William Greider

1. Down with the Fed! William Greider suggests we “dismantle the temple” that is the Federal Reserve in a piece this week. Greider is not only one of my favorite authors and one of the best writers on economics, he is also one of the foremost experts on the Federal Reserve. They key problem for Greider is that the Federal Reserve is an essentially anti-democratic institution:

The Federal Reserve is the black hole of our democracy – the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies.

Ezra Klein gives the piece a symapthetic audience, but then explains his reservations:

[F]or a period of time, Ben Bernanke ran our economy under a monetarist’s version of martial law. And the really problematic thing is that it probably worked. It may be all that saved us. You could argue that in the absence of the Federal Reserve, Congress would have been a whole lot more aggressive and responsible because Bernanke wouldn’t have been there to backstop them. But would you really want to bet the U.S. economy on it?

2. Sanity on the Henry Gates Controversy. Jacob Sullum in Reason‘s Hit ‘n’ Run blog gives what I think to be the essential take-away from the Gates fiasco:

[E]ven if we accept the facts as presented by Crowley, it’s clear he abused his authority, whether or not the color of Gates’ skin had anything to do with it.

Let’s say Gates did initially refuse to show his ID (an unsurprising response from an innocent man confronted by police in his own home). Let’s say he immediately accused Crowley of racism, raised his voice, and behaved in a “tumultuous” fashion. Let’s say he overreacted. So what? By Crowley’s own account, he arrested Gates for dissing him.

3. The Appearance of Bipartisanship Creates Popularity. Matt Yglesias has an interesting piece exploring the difference between how the media treats the relationship between public opinon, Congress, and policy issues and how that relationship actually works.

4. Imitation is the Sincerest Form of Flattery. Ezra Klein points out that one passage from Obama’s speech Wednesday night seemed to be taking arguments directly from articles by Steven Pearlstein and David Leonhardt this week that got a lot of traction in the blogosphere. Both columns are worth reading even independent of their apparent influence on the Obama administration’s tactics.

5. Krugman on Cap and Trade Speculation. Paul Krugman takes on doubters encouraged by Matt Taibbi’s piece describing cap-and-trade as a giant scheme:

The solution to climate change must rely to an important extent on market mechanisms — it’s too complex an issue to deal with using command-and-control. That means accepting that some people will make money out of trading — and that yes, sometimes trading will go bad. So? We’ve got a planet at stake; it’s crazy to cut off our future to spite Goldman Sachs’s face.

6. A Laid-back Beat. Lastly, I came across this song in an episode of the British series Skins this week:

[Photo by me.]

The Reagan Revolution (cont.)

There’s been quite a strong response to Paul Krugman’s column last week blaming the financial crisis on Ronald Reagan. William Greider from the left and Richard Posner from the right both made the case that it was actually Jimmy Carter who’s to blame. But I think Andrew Leonard in Salon has the best take on the whole meta-debate over the debate:

The continuing influence of the banking industry on Congress, on which point we witness new revelations nearly every day, should be enough to underline how both parties succumb all too willingly to the financial blandishments lavished by Wall Street. I’m sure Krugman would acknowledge that. Despite Posner’s dismissal of Krugman as a Democratic partisan, it is well worth noting that Krugman has been far harder on the Obama administration’s economic policy moves than your typical Republican partisan was on George Bush until late in his second term.

But there’s a different, perhaps more profound sense in which Reagan really did do it. Momentum for deregulation may have gotten started during the Carter administration, but the ideological case for it didn’t crystallize until the election of Reagan in 1980. From that point on, the predisposition to loosen the reins on the financial industry became explicit. Both parties helped get us where we are today, but one party in particular identified itself with the all-knowing wisdom of the markets. And that party is paying the price.

I still like the formulation I used – that does not lay the blame directly on Reagan or his advisors – but indirectly:

To some degree, these changes had positive effects – as the market was freer, as the economy grew, as corporations thrived, as the overall wealth of America grew.

But they spelled trouble down the road. The stimulus spending and tax cutting, the informal Bretton Woods II agreement, and concentration of wealth created an unstable system. Internally, the society was imbalanced as extremes of wealth and power were accumulated by a small minority. This eventually undermined the very free market and democratic discourse that is essential to the American tradition. A course correction later might have saved the Reagan vision – and for a time it seemed as if Bill Clinton’s moderate presidency had, as middle class wages finally began to grow again – but Bush doubled down on Reaganism when he should have pared back, and we are left with this mess.

Is this collapse Reagan’s fault? I wouldn’t say so. But he set the initial course towards this iceberg, even if the iceberg was out of sight at the time he set the course. He – and the 1980s revolutions in finance, economics, and government that his administration supported and enabled – are the true authors of this economic collapse, even if they cannot be blamed for not forseeing it.