Back in the middle of September, when the Wall Street model of investment banking collapsed into the dustbin of history Stirling Newberry wrote a series of articles laying out the underlying realities of the financial crises, and re-framing the issue as a Constitutional crisis because of the existence of a reactionary faction in American politics that is as yet unwilling to move from the existing means of storing wealth – the development of land, i.e., suburban sprawl – to a new store of wealth that would allow us to begin building a workable future. The Constitutional crisis arises because the present monetary configuration of the United States rests on the valuation of mortgages, the values of which are supposed to keep increasing as more land is developed:
Bernanke and Paulson talk about the financial collapse
John Cassidy has a lengthy article in The New Yorker today which includes some excellent insights into U.S. Federal Reserve chairman Ben Bernanke and his miserable handling of the financial collapse, including, so far as I know, the first public discussion of an August 2007 meeting in Jackson Hole, Wyoming in which the Fed’s initial approach was discussed and decided by Bernanke and a small group of top advisers.
First, Cassidy provides some interesting details on how Bernanke became Fed chairman,
“I always thought that Ben would stay in academia,” Mark Gertler, an economist at New York University who has known Bernanke well since 1979, told me. “But two things happened.”
We are in a worse situation than The Great Depression Barry Ritholtz linked to a video of Paul Solomon of the PBS News Hour interviewing with Dr. Nassim Nicholas Taleb, famous economist and author of The Black Swan : The Impact of the Highly Improbable” and Taleb’s mentor, French mathematician, Dr. Benoit Mandelbrot, Professor Emeritus of Mathematics at Yale University. Dr. Mandelbrot, a pioneer in the development of chaos theory, is regarded as the father of fractal geometry. Both say that the present economic situation is actually more serious than the Great Depression. In fact, they fear the U.S. is in the worst situation it has been in since the American Revolution.
The reason, Dr. Taleb explained, is that “Never in the history of the world have we faced so much complexity combined with so much incompetence in understanding its properties.”
The following items have come to my attention the past few days, and, dear reader, I deem them worthy of your attention and perusal, and just generally good stuff for your edification and amusement.
Man oh man, if there ever was a prime example of a revelation of the greatest flaw in libertarian economic theory, it had to be Alan Greenspan's speech. For those not in the know, the former Federal Reserve Chairman spoke before a Congressional committee yesterday. Long one of the grand proponents of laissez fair capitalism, his decisions, ironically, probably has lead to the complete discrediting of such economics.
"Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief," said Greenspan, who stepped down from the Fed in 2006.
This is a first review the Democratic Policy Platform Draft in terms of trade, economic and labor reforms, focus on US workers. I'll let you click on the original and decide for yourselves.
What I see is a lot of problem description and a whole lot of vague rhetoric that implies more of the same. We know more of the same is not dramatic policy change in favor of US national economic interests or US workers interests.
Parsing through the pages and pages of rhetoric which describe various problems, I managed to pull out a few hints of actual policy agenda and frankly it's not good.
I am a man. I am from "Middletown". "Middletown" is my home.
For four years now, I've always had people ask me where "Middletown" is. But the truth is that more than what "Middletown" is what Muncie, Indiana was. The quintessential American town.
Chevy on 8th Street. Borg Warner out on Kilgore. Westinghouse on the south side. And Ball Brothers, which gave the town's public university its name. The union made us strong, and the working class stood proud and strong.
The deprecation, denigration, and contempt for the working class that the Lynds found when they came to the city 40 years before was gradually disappearing. The children of the working class were able to attend the local state university, and go on to become the college-educated middle class.
One of the speculations I have made from time to time is that the very assumptions underlying neoclassical economic theory are so flawed in comparison with reality that the theory, while elegant, and able to generate wonderfully pretty mathematical graphs, is deeply flawed.
One such problem is that neoclassical economic theory made use of the mathematics of 19th century Newtonian physics. And just as quantum theory and the theory of relativity gave rise to startlingly different results, if one applies 20th century physics to economic theory, the entire notion of equilibrium breaks down, and one sees radically different predicted results.
There is a neo-populist movement afoot in the US right how. No one is sure exactly what to call it. Analogies with the original Populist party break down over issues of tariffs and xenophobia. The later "Progressive" movement, which is credited with creating the first round of government regulatory agencies, doesn't fit well either. It didn't have the broad-based working class foundation that is meant when one talks about populism.
These days when critics accuse liberals of engaging in "class warfare" they mean the the working classes are looking to rein in the excesses of the super wealthy. Since this group is tiny, the appeal to defending the rights of Paris Hilton doesn't work well, so they try to include the top 20% as well.
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