Washblog

Arthur
What they inwardly imagine is the only thing they'll accept.

In the meantime, we're all hearing reports about how the big (California) and the small (a Big-O tire dealership) aren't able to get loans not because of poor credit, but because the banks don't have the funds. In a situation like this, I assume California will get the funds to make its payrolls, but the Big-O tire dealership won't.

   Do you have the attention of the Govenor or her office?  

'Am I not destroying my enemies when I make friends of them? ~ Abraham Lincoln

Deflation is upon us, but it's not as if the price of eggs will go down fifty cents by the end of the week. What will happen instead, it seems, is that U.S. states and municipalities will likely start defaulting on their financial obligations by the end of the year.

Eventually, though, the price of eggs and many other things could go down.

If the credit contraction goes on long enough, we'll see newly unemployed workers flood the labor market as businesses go under. At a certain point, workers will gladly take a pay cut to keep their jobs. With labor costs going down, businesses will begin sell their products at lower prices just to turn a small profit and keep afloat. Falling prices in other sectors of the economy will ultimately affect the labor costs of egg-factory workers and even the cost of feed.

So, yes, prices will eventually go down. If you're lucky, you'll have a job that will enable you to buy at those lower prices.

We're in another one of those "oh, that can't happen" moments with municipal bonds, I think.

The answer to these crises is to get way ahead of the thing and we're just not doing that. Markets aren't magic, but apparently our leaders think they are.

I wouldn't have any way to talk to Gregoire, but I think that if folks here put their heads together, they might. I mean all she has to do is do what McCain did, except she can control the result. She calls of the campaign for a couple days and holds and economic summit in Olympia to assure everyone she's on top of the situation and that she's going to get an immediate report or whatever. It's just common sense, really.

If for no other reason, I would hope that Governor Gregoire would want to show everyone why we trust her to be the Governor. She's got to take a position on the credit crisis and that just seems to me like the best way to do it.

I personally think she's going to find a big enough issue that needs enough attention that she might even have no choice but to change to a "Rose Garden" strategy - at least for part of the time. It really is that serious and this is the kind of problem where there's no such thing as doing too much. Confidence needs to be restored.

Not much will happen before the election.

We need to be ready to push an economic agenda the morning after the election.  I'm thinking nationally, progressives need to push out what we can during the lame duck administration to mitigate damage even though I figure nothing substantive will happen until after the inauguration.

But at the state level, Jim could probably influence action sooner rather than later.

World stocks swoon; new rescue weighed
http://seattletimes.nwsource.com/html/nationworld/2008234544_econworld070.html

which wraps with the greatest understatement I've heard to date: '"People are slowly but surely coming to the realization that playing Whac-A-Mole with each of these issues as they arise, on an ad hoc basis, doesn't get the job done," said Max Bublitz, chief strategist at SCM Advisors, an investment firm in San Francisco.'

With government intervention, do we gain more public control of the economy?

Also of note is Naomi Klein: Wall St. Crisis Should Be for Neoliberalism What Fall of Berlin Wall Was for Communism

....what we are seeing with the crash on Wall Street, I believe, should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism: an indictment of ideology. It cannot simply be written off as corruption or greed, because what we have been living, since Reagan, is a policy of liberating the forces of greed to discard the idea of the government as regulator, of protecting citizens and consumers from the detrimental impact of greed, ideas that, of course, gained great currency after the market crash of 1929, but that really what we have been living is a liberation movement, indeed the most successful liberation movement of our time, which is the movement by capital to liberate itself from all constraints on its accumulation.

So, as we say that this ideology is failing, I beg to differ. I actually believe it has been enormously successful, enormously successful, just not on the terms that we learn about in University of Chicago textbooks, that I don't think the project actually has been the development of the world and the elimination of poverty. I think this has been a class war waged by the rich against the poor, and I think that they won. And I think the poor are fighting back. This should be an indictment of an ideology. Ideas have consequences.....

....And now the Bush administration has already left the next administration, whoever it is, with an economic crisis on their hands, but with this proposed transfer, they're dramatically increasing that crisis. So, we can count, I would argue, on the Heritage Foundation refinding their faith, refinding their faith when it becomes necessary and useful to once again argue that the way to revive the American economy is to cut taxes, cut regulation, to stimulate the economy--and, by the way, we can't afford Social Security; we're going to have to privatize it, because we've got this terrible debt and deficit on our hands. So, the ideology is far from dead, and what we are, I think, seeing with this proposed monument to Friedmanism is really a way of entrenching it and making sure that it is always available to come back, to come roaring back......

......Milton Friedman understood the utility of crisis. And this is a quote--you know, I use it a lot, but I'll use it now again, because I think it's important--which he has at the beginning of the 1982 edition of Capitalism and Freedom: "Only a crisis, actual or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. emphasis added That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

Now, because I've been studying the utility of crisis for this free market project, which I consider to be very anti-democratic, it's really attuned me to looking for the ideas that are lying around. And I've been paying really close attention to people like Grover Norquist, Newt Gingrich, the Republican Study Committee, these past few weeks. And I have an "ideas lying around" file, which are the ideas that they are floating right now in the midst of this economic crisis. And a lot of them are familiar, but the point is is that they're being repackaged now as the way out of this economic crisis. So, it's suspending the capital gains tax, getting rid of the post-Enron regulations, getting rid of mark-to-market accounting. In other words, more deregulation and less money in the public coffers. And it is interesting that the way in which this bill--the way the senators were trying to get the bailout bill through the Senate, after it had failed to go through Congress, was by adding tax cuts, a package of $118 billion worth of tax cuts. Some of them are good, some of them are not. But it's a deepening of this crisis.

So, we know that the crisis is coming, and the question is, how are we going to respond? I think there needs to be better ideas lying around emphasis added.....

http://www.democracynow.org/2008/10/6/naomi_klein

The Fed's move today to buy corporate commercial paper is essentially a white flag. They are done. They have nothing left. They are stuck behind the curve and they cannot - for ideological reasons - get ahead of it.

The market is not down, it's broken. In their world that simply cannot be true. They cannot accept that the market is broken because their ideology has blinded them even to well-known, well-accepted economic scholarship - some of which Bernanke wrote himself. They are inside and ideological bubble that is hopeless. None of the ideas that are "lying around" have any chance of success at all.

This brings me to the other piece. Once there is a panic, things actually become really simple: When you have a crisis it means you have a large number of people important enough to move society who are doing the wrong thing. You have to change their behavior by using a number of people that is larger and more powerful.

The scary thing is that there are TWO ideologies based mass movement.

One is the bottom-up ideology behind democracy and socialism. This is the basic belief that since, ultimately, the society is master of its own fate, large institutions should be guided by the whole people for the benefit of those people. Obviously that means that when essential institutions are broken, we take them in hand and put them right. The inescapable logic there is why very right-wing people have been so quick to embrace "socialist" actions during this crisis.

But the other ideology is the scapegoating ideology of fascism. This ideology seeks to unify people by assigning blame and attacking and to divide the society into "virtuous" and...well...unvirtuous. It seeks to push people towards institutions it puts forward as virtuous, inevitably including the military and characterizes all change as a battle.

Of course America has fallen perilously, perilously close to this kind of thinking. Americans are confused and angry and have been for some time. Barack Obama was clearly right about guns and religion.

But we on the Left can fall into this thinking just as easily and here's where I take issue with Amy Goodman. The right-wing is finished. They have nothing left. The worst possible thing for the Republican party would be the election of John McCain right now. If elected, he will fail totally. The argument is really over.

Blame is important here only insofar as it correctly identifies the failed dynamics. But these are pretty easy to spot, actually:

1. Unregulated markets always, always, always suffer huge crises because of manipulation and fraud. Always.

2. The LTCM models - which we have known don't work since the '60s...well...don't work. You can't hedge your way out of all market risk and if you try too much, you create more market risk. Or, in this case, total, existential, market risk.

1. happens because people self-deal and pass off bad stuff for good stuff.

2. happens for the same reason that the strategy of doubling your bet every time you lose (called a "martingale") seems to work; may work in the short term; but leads to inevitable bankruptcy.

But is IS time for Progressives to UNDERSTAND THIS STUFF---FAST!

WE need to have the ideas that are "lying around". And those ideas, frankly, are the ideas of the New Deal - provided we use them fast enough - used with some creativity. That will save capitalism.

If we don't, we will have to get REALLY creative. On the one hand, as a person who is well left of the Democrats this prospect should make me happy. It doesn't. Too many people will be hurt and the risks are too large.