I’ve been trying to figure out how to explain my understanding of the liquidity crisis that was the latest and most panic-stricken phase of the ongoing financial crisis.
I’ve created a series of charts – trying to put all the different factors in perspective.
They are all basically drafts at this point – but let me know what you think, if you have any suggestions.
(For those who are going to say the government – and especially Fannie Mae and Freddie Mac – played a role in causing this mess aside from the lack of regulation, and failing to act to prevent Lehman Brothers from collapsing – the government is given a greater role in the section that is expanded on in the “Housing Prices decline” chart that I haven’t posted yet. If you see a greater government role in the events and factors here – as some who read this previous piece of mine did – than let me know where – because I haven’t really seen any specific explanations that seemed convincing.)
My favorite line – to throw back at all those McCain fans who have told me McCain is only doing what he has to do to get the nomination, and will go back to being his reasonable self after it’s over is this:
In McCain’s mind the biggest sin is to run as one thing and then be another. You incur an obligation, just like when you go to war, the worst thing is to not accept responsibility for the deaths that you are responsible for.
[digg-reddit-me]Just a few weeks ago, today was seen as a pivotal day in managing the economic crisis. The deadline for all credit default swaps to be settled on debt in the Lehman Brothers bankruptcy is today. Much of the fear that swirled about disrupting markets several weeks ago centered on who would be able to survive this “settling.”
This morning, Reuters is reporting that these fears are overstated. One key reason is that a number of the major players who were involved both bought and sold credit default swaps – thus accomplishing to some extent what they were supposed to do – hedging their bets in the event of a catastrophic outcome. Despite the fact that an estimated $400 billion in credit default swaps on Lehman exist, some industry observers estimate less than $6 billion will actually change hands as many institutions have effectively hedged their losses.
Of course, this is a delicately balanced system – and if one party has not effectively hedged their losses, it could trigger another bout of panic as any banks who were expecting to be paid by the party that did not hedge don’t get paid – thus increasing their losses.
But with the stock market surging and the voices of calm and reason seeming to prevail for the time being, with liquidity apparently restored to the financial system and the federal government willing to step in to prevent another major player from collapsing – today’s deadline doesn’t seem as apocalyptic as it did just last week.
Christopher Hitchens is a writer – nay, a provocateur who happens to write. Thus he has viciously attacked Catholics from John Paul II to Mother Theresa to John Kerry. He pushed for the ill-fated war with Iraq – and is today entirely unrepentant. He mocks those he disagrees with. He is mean-spirited. He is the David Addington of debates – always ready to “go for the kill” and despite his intellectual dexterity, somehow uncouth. Yet, he is, in his way, honest.
At numerous rallies where the atmosphere has been, shall we say, a little uncivil, Gov. Palin has accused Sen. Obama of accusing our forces in Afghanistan of simply bombing villages. Only a moment’s work is required to discover that the words complained of were never uttered in that form and that they occurred in a speech that stressed the need for more ground troops as opposed to more airstrikes (a recommendation, by the way, that begins to look more sapient each week, at least in respect of the airstrikes). Again, I have a question: Did Palin know that she was telling a lie? Or did her handlers simply assume that she would read anything that was put in front of her, however mendacious? And which would be worse? And when will she issue the needful retraction? There seems no way of putting her in a forum where these points could be raised. So, continued media coverage of her appearances is no better than lending a megaphone to a demagogue, the better to amplify her propaganda.
Andrew Sullivan has been tireless (and I mean reallyreallyreallyreallyreallyreallyreally tireless) in pointing out that Sarah Palin has yet to give a single press conference – a first for a vice presidential candidate in the modern era, and perhaps ever.
Yet the liberal media continues to “lend a megaphone” to this demagogue, playing on class resentments, using the language of class warfare, attacking a majority of America, ignoring the shouts of “Kill him!” at rallies, and lying shamelessly about her life and her record as well as Barack Obama and his.
And, to keep anyone from making her accountable, she demonizes the press for good measure – to give her an excuse to avoid having to answer any questions.
Neoconservatives extol the virtues of American hegemony and believe that other states will welcome U.S. leadership so long as it is exercised decisively. They attribute opposition to American dominance to deep-seated hostility to U.S. values (rather than anger at specific U.S. policies) and believe that enemies can be cowed by forceful demonstrations of American power. Thus, neoconservatives downplay diplomacy and compromise and routinely charge anyone who endorses it with advocating “appeasement.” To the neocons, every adversary is another Adolf Hitler and it is always 1938.
The more I talk to people who support McCain, the more easily I forget that he is a neoconservative and a believer in American empire. Certainly, this paragraph describes John McCain’s foreign policy as well as it does George W. Bush’s.
[digg-reddit-me]If you want to know why I – like so many others – held John McCain in such high regard for so long, it had a lot to do with David Ifshin. And if you want to know why my opinion of him has plummeted, it has something to do with William Ayers.
Of course, this is the same McCain who refused to take on the issue of the Confederate flag flying over the state capitol during the 2000 South Carolina primary – until after the primary was over. This is the same McCain who condemned torture – until he finally was in a position to actually affect policy. This is the same McCain who promised to run a clean campaign – only to base his campaign around slander, hiring the verypeople who he had so vigorously condemned for playing dirty during the 2000 campaign. This is the same McCain who – after being embroiled in the Keating Five scandal – vowed to become a reformer – and did so, but meanwhile maintained cosy relationships with lobbyists and did many favors for donors. And on and on.
[digg-reddit-me]Interviewer: If McCain is elected, then how will the world react?
Bernard Henri-Levy: …The world will react badly. McCain may not be a bad guy, but he will mean – his victory will mean – the revenge, freezing, frightened, shy, rear-guard America. Rear guard. Not vanguard. Not victorious. Not optimist America.
That’s from a new interview with the American conservative movement’s favorite French leftist.
That’s also what former United Nations official Shashi Tharoor said several months ago. Obama represents the confident America, attracting other nations to it’s causes, standing for diversity and freedom and democracy – a country tolerant enough and open-minded enough to elect a black man whose middle name is Hussein president. Obama represents a country that could inspire people like Kareem Rashad Sultan Khan who Colin Powell referred to in his endorsement yesterday and Ali Soufan whose story I first learned from Lawrence Wright and now am reading about in Jane Mayer’s The Dark Side.
…the crudest but most effective weapon against the demonization of America that fuels Islamist ideology… [He] proves them wrong about what America is in ways no words can.
Perhaps that is why former counterterrorism czar Richard Clarke suggests that Al Qaeda may attempt – through the release of a well-timed video or possibly an attack – to affect the election:
Opinion polls, which, as noted above, al Qaeda reads closely, suggest that an attack would help McCain. Polls in Europe and the Middle East also suggest an overwhelming popular support there for Barack Obama. Al Qaeda would not like it if there were a popular American president again.
And of course, Obama’s focus on limiting our involvement in the Middle East as much as possible would help counter Al Qaeda’s plan to defeat America by drawing into multiple conflicts in the Middle East. (Of course, even as this strategy has clearly hurt the United States, this strategy hasn’t been working out too well for Al Qaeda either.) Further, Obama has promised to focus on the central front in the war on terrorism – the Afghan-Pakistan border – rather than the sideshow in Iraq that Bin Laden has been begging us to focus on while he reconstitutes Al Qaeda.
As most citizens of the world see Obama as the clear choice for America, they see the main reason to oppose him to be as being racism – an idea fueled by many Americans at recent McCain-Palin rallies who speak of “Obama’s bloodlines” and use the words Muslim and Arab as epithets. This is an unfair characterization of many McCain supporters – but it is the clear international perception.
The overall point is – the world sees this election as a referendum on Barack Obama, a referendum on whether America will move confidently in the world and re-brand itself in the face of the disaster of the past eight years. John McCain – as good of a man as he may or may not be – cannot be this – which is part of what Powell meant when he said we needed a “transformational” leader. Neoconservatism has been tried and failed (and John McCain clearly self-identifies as a neoconservative); muscular liberalism and bipartisan realism need to be tried.
A victory by John McCain will make Al Qaeda’s job easier. A victory by Obama will make it harder – it will defy the worst stereotypes of America that Al Qaeda draws upon. It will be a victory for the American ideal.
All in all – there’s a lot of talk about socialism these days – driven by a fear, especially among the financial elite, that a blowback is coming. At the same time, after the better part of four decades of Republican rule, the Republicans need to scare people out of voting for the charismatic candidate who’s offering to help them in this time of crisis. And certainly this ongoing financial crisis has demonstrated to many the insufficiency of the Republican approach to regulation and governance and the limitations of the market. (Though not to Republicans and free-market ideologues who continue to insist that the problems that have spiraled out of control in the shadow banking system were the result of too much government in the more stable, regulated banking system.) I could easily see a populist candidate gain power today by railing against the big money elites. But Obama is not this candidate, let alone an advocate for socialism, class warfare, or any similar ideology. (In fact, McCain’s rhetoric comes closer to populist demagoguery of Wall Street.)
Obama’s economic plan is not about socialism or revolution or any such radicalism. He’s not that type of politician. The goal of his Obamanomics (if you will) is not a socialist paradise or a European-style market socialism but a restoration of the economic justice that made 1950s and 1960s America so stable. Unless you think Leave It To Beaver took place in a socialist nation, then Obama’s economic plans shouldn’t strike you as far left. As Andrew Sullivan pointed out while thoroughly debunking the right-wing spin that Obama is “far left,” Obama is to Richard Nixon’s right on taxes, which you would never guess from the ads Senator McCain has been running. Even the “code words” that the Investors Business Daily finds to be so fraught with meaning – “economic justice” – which they insist is just code for socialism – are from1950s era American thinkers Kelso and Adler. They were the authors of the 1958 Capitalist Manifesto, a book which sought to figure out how to make American capitalism more just – while acknowledging that “capitalism [is] the only just form of economic life.”
Barack Obama’s economic plan falls well within the mainstream of American economic history.
Alexander Hamilton – that first budding capitalist of a new nation – believed that government must create and maintain infrastructure, encourage industry, and maintain financial stability through central banks and financial regulation. Henry Clay promoted (and Abraham Lincoln supported) what he called “the American system” – which included various government interventions to build up American industry. After the Civil War, industry gained more and more power – and by the time the Panic of 1873 gave way to the Gilded Age, extreme capitalism had taken over America – with extreme concentrations of wealth and vast amounts of power concentrated in the hands of a few magnates.
McCain’s hero, Teddy Roosevelt, believed that we needed to protect essential institutions and elements of society from extreme capitalism – and focused on environmental conservation, on breaking up monopolies and other concentrations of power, on increasing regulations and beginning government’s role as a protector of consumer rights. This conservatism of Teddy Roosevelt’s resembled that of William F. Buckley – who defined conservatism as a man standing athwart history, yelling, “Stop!” ((Of course, Buckley came to distance himself from contemporary conservatism – which dropped this moderate approach with preemption and prevention.))
As a result of Teddy Roosevelt’s reforms, and then the turmoil of the Great Depression, World War II, Hoover, FDR, and Truman – America had reached a point of social and economic stability. This stability of the 1950s and 1960s came at the expense of tamping down certain social and economic forces. The social stability was torn apart by the Civil Rights movement, feminism, free love, and the later radicalisms of the late 1960s and early 1970s. This culture war has been dominating politics since then.
The economic stability of this period was destroyed by the forces of extreme capitalism, greed, deregulation, and other economic radicalisms of the 1970s and early 1980s – as labor unions were undermined, executive compensation grew exponentially, social mobility was impeded, and economic power concentrated in a handful of large corporations.
The excesses of the social radicalism of the 1960s have been cataloged by the conservative movement – and many of the worst excesses have been reversed – while other elements have become accepted by the vast majority of Americans. There has been no similar concentrated political effort to moderate the other radicalism that destroyed the status quo of the 1950s and 1960s America, extreme capitalism. Just as the social radicalism of the 1960s produced great good – from the Civil Rights Movement to women’s rights – and the mainstream opposition today accepts these progressive strides forward, so the economic radicalism introduced market forces, encouraged competition, and has elevated many people in Third World nations from abject poverty as it’s mainstream opposition today accepts these positive effects of the market.
Obama belongs in this camp of mainstream opponents of extreme capitalism. His agenda stems from an understanding of the middle class best encapsulated in this clip from West Wing, which though it aired ten years ago, seems eerily relevant today:
Obama’s economic plan is a response to this wish to make things “just a little bit easier.” It is an attempt to temper the forces of globalization and extreme capitalism that have wreaked havoc in our society and position us to compete in a globalized marketplace. Like Teddy Roosevelt, he’s attempting to protect the core values of our society from economic radicalism; like Alexander Hamilton, Henry Clay, Abraham Lincoln, and Americans throughout history – he is proposing investments in our infrastructure and incentives for industry. Obama’s plan isn’t perfect – it’s just a start. It’s just tinkering – which is how that sage Nassim Nicholas Taleb describes “the best we can do” to improve our condition. It’s an attempt to make things “just a little bit easier.”
When Obama talks about “economic justice” he is not referring to some obscure Communist codeword – he is calling us to remember the world of Leave It To Beaver – a world where firemen and bankers, lawyers and plumbers, could all live in the same neighborhood. Obama doesn’t pretend he can bring back this past – but he believes we must stop the forces of extreme capitalism from destroying this American ideal and that we must take pro-active steps to reduce the destabilizing effects of globalization and capitalism while protecting our core values as a society.
This isn’t socialism – this is common sense – and it has been the American system since our founding. The radicals are those who propose we do nothing in the face of attacks on our way of life and in the face of economic calamity – the nihilists among the House Republicans and the Hooverites and those who continue to favor deregulation and oppose sensible government intervention in the markets. The radicals are those who believe the free market will cure all ills and will heal itself.
Those who claim that Barack Obama would be the most liberal president in history must have skipped the American history classes covering the period before 1980. Those who claim he is a socialist are just plain wrong.
[digg-reddit-me]I’ve reluctantly come around to the view of Sarah Palin, John McCain, and other luminaries that we must judge our fellow citizens by their associations – and we must assume that you at least partially endorse the views of anyone you pal around with. Hence – Barack Obama pals around with a terrorist – by which I mean he served on the board of a charitable foundation with this guy, along with a bunch of conservative Republicans. Therefore, Barack Obama does not see America as you see America and as I see America.
Clear. Logical.
So, I decided to see who else I could disregard because of their poor judgment and unsavory associations. Now – I first thought about Sarah Palin herself, whose husband is a member of a political party whose founder recently declared: “The fires of hell are frozen glaciers compared to my hatred for the American government” among other nice tidbits; worse, Palin herself has spoken at this party’s convention and was at one point thought to be a member by their spokesperson – before the McCain campaign corrected her. I mean, in this case, Palin isn’t just palling around with this group – she’s associating herself with their politics by speaking at their convention – and her husband believed in the party enough to join! But then I realized that I know Sarah Palin – and Sarah Palin wouldn’t endorse those views. Obama on the other hand – he’s got bloodlines I don’t trust.
Then of course, I came across this other guy – a peacenik, with long hippie-like hair, preaching namby-pamby, weak-kneed, anti-American values like forgiving enemies and avoiding violence and caring for the poor and telling people they should pay their taxes – basically a filthy liberal. He seems to have influenced a lot of people – so I wanted to point out that not only was this guy born in what was called in his day, “Palestine” – making him likely an Arab.
Clearly, the guy is a dangerous liberal with worrying bloodlines who’s going to wage class war on the rich. That’s not what this Christian nation needs. Enough of this WWJD. It’s time for WWSPD!
We need a Straight Talkin’ Maverick to save this country! And it’s about time Sarah Palin and John McCain took the gloves off and denounced that guy with long hippie hair, class warfare rhetoric, and questionable associations with radical and prostitutes.
