I’ll say it again for those that read slowly. Fiat currency. Google that and you’ll then know what caused the crisis. Oh, and the very thing that will cause the next crisis, and the next and the next, until the world goes back to some kind of standard.
Its humorous how only after every crash do people start finding blame. What about before a crash? Didn’t the sheeple ever understand what was happening to their money? Did nobody ever realize how years of savings couldn’t make up for one year of spending during their retirement? I seriously think that most of the world is a bit too thick at times.
Whose fault is it? Bush and the Republicans, with their deregulations, big government spending, fiscal irresponsibility and fixation on trickle-down economics (screw Joe Sixpack, enrich the few at the top).
I don’t think so, but because of that book, people are less willing to trust this government to have free reign to ‘fix’ this problem.
so what kind if wisdom exactly does a Harvard MBA or a Wall street CEOship bring you? an outward, forward looking one, or simly a deep cheap concern to fill one’s own pockets and fuck off out of the system before it collapses?
a couple of very prescient articles in the Economist about four years ago pointed the finger sqaurely at greenspan and his bunch of Shylocks, and described exactly this situation.
So, now that capitalism has failed, especially the Anglo-Saxon variant of amok capitalism, what next?
Socialsm? SSA, Socialist States of American. Come on, not so bad. Chavez in Venezuela seems more capable than Bush, Obama and McCain with Palin thrown in. And they have free speech as well, free elections plus Che Guevara shirts. Come on, admit it, you are done :lovestruck:
Greetings,
Commandante Bob :beatnik:
The author would say it was because of the government that the people won’t trust it and that it doesn’t matter if the Shock Doctrine in and of itself fails. It typically does fail. However, it opens opportunities to introduce more regulatory change mostly deregulation with the end result regardless of success or failure being the separation of the masses from their money.
In fact, the shock doctrine actually traces its roots to Milton Friedman. He was initially a Keynesian economist, but started to develop his own theories about monetarization of the economy for which he won the Noble prize in economics. It involves essentially the creation of monetary instruments such as packaged debt (bonds) to price the value of every thing and little government intervention so as not to interfere with pricing signals. The best time to introduce such a policy according to Friedman is when there is a crisis which can wipe the slate clean and allow for regulators to remove things which he considers create market failures such as labor unions. The Federal Reserve controls the price of money through a single instrument that being interest rates. The IMF tried to introduce this policy frequently throughout the 80s and 90s in third world countries and it was evidenced by central banks the world over selling off their gold holdings through out this period. Something that looks pretty stupid today. It has a fundamental floor, however, and that is that the Federal Reserve behaves in a predictable rather than unpredictable manner when it comes to interest rates. For example when the economy is slowing the reserve will cut interest rates and when everything is going well there’s no change, and when inflation increases due to capacity constraints it will raise interest rates. So the market watches the Fed and the Fed watches the market. If one can predict how the Fed is going to respond with a certain degree of confidence then one can create as much debt as one would like and speculative bubbles can and do result.
The beauty of the system for some is that if you are in a cash position when the crisis hits, you can buy up all the assets and the Fed is compelled to support the monetary system it oversees. The Fed in punishing those who hold the bad debt sells off their assets cheaply to those who are in a position to buy them and take over the bad debt which it is fundamentally responsible for through monetary policy. It has to keep the system liquid. This leads to some firms benefiting greatly and having the Fed guarantee their position.
Take for example the case of Bear Stearns. Bear Stearns went bankrupt earlier this year. At the time, the Fed brokered a deal with JP Morgan to take over Bear Stearns. Originally, JP Morgan offered two dollars a share for the viable assets. That was an ambit claim probably just to feel out the Fed. In the end, JP Morgan brokered a deal whereby they took all of Bear Stearns decent assets for 10 dollars a share plus had the fed lend them 30 billion for taking over the crap. The beauty of the deal for JP Morgan Chase is that if the crap really is crap they only have to put up a billion dollars as security to cover their 30 billion dollar loan.
This is a situation where one could say the Fed is definitely punishing Bear Stearns or one could say that JP Morgan Chase is creaming it. Well it just so happens that JP Morgan Chase is the banker to Big Oil with connections right back to the Texas Commerce Bank and the former Chairman of Exxon Mobile sitting on the Board.
Lee R. Raymond
Retired Chairman
and Chief Executive Officer
of Exxon Mobil Corporation
Director since 1987 of JPMorgan Chase
or a predecessor institution (Texas Commerce Bank).
Who is the underwriter and syndication agent for Halliburton since 2004 i.e., who is underwriting the privatization of the war in Iraq and organizing all the loans to Halliburton? JP Morgan Chase.
Their deal with Halliburton. They must be paid in cash, no shares.
So its not really that the Bush administration has failed, they have simply had another agenda all along. MONEY.
There will be increased government scrutinization of the last three remaining big banks, BoA, JP Morgan, and Citigroup because they now hold more than 30% of consumer deposits. The Big Three may start to resemble quasi-state owned banks (although not technically) where the government closely monitors their lending practices.
Taiwan escaped from the 1997 Financial Crisis because of the legacy of its state-owned banks. The government directed bank lending towards industries it wanted to develop. Government regulations in Taiwan’s banking sector limited lending for real estate and stock purchasing. So when the real estate market tanked in 1997, Taiwan’s banks emerged unscathed.
The negative savings rate in the US also helped contribute to this mess. In Taiwan, a high savings rate was a decisive factor in its successful development. The KMT government’s prudent fiscal policies encouraged national savings by running account surpluses through low taxes and very restrictive government consumption. Government savings made up 21% of national savings in Taiwan from 1950-1990.
In contrast, Bush’s spending habits led to huge deficits that discouraged the achievement of a high personal savings rate in the US.
[quote=“Fox”]In fact, the shock doctrine actually traces its roots to Milton Friedman. He was initially a Keynesian economist, but started to develop his own theories about monetarization of the economy for which he won the Noble prize in economics. It involves essentially the creation of monetary instruments such as packaged debt (bonds) to price the value of every thing and little government intervention so as not to interfere with pricing signals. The best time to introduce such a policy according to Friedman is when there is a crisis which can wipe the slate clean and allow for regulators to remove things which he considers create market failures such as labor unions. The Federal Reserve controls the price of money through a single instrument that being interest rates. The IMF tried to introduce this policy frequently throughout the 80s and 90s in third world countries and it was evidenced by central banks the world over selling off their gold holdings through out this period. Something that looks pretty stupid today. It has a fundamental floor, however, and that is that the Federal Reserve behaves in a predictable rather than unpredictable manner when it comes to interest rates. For example when the economy is slowing the reserve will cut interest rates and when everything is going well there’s no change, and when inflation increases due to capacity constraints it will raise interest rates. So the market watches the Fed and the Fed watches the market. If one can predict how the Fed is going to respond with a certain degree of confidence then one can create as much debt as one would like and speculative bubbles can and do result.
Lee R. Raymond
Retired Chairman
and Chief Executive Officer
of Exxon Mobil Corporation
Director since 1987 of JPMorgan Chase
or a predecessor institution (Texas Commerce Bank).
Who is the underwriter and syndication agent for Halliburton since 2004 i.e., who is underwriting the privatization of the war in Iraq and organizing all the loans to Halliburton? JP Morgan Chase.
Their deal with Halliburton. They must be paid in cash, no shares.
So its not really that the Bush administration has failed, they have simply had another agenda all along. MONEY.[/quote]
I really like Ms. Klien. I’m reading the book now.
Here’s her and Andrew Sullivan debating on Maher’s show. They both have some good points.
Me, too. She’s hot and I’m shallow.
I read some of that book when I was on holidays in Australia.
I like it cause it fits the siphon up theory. I was reading a little about Greenspan’s appointment to the Fed today. It was pretty interesting and I think telling.
Greenspan was appointed to the Federal reserve by Reagan when James Baker was Treasure Secretary. James Baker was the Chairman of the Board of the Texas Commerce Bank which through a series of merges became JP Morgan Chase.
Baker wasn’t happy with Paul Volker who was Fed Chairman appointed by Carter, but stayed on under Reagan. Baker wanted to be able to influence interest rate policy for political ends. The Fed board is made up of 7 members, which are partial life appointments (16 years). Baker didn’t like the lack of influence he could have in such a situation. He got lucky, however, when a board member resigned and he appointed his own undersecretary Johnson (Johnston) a 36 year old ex green beret intelligence officer who pledged to keep Baker informed on interest rate policy. Inside the Fed, Johnson was able to tip the balance in favor of Baker’s desire to control interest rate policy and they were essentially able to create a cabal within the Fed. In the meeting after Johnson’s appointment a rise in interest rates proposed by Volker got voted down. Volker resigned over what he considered political influence over the Fed’s supposed independence. He had already come to this conclusion weeks before when James Baker with Reagan present had asked him directly to lower interest rates. When he quit Baker appointed Greenspan. One interesting thing about Baker’s relationship with Greenspan was that if Greenspan believed he was going to make a policy move that Baker didn’t like, he would tell Baker in advance.
Another interesting thing, I learned about JP Morgan Chase is that during the Enron scandal JP Morgan Chase was found guilty of aiding and abetting Enron by knowingly lending it 2.5 billion dollars which Enron though smoke and mirror accounting was able to show as company profit. Ken Lay was a former Board member of the Texas Commerce Bank. They were similarly involved with WorldCom and had to pay back 2 billion dollars to their shareholders.
Last year, I read Charlie Wilson’s War and whilst I kind of enjoyed the antics of Charlie Wilson and his CIA buddy, I found the most intriguing person to be Joanne Herring. There was little on her background in the book and how she came to be so closely aligned with Middle East politics. It’s kind of presented that well she just was and she had many husbands and was very sexy and she was a minutewoman (make of that what you will). However, interestingly her second husband had his own oil and gas company, she was a childhood friend of James Baker and her husband until his death in 1981 was on the board of the Texas Commerce Bank.
One word=Duplicity
Next question…
[quote=“Dr. McCoy”]I really like Ms. Klien. I’m reading the book now.
Here’s her and Andrew Sullivan debating on Maher’s show. They both have some good points.[/quote]
I thought that was one of Maher’s better shows – and I’m generally a fan.
I don’t have much respect for Naomi Klein, but she was not as stupid as I expected in this case. And I thought that Andrew Sullivan was absolutely excellent.
Sullivan recently posted on his blog about one of the points he was making on Maher’s show:
[quote]…Much if this crisis stems from rank greed and irresponsibility from ordinary Americans on a massive scale, who bought homes they couldn’t afford on credit they couldn’t repay, or who leveraged their property with loans they had no reason to take out. If this crisis hits Main Street hard, it will also hit a great number of people who also deserve their comeuppance. We need a fix to solve the credit problem. I understand that. But a little delay is important and salutary. And the real, long term fix requires weaning Americans off credit - and giving enough of them a taste of what their greed and recklessness can do.
http://andrewsullivan.theatlantic.com[/quote]
I agree with Sullivan’s main point in that debate.
There are plenty of people to blame in this situation, and this includes both the bankers who gave loans to people who couldn’t afford the houses they were buying and the buyers themselves, who took the “why worry when I can put it on the credit card!” approach to their family’s finances, and bought houses that their incomes could nowhere near support, betting that rising house prices would continue forever and get them out of jail for free on their irresponsible gamble.
But my guess is that this was not one Sullivan’s “good points” from your perspective, Doc?
Didn’t you suggest earlier this week that saying [color=#0000FF]“I think home-owners who themselves made the decision to borrow money they couldn’t repay should take some share of the responsbility for their reckless behavior” [/color]is bascially the same as saying [color=#0000FF]“I think the babies in China dying from melamine poisoning deserved it, because it was the babies themselves who made the decision to be fed poison milk-formula”[/color]?
I’m not sure which thread it was on, or what your exact words were, but I’m pretty sure you said something like that (i.e. that the two are both essentially equivalent cases of “blame the victim”) because I remember reading your post and thinking at the time that it was a very offensive thing to say.
Anyway, if the point quoted above wasn’t one of Sullivan’s “good points”, what did you think his good points were? (I doubt it was his point that Bush was an absolute horror as a president, since that is one of the things Sullivan and Klein agreed on – so it wasn’t really up for debate on the show. 
)
H
Actually, I think Sullivan and Klien are actually taking about two quite different aspects of the same problem. Klien’s point is how the government handles disaster whilst Sullivan’s point is what created the disaster.
There is an obvious distinction. Klien would have it that America, in particular, will opt for more deregulation on the basis of economic ideology. It is a strategy recommended by Friedman that government must take advantage of shocks either economic, military or natural to introduce more laissez-faire policies. That ideology also assumes that people are rational agents that always make the best choices given perfect information about the economy. The floor in that theory is the cost of information about the future and the ability to attain it --none of us has a crystal ball. Also individuals behave differently than groups. What makes a rational choice for a single agent might not be the same for the group as a whole and there is no reconcilable average outcome or equilibrium.
Sullivan’s approach was to say the agents were not making rational economic choices. They didn’t cost in the future correctly. They were using adaptive expectations. He was right to say that but by doing so he was highlighting the deficiency in the ideology Klien points to that forms the basis for the problem.
Klien said it was an idological problem and she was right. Sullivan said what are you talking about. This is capitalism. It’s the best system in the world. The only way we know that works. What are you a communist? He was stupid.
What the Bush administration has effectively done is stain the social contract. Almost to the point where when the government is needed to govern it has been hamstrung by an incompetent, ulteriorly motivated executive administration and the people who are sick of it.
The 55 Trillion Dollar Question
They could make a Robin Williams movie on this. I’d probably wet myself laughing. 
[quote=“Hobbes”]
Sullivan recently posted on his blog about one of the points he was making on Maher’s show:
[quote]…Much if this crisis stems from rank greed and irresponsibility from ordinary Americans on a massive scale, who bought homes they couldn’t afford on credit they couldn’t repay, or who leveraged their property with loans they had no reason to take out. If this crisis hits Main Street hard, it will also hit a great number of people who also deserve their comeuppance. We need a fix to solve the credit problem. I understand that. But a little delay is important and salutary. And the real, long term fix requires weaning Americans off credit - and giving enough of them a taste of what their greed and recklessness can do.
http://andrewsullivan.theatlantic.com[/quote]
I agree with Sullivan’s main point in that debate.
There are plenty of people to blame in this situation, and this includes both the bankers who gave loans to people who couldn’t afford the houses they were buying and the buyers themselves, who took the “why worry when I can put it on the credit card!” approach to their family’s finances, and bought houses that their incomes could nowhere near support, betting that rising house prices would continue forever and get them out of jail for free on their irresponsible gamble.
But my guess is that this was not one Sullivan’s “good points” from your perspective, Doc?
Didn’t you suggest earlier this week that saying [color=#0000FF]“I think home-owners who themselves made the decision to borrow money they couldn’t repay should take some share of the responsbility for their reckless behavior” [/color]is bascially the same as saying [color=#0000FF]“I think the babies in China dying from melamine poisoning deserved it, because it was the babies themselves who made the decision to be fed poison milk-formula”[/color]?
I’m not sure which thread it was on, or what your exact words were, but I’m pretty sure you said something like that (i.e. that the two are both essentially equivalent cases of “blame the victim”) because I remember reading your post and thinking at the time that it was a very offensive thing to say.
Anyway, if the point quoted above wasn’t one of Sullivan’s “good points”, what did you think his good points were? (I doubt it was his point that Bush was an absolute horror as a president, since that is one of the things Sullivan and Klein agreed on – so it wasn’t really up for debate on the show. 
)
H[/quote]
If you think the borrowers are to blame, then how do you propose to prevent this from happening again? Isn’t it easier to put regulations on the banks to stop these idiots from getting loans than it is to stop these idiots from trying to get loans they can’t repay?
I think the “free markets are the only way” mantra is just empty talk. It’s like saying, “Jesus loves you” or “God bless you”. You repeat it again and again until it has no meaning. Do you have an answer to Ms. Klein’s question? Can you give an example of a successful free market state? All I can think of is Europe in the Middle Ages, and I don’t think we want to go there.
The answer (again) to a free market with need for only the minimum of government regulation is a market run on gold backed dollars. Lets see people create debt from nowhere and then sell it and back it with insurance created from nothing, and market it to people who take out loans to buy it with a system which is backed by gold. I somehow don’t think that will be possible. The sudden desire for regulation only comes because with a system where you can create money from nothing, you can also create rules and products from nowhere. If we can’t sell one make believe product today, we’ll just call it something else tomorrow. Much like the government’s own bailout proposal. 
I would like to see the media take some of the blame for the crisis.
I would also like to see homeowners take some of the blame for the crisis.
The government isn’t responsible for the stupidity and greed of the proletariat.
Agreed! However it was governments that halted the teaching of economics at high school. It always used to be part of everyone’s curriculum. I wonder why they changed it? 
HG
Uh, ever hear of the South Sea Bubble? And the pound wasn’t backed by gold then, it was gold (well, guineas anyway.)
I don’t know where gold bugs get these bizarre ideas that there were no massive speculations and crashes during the era of gold-backed currency.
I don’t think the teaching of economics would do anything more than confusticate the system.