, they saw it from miles away and have no excuse for surprise.

    So what explanation can there be for a wholesale capitulation to the Wall Street elite on most every issue of importance other than regulatory (or perhaps more accurately, “administration”) capture pure and simple? And I’m no Obama “hater”, to be clear; I gave both money and time to his effort and was thrilled with his election. Indeed, I like much of what he’s doing, have reservations about some but am absolutely appalled by what has developed and continues to develop on regulatory “reform”.

    I understand there’s still miles to go on regulatory reform and the proposals may well be substantially improved. And if his campaign has taught us anything, it’s that Obama is patient and spectacular at late in the game saves. I sure hope so, because if not, then I believe there will be hell to pay in November 2010 when folks get the opportunity to express how scared, frustrated and downright pissed off they really are.

  28. Russ, I see the American military using the new poverty as a fertile recruiting ground for many new resource wars, sacrificing the lives of the poor to steal whatever world resources the rich desire. In this scenario, anyone with fighting potential will die abroad for this worthy cause.

  29. I’ve read that there are people who dream of creating artificial islands out of international waters, residence on which would enable them to operate free from anything cumbersome. Now if one could lure them to something like that and then prevent transportation away from it scrambling their internet and phone connections etc – I hope the result ‘ll show up in my dreams tonight

  30. I learned about mercantilism from Spain, where they essentially thought that if they gathered all the gold in the world and just sat on it, it would magically make them rich. Unfortunately for them, it’s not enough to hold onto a lot of dough–you’ve got bake it into something for it to be worth anything.

  31. taken altogether the Brits are probably much poorer and a lot more dependent on foreign benevolence and consequently influence than the US-sers and mind you I am so much in love with British historians and a lot of others of their writers that I’m probably eligible to be considered an addict to the Brits

  32. Did you see how the Pentagon just reported 169000 enlistees for the year ending 9/09. That’s the highest since 1973 and beats its recruitment goal by 5000.

    Michael Roston said “If there’s anything that shows the divide between Wall St and Main St, it’s the contrast between a day when the stock market returns to 5-digit territory, and the military beats its recruitment goals.”

    It’s definitely part of the equation:

    The crash = impoverishment = bank bailouts = bogus bank “profits” = Dow 10000 = military Keynesianism (the true bipartisan and MSM-approved “stimulus”) = Global War on Terror = crap jobs for the impoverished.

  33. Well, in Europe it led to all kinds of disasterous policies. Not learning from history seems to be the destiny of all that happened not to live through it.

    I can’t presume to speak for Raven, but nowadays, China (and Japan of 20 years ago) is widely regarded to be the key neo-mercantilist: amassing a huge currency reserve war chest, exporting tons, making it hard to import, aiming a complete control of the economy towards these ends. This makes them a target for our champion bubble-blowers who will make money one way or another on this sort of predictabily disasterous behavior, both on the inflation of the bubble and then with advanced knowledge of its deflation.
    I’m not sure how this is a surrender to neo-mercantilism, as much as a crushing of it.

  34. Startling numbers HD. I really can’t imagine seeing a figure like that in any paycheck. Also this is just the bonus fund! Above this is the profit number and above that the revenue number!! Is this all a catalyst for running our country or is some part of it just plain gouging?

    Can you explain to a mere mortal exactly what is the actual service provided by GS for which they can charge such huge fees? The actual deals which they enable must surely be immense and who are the parties? They are on several orders of magnitude above my experience. Profit of three billion plus in three months is a billion a month, then the revenue must be enormous.

    What strikes me is that GS produces absolutely nothing which provides shelter, sustenance or well-being to the main street folk. Just skims the cream off the top without planting, tending or harvesting. Is this the best expenditure for America?

    Is more better? Or less? Something doesn’t sit right.
    What’s more the management is fired with only one ambition. To get more more more next year and next year and ….

  35. your comment makes me ask an old question of mine: is globalisation, free trade the world over really something conducive to the well-being of “normal” human beings?
    It is such an unquestioned model but weren’t the trade barriers of old and the corresponding market places also creators of wealth?

  36. Goldman runs the casino. Like other casinos, they are rolling in dough. Guess who the gamblers/suckers are?

  37. You really need a more careful analysis of trade and trade barriers to see what is conducive to “the wealth of nations.”
    At certain times and to certain degrees trade barriers may be appropriate. Likewise with lack of trade barriers. They are not good and bad in themselves, but depend on how they are used and to what ends. I am an old school person who thinks that the greatest good for the greatest number is the best way to run an economy, but I am currently in the minority.

  38. thanks Yakkis
    but for the last three or four years I have been listening to a great number of savvy people talking about utilitarianism and that has got me a bit weary of it – it sounds so convincing on first hearing but then … – you limit it to the economy so maybe there it is’nt as questionable as in the so-called trolley-problem (which by the way asks hypothetical questions of humans which should be forbidden to ask) – I’ll have to think about it –
    according to Amitav Ghosh http://www.amazon.de/Antique-Land-History-Travelers-Departures/dp/0679727833/ref=sr_1_9?ie=UTF8&s=books-intl-de&qid=1255819711&sr=1-9
    there was global trade before but then geographic barriers put boundaries on it … so I keep asking myself, now that all “natural” boundaries have gone, transportation is’nt hindered by anything anymore is taking down of trade barriers everywhere really a good thing?

  39. I’m unaware that trade barriers are being taken down everywhere. I thought the opposite was happening.

  40. again thanks Yakkis
    but wouldn’t it be intersting to know who blocking what and where – I remember that we block agricultural produce from Africa but who is blocking our stuff?

  41. Broadly, mercantilism is managing a country’s trade so as to disadvantage the country’s trading partners. The historical American example was the British policy of limiting trade among its American colonies so as to draw money to Britain. As other commentators have observed, it’s a destructive and discredited policy; taken to extremes it tends to lead to wars.

    What I find striking about the Simon Johnson’s account of the current matter is the way the world seems to have broken up into trading blocs, each competing. This might be a kind of mercantilism and, if it is, the surrender to Sachs and Morgan can be viewed as an acceptance of this order.

  42. This is curious:

    The new wikpedia edit states: “In his appearance (re-telecast on October 11, 2009) on PBS’s Bill Moyers Journal, Johnson confirmed that he is a United States citizen who voted for President Barack Obama.”

    A lie or clumsy exposition. In the video Johnson says only: “I like the administration. I voted for the president.”

  43. Who is Duncan Thomas?

    Simon’s cv at the University of Sloan points to a sr. fellowship at something called BREAD – The Bureau for Research and Economic Analysis of Development, at Duke University. The fellow who runs BREAD is Duncan Thomas, who spent 7 years with RAND. Picture is getting clearer.

    BREAD conferences have been sponsored by the World Bank, and BREAD has a number of fellows and affiliates associated with the World Bank.

    Both RAND and World Bank have a certain stink about them. Why is the good professor hanging out with *those* guys?

  44. I posted above and put the grossly obscene size of the Goldman Sachs oligarchs’ $23 Billion Bonus Pool in context to reinforce Simon’s point by comparing its size to aggregate expenditures by all state government entities to fund all public services for a one year period.

    $23 Billion is the exact expenditure amount of all government entities in the state of Utah, the 30th largest US state in terms of spending, for 2009.

    I have an even better comparison. There are +/- 195 countries on the planet. Panama ranks +/- #90. Thus, Panama ranks well into the top 50% of countries based on GDP ranking. And, over 100 countries have GDPs smaller than Panama’s. According to the World Bank and the IMF, Panama’s 2008 GDP was $23 Billion US. Panama had a population of 3,309,679 people in 2008.

    Panama exports very significant amounts of coffee and other agricultural goods. Panama enjoys a very robust tourism sector. Panama is the very important banking, commerce, and trade capital of central, if not south america. Panama has a relatively short, albeit very important waterway that bisects the country called the Panama Canal. The Panama Canal transports four percent of world trade, 16 percent of total U.S. borne trade, and 68 percent of Canal traffic originates in or is destined for the United States. In essence, Panama produces stuff, transports stuff, and provides tangible services.

    And, the combined gross domestic product representing all economic activity of the country of Panama and its 3,309,679 people in 2008, at $23 Billion, from all sources, exactly equals the $23 Billion 2009 Bonus Pool to be enjoyed by Goldman Sachs’ 25,000 worldwide employees. It’s fair to say that the vast, vast majority of the $23 Billion will be enjoyed by merely a few hundred of Goldman Sachs’ senior executives. This is, of course, exclusive of additional salary and benefit payments.

    If this isn’t oligarchy, I don’t know what would constitute it. In my view, we have very serious challenges when one company with 25,000 worldwide employees has a bonus pool equal in size to the GDP representing the entire economic activity of the 90th largest COUNTRY, ranked by GDP, on the planet.

    How precisely are we supposed to even attempt to regulate Goldman Sachs? Regulatory capure, system capture, or global capture? We have created a monster.

  45. Simon never says China, but I think that’s where the action is heading. Here’s how I see it going down.
    1.) China must export (to keep up it’s neo-mercantilism), and to do this it maintains its currency peg artifically low so its exports are cheap
    2.) ZIRP (or NIRP) in the US allows firms like Big Banks to do the carry trade that Simon describes. Artifically strong dollars give it leverage.
    3.) We keep printing money depreciating the dollar. China must follow suit or see its currency rise. It does this by buying more stuff in dollars…they get the stuff, we get the dollars to plow into their economy.
    4.) &5.) Exercise for the reader.

  46. I would like to see a three way cage fight between panama, utah and goldman. I put my money on Goldman.

  47. Maybe Goldman Sachs should enter into their rightful place and make a takeover offer for the Washington sub-contractors? Cash payment of course.

  48. Rumor has it that Goldman Sachs is gunning for Latvia #80 on the global GDP ranking list next year. At roughly $34 Billion in GDP, this would represent a modest 50% growth rate year over year for the Goldman Sachs bonus pool.

    If Goldman wants a cage match, they should endeavor to do it this year. I hear the Latvians are tough….

  49. “A pox on the house of…” Amerikan finance. It astounds me, that all these brilliant minds cannot discover blatant overt CRIMES committed!!! We all undertand the finance oligarchs and the predator class will cut off gas, or electricity, or water, and set up check points if necessary – and the people will be forced to succumb to the allmighty dictates of the predatorclass. The predatorclass operates under no scrutiny, and abides no known laws or accounting standards and practices. Criminal behavior: (insidertrading, collusion, Fraud, Ponzi operations, predatory and deceptive lending, fee’, and services practices, et al., is freely tolerated and perhaps even glorified if money is the metric.

    We know also, that the socalled judicial system and that thing they call theruleoflaw is fiction, a dream. Justice in Amerika today is “justus” an in just the predatorclass. Everyone else is doomed to deprivation, slavery, poverty, and poor health. Jefferson, nor Adams, nor Hamilton, nor any of the founding fathers imagined an America so foul and criminal. They were bathed in hope!, and being wise men and committed to something other than MONEY!! and the getting of MONEY, which always lead to CRIMINALITY! The America we were all born into has indeed changed, – for the worse! Have any of these bastards bothered visiting the Statue of Liberty, or the Lincoln or Jefferson Memorials!! What are we as a nation if we deprive millions of our children of basic healthcare. What calculus can explain or stasticaway, or quantify that harsh reality. Predators must be put back in the keep. If predators imagine they are safe and secure in their oppulent palaces, – they are wildly mistaken. Someday, these grievous wrongs will be righted.

  50. Poor derar Simon, preaching to the choir again. TSadly, or tragicly really, the only positive thing I can see is that there will be nothing left to bail out anyone, once the game stops, and it will, in a very bad way, since those who really need the money can’t get it (whether mortgage debtors, state governments, or even the IRS — after all, where is the actual tax revenue coming from these days?).

    When the great 2010 bubble collapses,the safety net will be gone, and the grim reaper will take over.

    Interesting that there are elections next year, wow, that should be a clusterF….

  51. And so now you want to make a gender issue out of it. Well let me tell you that brain and guts probably requires more testosterone than following pitch forks and torches like macho lambs beating their chests.

    In fact let me remind you that the most serious problems with our current financial system is that our regulators are trying to lower its testosterone level by arbitrary increasing the incentives for capitals to go where the regulators naively believe there are risk-free green valleys.

  52. In the history of the world, indesputably, every countries reign of power ends. Usually there are wars involved, and the transfer comes with a heavey price paid by the “citizen” of the power-loosing country. Meanwhile the finaincal and power-elite struggle to carve/goble up more of the pie as the empire starts to crumble around them. Think Roman, Ottoman, Spanisn, French, British…. and now American. The question becomes how messy does this get, and what country will step up as the next hegemony. We are witnessing The End Of The American Century… Only in the lense of history does these transfer seem clear. Or perhaps on blogs like baseline…

  53. “Or perhaps on blogs like baseline…”

    How would you know for certain that blogs like baseline are not part of “the financial and power-elite struggle to carve/gobble up more of the pie?” I mean the owner of the blog is a former chief Economist of that IMF which just nano/seconds away supposedly ruled the world? There is not just one elite struggling!

  54. don’t forget the end of an empire can take centuries from when the feeling “decline is upon us” starts to the actual finish line

    – just a reminder East Rome survived until 1453, West Rome got a kind of second life with the “Holy Roman Empire” and if the two hadn’t been so interested in fighting eachother instead of their other enemies they might have made it for quite a number of centuries longer

  55. Do you want to know how to be certain to be hit by a slow moving truck? Stand transfixed in its headlights and wobble.

    For heaven’s sake jump, it doesn’t matter in which direction, doing something is better that just standing there ensuring that the probable becomes the inevitable.

    You have diagnosed and agree on the appalling economic and social perils. Now what are you going to do about it?

    Are Baseline Scenario and its commentators just a load of wobblers?

    I made my suggestion two blogs ago under the title Move Along.

    Maybe it has to be said in baby talk by someone like Seth Godin:

    If people – who are as so aware of the risks – are not moved to collective action of some sort, any sort, then I repeat Baseline Scenario is highly counterproductive.

    Don’t those who understand the dangers have a moral responsibility to act?

  56. In modern times, the transition from superpower to just-limping-along can happen pretty quickly too.

  57. This blog serves the important function of countering an even more pernicious propaganda.
    The two keys for overcoming what is about to happen is being able to face the truth (this blog), and banding together to work in the right direction (blog discussion).

  58. You are the second person after Uncle Billy to suggest this.
    How do you think this blog is part of the elite power-struggle?

  59. No I asked first. How can you be sure it is not part of the elite power-strugle? Let us not forget there are many different elites with different agendas lurking out there.

  60. I’m not even sure how being part or not part of an elite power struggle either invalidates or validates any claims made by Simon or James.

  61. Dear Per,
    there may also be “elites” out there who are not “lurking” but doing some serious thinking and questioning and pondering !!!

    – unfortunately I do not have the capabilities which might enable me to decide even for myself in which class Mr. Johnson belongs – for a time I wavered whether I should do some serious reading on the subject but by now I believe that if the conversation is kept on a level suitable for the “elite” only it will not achieve much and all I can hope for is that I will not have to see the day when an evil orator shows up who has mastered the trick transcribing all this smart full of long words stuff into simple language.
    Per made a suggestion for a sound bite the other day – has anybody come up with suggestions for polishing it? I haven’t read anything – demanding action sounds great and even heroic but getting messages polished so that somebody with 2 or 3000 words of English gets the picture might get you groups willing to gather to do really something with.

  62. PK – SJ & JK have been consistent in pointing out the regulatory capture of our financial system, and painted comparisons of the way America is handling this crisis to that of developing world markets. You may not like the way the IMF handled those situations, and SJ’s involvement therein – however, it appears clear to me that thier suggestions of how to depoliticize the regulatory structure, and their consistent caling out of all things not in the interest of a longer-term fix to our financial system (TBTF, etc) has NOT been in the interest of the Power-elite. Quite the contrary – those people (GS, JPM, and thier government puppets) are exactly the ones called to the carpet on this Blog. I fear that history will show that the future consequences of inaction (and what those actions should have been) will have been thoughtfully discussed on this site… to no avail….

  63. I don’t understand #3: “China must follow suit or see its currency rise. It does this by buying more stuff in dollars…”

    By what mechanisms will the buying of stuff in dollars devalue the RMB?

  64. The world’s ‘elites’ are pretty much in the same boat. They don’t want world war – least of all, China. Though this could change if the crisis continues.

  65. The answer to why so is short-term or long-term failure, often with additional backlash. This happens essentially due to poor planning, failing to take into account the most common human failings, failing to make plans robust in the face of failure, robust in the face of unexpected contingencies, sustainable and equitable.

  66. It is clear that there is no way that the new “winners” can be sustained without a massive taxpayer subsidy, in the form of massive dollar printing. This is reflected in the slow, steady, upward march of gold over the last decade.

    Assuming no political upheaval, this trend can be expected to continue and can be traded profitably.

  67. I should also say the framers of the American constitution thought they were doing this and were somewhat successful for 200 odd years with many big bumps and wars along the way, but clearly they didn’t plan ahead well enough and had all kinds of blind-spots and human weaknesses of thier own because things have reached this point (and reached this point in the past too).

  68. Excellent post Steve.

    I’m a big Goolsbee fan, but I concur with your assessment. I suspect the bon mots are trotted out largely because nuanced alternative explanations for what appears to be regulatory/administration capture are hard to come by.

  69. “those people (GS, JPM, and thier government puppets) are exactly the ones called to the carpet on this Blog.”

    Bingo. To put the point charitably, it strains credulity to argue that BS is tool for propping up elite interests. Thus even among the characteristically skeptical/paranoid, the burden of proof lies heavily on those who would suggest otherwise.

  70. we just need to stop bitching, stop paying credit card bills and mortgage payments and watch the machine stop cold. I money is the oil in the capitalist engine just drain it out and watch the engine seize.

    Or just start passing out pitchforks. Most of these “bankers” went to school long enough to have learned about the french revolution. I swear if nothing is done we have 10 years tops until the pot boils over.

  71. When the pitchforks come out, it will be interesting to see how Americans react to their government using chemical and microwave weapons on their own people.

  72. Well, mercantilists (the neo ones) by now know that currency is just like any other commodity governed by the rules of supply and demand.
    In the past, China has managed its peg by buying U.S. T-bills (it gets our debt, we get the dollars). Now it is looking into buying other (safer) things with its dollars.

  73. Sorry I misunderstood your question, and in addition my explanation was confused and inaccurate even towards the question I thought I was answering. Also, I now think my #3 is partly wrong in retrospect.
    In contravention of all blog-commenting protocol, I will be quiet before I dig myself in deeper.

  74. Oh what I would give to have an Andrew Jackson as president. Obama was never much of a promise but he has so disappointed in this regard. We need someone who will cast the moneylenders from the temple, not sell it to them.

    We face a dismal future.

  75. Re-read SJ’s post. Elizabeth Warren is definitely tops but not one of the “top people” he refers to.

  76. @David
    sell it to them???

    that sounds like really good news, up to now I was under the impression they get paid to keep on tolerating being moneylenders.

    and to think of it maybe that’s the reason for all more inappropriate than ever bonussing going on
    – RSB will go for it big too says the London Times
    – the stars at the banks who are so flush with past bonusses that they long for early retirement on one of their islands or aychts or maybe aircraft carriers can be made willing to labour along for another year only if they are bonussed alright – me thinks …

  77. I come from a country were those who loudest voiced rightly against some elites having captured it, turned out to be a much worse breed of state capturers. As a result I am very suspicious, especially when I don’t see in front of me a consistent long term trajectory or writing that I can evaluate… like the one a Brooksley Born can show.

  78. I’ve never studied economics. Monetary dynamics are a mystery to me.

    You say: “currency is just like any other commodity governed by the rules of supply and demand”

    If that’s so then scarcity drives prices up and abundance drives them down. The Chinese want the dollar to be dear in respect to the RMB, so they should try to keep the dollar scarce. Shouldn’t they keep their dollars instead of buying T-Bills? If they sit on their dollars it makes the supply scarce. If they buy T-bills, they are re-injecting dollars in the market making them abundant, therefore cheap.

  79. Word David Gutting! Many of us had hopes that Obama would truly give voice to the voiceless, but alas we have – yet again – been decieved, – and Obama like all politicians in hard in the pockets of the predatorclass. The people alone will right these wrongs, and you are correct Yakkis that our government will unleash upon its’ citizen a pandora’s box of unholy weapons and socalled calmative weapons, (marking chemicals, and other chem and bugs, painrays, and information warfare to boot. Know this and act accordingly. Large mass protests with large numbers of women and children, (the hardest hit Americans in this economy) could stifle, or at least caution the use of these kinds of dastardly technologies in the predatorclass/government bins. But I would resist large gatherings and networks.

    We’re all insurgents now!

  80. This is why I argue for a stringent vetting process. Of course, we will have much disagreement over the ultimate bent of the people we vet. But whichever way it goes, they should be honest to a fault, isolated from the big money, both directly, and in the influence it can buy.

  81. Yakkis, here is the argument.

    The financial blogosphere has acquired a great deal of credibiity through the crisis. A careful study of the various blogs shows that there has been a concerted effort to place certain blogs and personalities at the top of the heap. Professional PR put Baseline on top. Be assured that this thing does not exist because Simon, Peter, and James (not in the Biblical sense) are simply thoughtful guys who put a lot of effort into bringing us the truth on a daily basis (Well mostly James and Simon). Through circular references on the other blogs, certain personalities rise to the top. DeLong tips hat to Salmon, passes to CR, back to Ezra Klein, back to Krugman, then to Baseline, who shoots and scores. This is a proactive method of building credibility and this handful of blogs is influencing the top influencers.

    Simon is affiliated with the Peterson Institute and things like BREAD, mentioned above, and NBER, CEPR, etc. MIT could very well be a government institution with all the NBER and NSF money that floods into it to produce research that rubberstamps desired policy. James attends a university that is known as a conduit to life in the shadows. Both Peter and Simon were in Russia during the privatisation glory years. Simon’s background is in “emerging economies.” We are now a Pre-emerging economy.

    So why would they be telling us the truth about what’s going on? Two reasons, I think. It’s important to know that we are certainly not getting the whole truth. We are getting “limited hangouts.” 1) We are being conditioned to say “Yes.” “There’s been a financial coup.” “Oh, yes.” “Things are really really bad.” “Oh, yes.” We haven’t arrived at the final proposition to which we’re supposed to say yes, yet, but when we do, it will happen quite easily. 2) It could be that they are waging a propaganda war to simply demoralize the readers with the “truth.” The bad guys and many good guys made pots of money as the bubble inflated. The pin-prick that began the deflation, in my opinion, was the ’07 Mason-Rosner paper presented at the Hudson Institute, which was the point at which everyone woke up to the ratings game. It looks like Mason was rewarded with tenure at LSU(?) and Rosner still maintains the fake looking website that makes it look like he’s an “independent analyst” and not simply a tethered spin-off of the grossly over-influential Medley Global Advisors.

    So what would be the point in depressing the hell out of everyone? Money? Power? But how? Maybe as simple as pumpadump on a huge scale. Or maybe we’re gong through that grand process of transforming of nations.

    Per, I will not let you steal my mantle. I’ve been ranting about this for the past 4 years, and as long as this blog has existed as the hosts can surely confirm for you. I tried to go to google and the blog’s own search function to demonstrate this for you, but google search has crippled the ability to search by date, and it looks like baseline doesn’t let you search comments (which is curious). I don’t have the patience right now to dig through my own archives. In any case, I respect your views, agree with many or most of them, and appreciate what you do here.

  82. The reasons :

    • Bush was too weak and moderate to object to the Paulsen/Bernacke coup for the banks. He was heavily influenced by the RINO establishment that is more concerned with the appearance of ‘governing” than effective solutions or the consequences of bad actions.

    • The Democrats saw an opportunity to both enlarge the government and destroy the Republicans in the election.

    • Our politicized media suppressed any honest discussion of the risks of TARP, and belittled anyone who objected to it.

    TARP opened the doors for Obama’s and Bernacke’s reckless spending, and pandering to the TBTF banks.

  83. Stray thoughts: Rosner used to contribute to Roubini’s RGE (who pays all those analysts?) Also, I don’t watch tv much anymore, but back when I did it wasn’t hard to identify which of the bloggers were getting pushed heavily, and had the biggest exposure. Simon is out there all the time now too, ala Roubini as evidenced by the clips that keep rolling in.

  84. Thanks for the figures, Hillbilly.

    I totally agree. When a small clique of people who produce absolutely nothing valuable play with a bonus pool the size of a national GDP, we know that there is a problem. A big problem.

    If we let them get away with it, we deserve to be screwed over and over.

  85. I definitely see your point with respect to Roubini. Around the time Obama took office his analysis seemed to change and it seemed like he began angling for a high post somewhere.

  86. He toned everything down and went into semi-retirement. But I don’t think he was looking for a position. I think he was playing the chief role in the deflation, and now he just gives an interview once in a while, “co-writes” articles, and works on his book. His rewards will be huge, but, as even he sees himself as a global citizen, it looks like his future role will either just be a life of laureled luxury, or something in a transnational organization.

  87. Jessica! (hope you catch this)

    When we chatted above, I had skimmed through Simon’s post and missed the second sentence, which most likely you caught. So there was some misunderstanding on my part. Full quote:

    “Top people in the Obama administration now begin to understand what they have wrought. The body language becomes uncomfortable when you bring up this topic and they are eager to discuss alternative ways forward.”

    Tim Geithner might be among the “top people” Simon refers to.

  88. The second chapter to the book THE CREATURE FROM JEKYLL ISLAND: A SECOND LOOK AT THE FEDERAL RESERVE, is called “The Name of the Game is Bailout”…and this has been going on ever since the privately held Federal Reserve has been in a position to print money on behalf of our country–and with their monopolistic power to get legeslators to legalize what should be criminal–banks now gamble with deposits, reap all rewards, then place the burden on the future of America, sacrificing our very security for this heist–
    TARP was passed by the US citizens cried out NO–we need to REVOKE TARP.

    The privately held Federal Reserve runs our government, and needs to be audited with the passage of HR1207 and S604 so if ANY legeslators do not support this–THEY NEED TO BE RUN OUT OF WASHINGTON.

    We the people want our country back.

  89. It isn’t the next few years… it’s just a bit further down the line, when the wave of Debt capsizes the ship. Argmageddon has been put off just a short while by transferring that debt to the Federal coffer, and incurring massive new debt without restructuring existing debt.

  90. Thanks for a post on the carry trades – I just had a conversation with a gentleman this morning to the effect that most macroeconomists have no idea about the impact of the carry trade on monetary outcomes or the savings/investment equillibrium.

    The only suggestion is this – the Carry Trades are (in a sense) a very elegant form of Tunneling, which you have posted on in the past. It might be worth explaining the linkage (or maybe not).

    Also, I have heard some economists defend the carry trades as a form of arbitrage, and by definition arbitrage is a ‘good thing’ according to a certain perspective.

    It isn’t ‘merely’ that people are making obscene amounts of money that is the problem; it’s also that the effect of doing so is to SUBSIDIZE DISINVESTMENT IN THE UNITED STATES.

    Making money, instead of requiring real investment, can be achieved through massively “trading”. It’s supercritical to understand what this means.

    Note, for example, that virtually all banking profits of the last 3 quarters were due to two factors:

    1) massively cheap credit (a huge yield spread, that’s a hidden subsidy by the taxpayer)

    2) highly leveraged trading profits


    It may be that #2, like #1, is intended by our government as a way to invisibly flood the financial sector with cash – in the vain hope (expressed by our fearless leaders) that if we give lots of money to banks they will lend it and pump more credit/blood into the Body Economicus.

    But the practical matter is they are STILL sitting on a mountain of reserves, are being PAID by the Fed to sit on a mountain of reserves, and prefer to make loans for the purposes of supporting a carry trade than for the purpose of making any real investment.

  91. My 2 cents worth on the big picture – Financial capital (people who lend) is at war with industrial capital (people who mine and make stuff). Financialists want ever increasing debt loads where the people become the authors of their own slavery; industrialists favor rapid expansion or war to stimulate demand. Historically, overextended debt loads lead to collapse and this over-reaching by financialists allows the industrialists to put their people in power, usually resulting in war (but not always – after the collapse in Japan, industrialists took over and promoted a weak currency and a crappy yield curve to allow for continued industrial expansion). Sometimes the people recognize they can plunder the nation’s treasury, and will do so through their elected representatives, impairing long term growth and severely impairing future generations through government debt loads (something the US and UK Baby Boomers have excelled at).

    Any system that seeks to replace the current one must be able to guard against, or balance, this trio of threats – the voters, the financialists and the industrialists.

    Do you know what to do? I don’t and so I watch and read and wait until someone with a realistic plan shows up. Then will be the time for action.

  92. first
    I had no problem googling Baseline comments – my search this page button can’t locate figures like 50 on the page though – unusual

    I am believing more and more that the ability to “publish” one’s thoughts and even get reactions to it every now and then is so satisfying in itself that it provides a ÜberDruckVentil=excess pressure valve
    … something like the boxes in Hyde Park were supposed to do at the time – let them vent their anger keeps them from doing something “real”

    Yakkis thinks the internet or rather the crowds spending time on it will come up with something and spare us, who shudder at the idea, the unpleasantness of going through the meeting and committee path/circus
    – I think at best it can provide those really willing to and capable of taking (community) action with thinking material from other corners of society or the world, i.e. do something like replace the travelling agitator of old – but aren’t we all rather similar? – most seem to be academics, business owners, well-educated or at least self-read etc. No one from the more blue collar stratum of society. If that’s true we are pretty lousy replacement agitators.

    As society is concerned I find it fascinating how quickly the crowd on such a blog gets in line – no radically different views stay for long – the number of people commenting even on a prominent blog (if Uncle Billy is right) is surprisingly small (this is my first time ever participating for any length of time)
    – and I keep asking myself quite regularly why I am doing it, because for example I do not agree with the notion that the most honest people are the best to clear up the mess and that switching from micro- to nano-scrutinizing will do the trick
    I dream more of somebody fiercely devoted to the protection of the working stiffs (including journalists at the MSM*) ;-), but otherwise capable of quite some shrewd and devious and shady backroom dealings and rollings in the hay or whatever he/she needs to recalibrate

    *) heard yesterday that those at the NYT had to agree to pay-cuts – blogs maybe all the rage but who is going to travel the world now to report, if the NYT can’t pay fancy and thus hopefully safe travelling anymore? Could it be that the job and its expenses will be taken over by the daughters and sons of well-oiled parents who want to give their kids a chance at fame/a career that way?
    My ideal would be more somebody writing his way up from the small local paper and hopefully learning on the way up how to combine a healthy cynicism with insistence on caring genuinely for the “great unwashed” and to be financed by consumers of an openly for-profit-and-thus-auditible-outfit.
    I hope the MSM soon will come up with a viable model that enables me to pay for what I want to read – for me all this free stuff smacks to much of charity from people who want to “nudge” me.

  93. and in this one hours long interview I heard with Buffett he spoke the kind of language I am “lobbying” for

  94. Thanks. With news that the UK Government debt is three times what they have been ‘fessing up to:


    We desperately need a better discourse, and I am in the process of launching a site to host it in the UK. And I would be happy to create a Yala here. It would certainly make this useful conversation more effective.

    Meanwhile, the question I raise here is the authenticity of hosting a discussion with no outcome in action.

    Jürgen Habermas, a German philosopher, suggested that a good discussion–one that helps us all to think together more successfully–should be three things: articulate, symmetrical and authentic. He calls these “discourse ethics”. By “articulate”, he means that we should talk about things that are on our mind–our hopes, concerns and thoughts–and not just keep silent or “bottle them up”. He means by “symmetrical” that each view should be equally valued and that no one person’s opinions should predominate at the expense of others, in other words that the balance of the conversation should not be skewed by power or upset by politics. Finally, he means by “authentic” that our thoughts, words and deeds should align. That is we say what we think. Our words are not empty. And that we do what we say (otherwise the conversation is a waste of time, a “gabfest”, just talking for the sake of talking).

    The notion of discourse ethics was an important step that brought a dialogical and historical perspective to moral questions. Its critics, however, are unanimous on two points.

    First, though it is presented as a purely procedural moral theory, it is not free from content. Everyone who agrees with its norms is already motivated by something: will, choice or tradition. Within any existing society, Habermas argues, a moral sensitivity or moral preference has already come into being that enables moral discussion to be successful. This is the willingness to reach consensus and the capacity to do so. But these are Western assumptions. The reasonableness and equality of individuals are postulated as self-evident highest Good. But not all African and Asian cultures take this view.

    A second criticism focuses on conditions that Habermas sets for the participants in the discussion. Not only must these “subjects” be capable of using language and acting reasonably, they must also have a level of reflection that enables them to think about questions of justice, to argue about these questions and to reach consensus about them with others. This level of reflection can only be reached by a small, well-educated group: an intellectual elite. This contradicts Habermas’s assertion that, in ethical discourse, everybody can speak for themselves.

    I have tried to make the Yala easy for people without a great command of language. Nevertheless, a Yala can never be completely free of content, or “right” for all. A Yala values the frank exchange of dissimilar views. And a Yala, at least where software assisted, can only serve those with Internet access and the computer literacy to use it.

  95. Disagree strongly. The fact that the capture is so obvious, so brazen, and so dismaying is actually grounds for hope– not the BS “audacity of” varierty that we heard from this shallow, flimsy man, but hope based on a realistic reading of the American character and history.

    Re. which, a few salient examples:

    1. 2010’s not far away, and we know who the enemy is. If The One can’t man up and rein in Govt Sachs and JPM-TARPChaser, we’ll chuck him and his party and find someone who can.

    2. We’ve been here before. Earlier generations reined in Rockefeller, JP Morgan and 1920s Wall St “Operators”. We can do it, too.

    3. Cleansing ourselves of household debt is a return to normal, healthy American values. The Spree, with its negative net worth and bizarre habits of buying $hit you don’t need with money you don’t have, was a freak, an aberration, in US history. Heavy indebtedness is NOT an American tendency. “Yankee” throughout our history has been wedded to core traits such as *thrift* and *ingenuity*, as well as commercial acumen and toughmindedness generally.

    4. We’re still attracting the best and brightest from around the world, while more and more of the millions of sixth grade dropouts and the illiterates are starting to go back to Mexico. This is progress.

    5. We’re Americans. F*ck those who say we won’t bounce back. We always do. We will. F*ck Goldman and Timmy G and the Talker-in-Chief. It’s our government, and we’ll take it back, even if it takes three years or more.

  96. nothing against Habermas but I hope for a village or small town mayor to instruct us on the how-to of discussions and/or actions

  97. We were busy playing with glass beads. Isn’t how the natives lost their lands centuries ago? Glass beads for fur pelts……

  98. Things aren’t right. Our future isn’t secured, nor is it guaranteed by the mere fact of us being Americans. History isn’t written always with the truth in mind and specially not US history.

    As I look at the youth today I don’t see the seeds of success for the future the odds are stacked up against them. Huge debts to pay back. The cost of their Education has become prohibitively expensive and with the downturn of the economy it is now being rationed. Many state schools are cutting classes and wholesale dropping students from their rosters. Thanks to privatization of student loans those who graduate with professional diplomas are spending the first decade of their careers paying back these loans, that is if they are lucky to be employed. Free Education should be our next priority after public health care is passed. I benefited from free education so should our children.

    The intransigence of the entrenched interests and the partisan politics further assure mutual self-destruction.

    The best and brightest aren’t coming to the US. They are staying in their countries as they are valued by their own and have serious nascent economies. The opportunities aren’t in the US it is in the rest of the world.

    It isn’t the fault of Mexicans that you have cheap produce and labor. It is moronic to blame them for the fiasco wrought upon us by greedy Wall Street and the white establishment after all weren’t they in control? Look at yourself before you blame others those who weren’t even remotely close to the levers of power.

  99. Silke,

    Interesting. When I went back in the archives here to September ’08 to get some samples to check. I took a phrase from a comment, and the name of a commenter and googled that, which produced the proper search result immediately. Yesterday that wasn’t happening. But I think this is why:

    I wanted to go back and see if I could collect all my comments from the early days in one google search. If you search, eh, for example, site:www.baselinescenario.com “Silke” “2008”, results come out, but I missed the fact that they’re “rolled up” and you have to click on the link beneath the result to fully expand all the results from the particular site.

    Hard to say if they’re all there, but it looks like it, for 2008. About 180 posts in 3 months. 2 a day on average.

    I still don’t see a way to search the comments from the embedded search box on the site itself. Is this by design?

  100. “is this by design?”

    I don’t think so, my experience is that there are few sites which (or whose?) own search features provide the results one would expect. It has gotten better over the years i.e. there are more of them now working fine, but all in all I find I am often better off with google especially when I have a “piece of text”

  101. The problem I have with your argument lies in point #1: “we’ll chuck him and his party and find someone who can.” Who? Both of the major parties in our system are practically speaking completely captured. The barrier has been raised to prevent any viable third party from taking these two away from the trough. How do you propose we “vote” to change this? I don’t see this ending well, and violence is an unfortunately logical direction for this to trend long-term. A truly visionary leader with the power to enact his ideas would be welcome now, but I don’t see him/her yet.

  102. “There have been some small steps in the right direction.”

    There have been steps. Well, basically, there’s been one step. We have a debt crisis. We upped the ante by piling on a lot more debt to cover the existing debt. Feels better for the moment, because the game can continue without that pesky feeling that the world is about to collapse. But has it prevented that collapse or postponed (and worsened) it?

    This is very much a step in the WRONG direction.

  103. I accept the criticism of my word choice. I also want what someone who will get basic things done, rather than create new ways to hear himself speak each day. The solutions are not that complicated in concept (devil’s in the details of course). We just need someone with the strength of character to stand up to the crime as it is currently practiced, and with the political skill to survive the attacks s/he would surely face for putting a stop to it.

  104. I agree with Wupta on #4. It just ain’t so. You exported many excellent American jobs to other countries, and now they’ve got the experience and expertise and they are sticking around there.

  105. Alcoholism is a disease. The first step in recovery is something like, “we admitted we were powerless and that our lives had become unmanageable.”

    Thank you Simon for pointing out this obvious fact in relation to our financial system. Until it becomes an accepted fact, we are just shooting for the spittoon.

  106. “Top people in the Obama administration now begin to understand what they have wrought.”

    That’s nice! Now, the key question is: Are they willing to do something about it?

    Maybe they will, since Wall Street doesn’t even want to give to the Democrats anymore. That could be a liberating factor.

    But I won’t hold my breath anytime soon.

    There will be much work to be done if the Obama Administration wants to correct the situation:
    1) Reinstate Glass-Stegall
    2) Reinstate mark to market accounting
    3) Remove the so-called Bear Stern exception
    4) Fire Geithner and Summers
    5) Audit the Fed and remove any regulatory role from them
    6) Pass a strong CFPA bill

  107. “• Bush was too weak and moderate to object to the Paulsen/Bernacke coup for the banks. ”
    He just wasn’t a leader. He just rolled over to anything, never made any strong decisions, and listened to too many of his advisors who had their own interests at heart. Either that or he was grossly incompetent. I’m still not sure.

    “• The Democrats saw an opportunity to both enlarge the government and destroy the Republicans in the election.”
    As much as I’m not happy with the democrat’s response to this problem, it’s funny to think that all democrats really want to do is “expand government”, like it’s some sort of goal to become as bureaucratic as possible. The republican destruction point though, is probably valid.

    “TARP opened the doors for Obama’s and Bernacke’s reckless spending, and pandering to the TBTF banks.”
    You lay this all on Obama. I thought the congress had to make the stupid bill and forgot to put restrictions and regulations into it.

  108. Congratulations on your do-something task list. Would it be possible to state this in a post which:
    1. the current scene and key issues(SWOT based?)
    2. connects the key issues and the related fix tasks
    3. the fixed scenario
    4. the national benefit
    5. who should take the ball and advance

    I think we need posts which journalists can see and say ‘wow’ this is a hot subject. Then we may just see some traction? Also people like Samuel and James will be supported as they push.

    Thanks again for your powerful contribution.

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