Who is advising President Obama? No, I mean really who. Not the visible advisors, the ones the media always cite: Goolsbee , Kornbluh, Liebman, Summers, Rubin, et al. No, I mean the ones who are convincing Obama that capitalism can be saved – if he’ll just continue to throw vaults of money at it. Who is telling him that continuing to pretend that we do not need a fundamental, essential, change is going to work; that this already moldering corpse of global capitalism can be reanimated? Is it the gang mentioned above? Or is it others, the shadowy collection of people who really rule. You know, the ones the tin-foil-hat crowd alludes to in furtive whispers. “It’s them! They’re doing this! They have the power! All of it!”
Why is he afraid to seize this moment in U.S. history – a moment when it is absolutely clear that we are marching into an economic abyss if we simply continue to do what we have been doing? Why is he afraid to make the next move in economic evolution and lead the nation to the democratic socialism that is working well in countries where it is applied in a “mixed economy” sort of way?
Fear of nationalizing this country’s banking system is a good example of the sort of hesitancy that could result in the complete unraveling of our economy, leaving us in a near-dead, “third world” state from which it will take generations to recover – if recovery is possible at all.
The American economist Joseph Stiglitz writes in an op-ed piece in today’s New York Times:
The Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win – and taxpayers lose. Treasury hopes to get us out of the mess by replicating the flawed system that the private sector used to bring the world crashing down, with a proposal marked by overleveraging in the public sector, excessive complexity, poor incentives and a lack of transparency.
Without composing words in Stiglitz’s computer, is that not an indictment of Obama’s current – and failing – policies? Has anyone in Obama’s circle of advisors read Stiglitz? Not just today’s op-ed piece, but ever? After quickly explaining why the Obama proposal is a loser for taxpayers, Stiglitz writes:
Some Americans are afraid that the government might temporarily “nationalize” the banks, but that option would be preferable to the Geithner plan. After all, the F.D.I.C. has taken control of failing banks before, and done it well. It has even nationalized large institutions like Continental Illinois (taken over in 1984, back in private hands a few years later), and Washington Mutual (seized last September, and immediately resold). What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other. And such partnerships – with the private sector in control – have perverse incentives, worse even than the ones that got us into the mess.
Did you get that last bit? ” . . .worse even than the ones that got us into the mess.” If things are to get “worse” how are we to survive the chaos? What “temporary” system will the Obama administration try to impose on a crashing and burning economy? Does one exist, short of Mussolini-style corporatism? Why, then, is President Obama continuing to impose a losing process on a country already reeling from the effects that process has already unleashed? Stiglitz answers:
So what is the appeal of a proposal like this? Perhaps it’s the kind of Rube Goldberg device that Wall Street loves – clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets. It has allowed the administration to avoid going back to Congress to ask for the money needed to fix our banks, and it provided a way to avoid nationalization.
It is providing “huge transfers of wealth” to the very financial markets that have led us to this collapse and it is a way to “avoid nationalization.” Is that the answer to what we are facing? Is that the plan? Is this what “change we can believe in” really means?
Stiglitz then concludes:
When the high costs of the administration’s plan become apparent, confidence will be eroded further. At that point the task of recreating a vibrant financial sector, and resuscitating the economy, will be even harder.
Or perhaps impossible. What then?
So, again, who is advising Obama with this madness? Are the tin-foil-hat people . . . right??