The Only Thing to Fear: Money Vanishing into Thin Air?

Wednesday, Diane Rehm cited a statistic that the world has lost 40% of it’s wealth in this financial crisis. What does that mean? In physics, the law of conservation of energy states that energy cannot be created or destroyed. Isn’t there a law of conservation of wealth? I don’t buy the idea that the world’s wealth just spontaneously combusted. The world’s confidence in the markets is all that has disappeared?

Miscalculations in finances and physics can cause great unpleasantness. These are the roots of our current financial problems. But wealth doesn't just disappear. During the housing bubble, a lot of people paid too much for houses. But that means someone else received too much. So where is the money now? Vaporized? No, it's under people's mattresses and sealed in bank vaults. The money is still here; it just isn't moving. If movement of money is what defines wealth, then we just wake up tomorrow and start loaning, rehiring and spending. There's that 40 percent back. No body burned the money supply. Our means of production are still intact. We still remember how to build houses, don't we? The wealth didn't disintegrate. Our confidence in the markets did.

So we've decided the U.S. economy is too big to fail. I can accept that. The powers that be have determined the best way to prevent that is to take the housing bubble, the credit crunch, the tanking auto industry and every other disaster we are experiencing and send them through the pipes to become one big National Debt Bubble (to expire when we all lose confidence in the phrase “full faith and credit of the United States”).

But we live to pay another day I guess.

What troubles me most is that this solution doesn't do anything about the confidence factor, and without that I don't see our great grandkids getting their money's worth. I don't believe there is a magical amount of money that will save the economy. A few months ago, I thought $100 billion was a lot of money. If Doctor Evil demanded that amount now we would all die laughing. We're well into the trillions with all these bailouts. If Secretary Paulson had asked Congress for $200 billion with conditions that financial institutions must use the money proactively or get flushed, and the architects of the bailout had convinced me it would be enough to stop the downward trends, I would have gone out and bought a house. So would you at these prices. Given, some Wall Street execs. would have had to weather a year of smaller bonuses, but they would have pulled through I'm sure.

President Obama's stimulus package is the same story. Americans would do a lot more with $819 billion in a confident mindset than they would in a “depression” mindset.

Bankers, employers and consumers only part with their money with expectations that more will come. If our leaders and media stop using claims of the world's wealth evaporating as hooks, I believe we could be well on our way to recovery by the end of the year. We need more than a comprehensive list of what the money will be used for. We need to know our leaders are confident what they are doing is going to work. Then it has a much better chance of actually working.

Here's my theory about what ended the Great Depression. It wasn't the New Deal or WWII. Roosevelt actually got those poor saps to believe the only thing to fear is fear itself. Then they ended the Depression.

Posted by Mark Montie at January 30, 2009 7:47 PM
Comments
Comment #274629

You could be right about ‘fear’ being our biggest problem, and the ‘bully pulpit’ being the best salvation.

But about the lost wealth…the part that disappeared never existed. That is why the house of cards came tumbling down. It was false wealth…it had no value, and without value it could not stand the tests required of it. It is no more, because it never was.

Posted by: Marysdude at January 30, 2009 10:28 PM
Comment #274632

Mark,

I have sometimes wondered if there was some loan shark that lived on another planet, and that is where all the money goes.

But seriously, somebody, or a bunch of somebodies just got 40% richer.
As far as FDR, sure in 1933 people believed it.
There were also quite a few people that believed five years later in 1938 that the “War of the Worlds” broadcast was true, and three years after that in 1941 they believed that you should “Never Give a Sucker an Even Break”.

Which one do you think is still true today?

Consider this a margin call for the world, and it’s time for us stiffs to pay up.

Rocky

Posted by: Rocky Marks at January 30, 2009 10:37 PM
Comment #274637

Even the few who sold on the high end either Built new or downsized and overpaid They Didn’t Really make out. Roosevelt Understood the Problem the People Believed in him.

Posted by: Rodney Brown at January 30, 2009 11:15 PM
Comment #274638

The Newspapers Created most of the fear on “War of the Worlds: They were Afraid of the newer medium Radio.

Posted by: Rodney Brown at January 30, 2009 11:34 PM
Comment #274643

Marysdude,

It’s kind of like raising prices so you can bring it back down and call it a sale. Sale sounds so much better than depression. Maybe if we called it that we wouldn’t need a stimulus package at all.

Rocky, I agree. Someone’s got to be making it big in the financial crisis market. And there aren’t many who can say they weren’t one of the suckers.

Posted by: Mark at January 31, 2009 12:33 AM
Comment #274654

Mark Monte, the Wealth she refers to is leveraged wealth that apppeared on financial institution’s balance sheets pre-October 2007 and that which appears on their balance sheets today.

Some execs converted that paper wealth into real asset wealth while they could, and then when the paper wealth evaporated, they went to GW Bush and Paulson asking for taxpayer’s money to shore up Shareholder’s wealth.

Diane Rehm is right about the evaporation of wealth. Tax payers see it evaporating for their children before their very eyes as the national debt goes from 5.65 trillion in 2001 to 14 trillion in just 10 years.

We opened this pandora’s box when we left the Gold and Silver standards backing our currencies. I am not arguing we shouldn’t have left those standards, there are sound arguments to be made both ways, but, that genie ain’t going back in the bottle (Sorry Ron Paul).

We now have a system of contractual wealth, wealth agreed upon by certain rules, contracts, and sufficient oversight and accountability. Such wealth will evaporate if those rules are corrupted, those contracts dishonored and unenforced, or the actions of contractees not overseen and accounted for. Welcome to the Recession and 21st century economic jeopardy, which some here ballyhooed me for saying was coming two years and before ago.

Folks in the Red column just couldn’t believe their Party’s policy decisions and fiscal mismanagement could come to all this. Some still deny it. A rather remarkable feat of mental gymnastics, I must say.

Posted by: David R. Remer at January 31, 2009 2:31 AM
Comment #274662

>Folks in the Red column just couldn’t believe their Party’s policy decisions and fiscal mismanagement could come to all this. Some still deny it. A rather remarkable feat of mental gymnastics, I must say.
Posted by: David R. Remer at January 31, 2009 02:31 AM

Hear! Hear!

Posted by: Marysdude at January 31, 2009 7:28 AM
Comment #274663

DR et al
The latest bank plan being floated about is for the feds to establish a “bad bank” to buy up the toxic paper of banks by the taxpayers. This is not just socialism but “lemon socialism”. Inother words all the risk is assumed by the government buying “lemons” while all the profit or potential profit stays with the investers. Looks like a bad deal. The government will be keeping “zombie” banks alive. Better the government just nationalizes the bank,sells the assets to pay depositers and closes them if necessary. The stockholders would lose their investments. They took a gamble and lost. Still they would be eligable for a tax write off. Either way is socialism. The latter method would be better for the treasury and of shorter duration.

Posted by: bills at January 31, 2009 7:31 AM
Comment #274664

DR
I’ll second Marysdude. Well put. I would also add monetary policy as well as fiscal. The only way out of this mess without a drastic increase in poverty and instability is with Keynesian means. The solution must be New Dealish to work. From the current GOP leadership,deeply opposed to anything that smacks of the New Deal, we are getting constant and fraudulent attacks in the hope that something sticks. They would rather drive the country to third world levels than admit they were wrong. This is exactly the worst thing they could do to the country. Let us work and pray that the American people see this and furthur drive these traitors into the wilderness and the GOP can once again be a LOYAL opposition party.
The election of Steele to head the GOP is interesting. They still don’t seem to get it. BHO won the election ,not because he was Black but because his policies are potentially better than their failed ones. He won in spite of being Black. Not because of it.

Posted by: bills at January 31, 2009 7:51 AM
Comment #274666

The Republicans need to stop claiming that FDR didn’t do much to help America recover. Between FDR’s election and 1937, FDR not only reversed the downward slide that occured under hoover, but grew the economy back. Only when he attempted to balance the budget did the economic problems return in force.

Let’s be realistic here: where else are you going to get money into the economy? The Republicans would like to pump more dollars into the upper eschelons, but the richest few have already seen great leaps forward in their net worth, and if that was going to fix the economy, it would have been fixed by now.

We’re living in an economy that only currently works if people are kept in a perpetual state of endebtedness. We’re suffering the consequences now. This is not a natural, cyclical recession we have here, but the direct result of a predatory system of credit, and lax regulations. We need to get Americans back in a position where they can afford to sustain their way of life without having to continually burden themselves with dead weight debt they can’t keep up.

The Republicans would like to pretend that with Bush gone, they’ll be able to re-market their image. They would like to think that if they purify themselves politically, and take a hardline that they’ll be able to step into the role of the hero, and come back in 2010 or 12.

But I think there is, at the very least, great fatigue with Republican policies, if not outright hostility. The Republicans should not be looking for opportunistic measures to come back at the Democrat’s expense. I mean, how transparent can you get? The Republicans obviously want Obama to fail!

The Republicans, though, can’t get away with being a stonewall. At this point, they’re not in a position to prove themselves superior. They first have to prove themselves competent and useful. They’re not doing that. They’re proving that they still live in an alternate universe where everybody still loves them, but they’re just misunderstood.

Posted by: Stephen Daugherty at January 31, 2009 8:45 AM
Comment #274668

Mark,

We may very well not need the stimulus package. I believe we do, but, who am I to say?

However, FDR’s programs may or may not have helped in the thirties, but his bully pulpit did help, and that was bolstered by those packages. Pig-in-a-poke? Perhaps, but it took the combination of FDR’s salesmanship, and the product he was selling to quiet the fear he spoke of. The current situation is not all that dissimilar.

Posted by: Marysdude at January 31, 2009 9:18 AM
Comment #274674


When you have a system that allowes a few people to accumulate vast amounts of the wealth, naturally you have to have a mechanism for printing more paper wealth for them to accumulate.

Posted by: jlw at January 31, 2009 12:52 PM
Comment #274675

Daugherty writes; “Republicans would like to pump more dollars into the upper eschelons, but the richest few have already seen great leaps forward in their net worth, and if that was going to fix the economy, it would have been fixed by now.”

Wrong…Republicans, especially conservatives, want government to reduce wasteful spending. To paraphrase your statement, “if spending was going to fix the economy, we would never have reached this financial crisis we face now?

Conservatives are not anti-government, just anti-government waste, government regulations and policies that intrude upon individual choice, government mandates that favor groups over individuals, government attempts to redistribute wealth, government policy to determine winners and losers, and much more government interference in our daily lives.

It’s really simple folks, liberals can’t take care of themselves and need government to tell them what to do and when to do it. Liberals can’t tolerate failure and insist that those who are successful must be dishonest or just “lucky”. Liberals rely upon group-think as they are incapable of thinking for themselves. Liberals pollute the mind and promote dependency upon government.

Liberal policies have brought us SS, Medicare and Medicaid all of which are sucking the lifeblood from our economy. Liberals wish to spend trillions of dollars we don’t have to fix problems caused mainly by that very spending. Liberals wish to bail out the very companies that helped us into this mess believing that government would do a better job in managing corrupt business practices. Corruption began in government and has now seeped into private enterprise. Corporate greed and malfeasance followed government greed and malfeasance. Wasteful and ineffectual government spending encouraged the same in some of our corporations. When government cleans up its act and leads by example, we can expect our citizenry and corporations to do the same.

Does anyone actually expect these trillions of mostly ineffectual and wasteful spending by government to promote effective and prudent spending by corporations? Hardly!

Posted by: Jim M at January 31, 2009 1:09 PM
Comment #274677

David,

I’m sure there was a lot of last minute mailing of jewelry by the bank execs late last year. Anything they had to do to get those balance sheets down in time for the government downpour of cash or bankruptcy, whichever came first. As for taxpayers, they’re on the butt end of this deal in all ways. They generally don’t have the same opportunity to stock up wealth. Diane might be correct with some dictionary definition of wealth, but for the average American, the message strikes me more as a “War of the Worlds” production. If wealth is still around, but has just lost momentum, then it can be started up again.

I agree that our system of contractual wealth is in a precarious position. That’s because it’s built completely on confidence of investors, lenders and consumers. Our leaders don’t seem to realize that.

Having said that, it’s true, Marysdude. FDR couldn’t have inspired confidence without actually doing something, and I’m sure the programs contributed. I’m still waiting for Obama to get on that bully pulpit.

Posted by: Mark at January 31, 2009 1:59 PM
Comment #274681

Jim M-
Republicans want to reduce wasteful spending? Under Bush, they had the perfect opportunity, but they threw it away. They indulged in tax cutting, almost knowing it would deepen and worsen the deficit. They showed little remorse wasting taxpayer dollars in drug benefits and on a war they didn’t even have the balls to keep on the books. This is an administration and an overseeing congress that literally lost billions of taxpayer dollars- just lost it! And you want to give us advice. Marvellous.

You say you’re not anti-government, but the list you give out basically indicates that if the government actually governs, it should be opposed. Well, we did things your way, and now look at the mess? Sure you’re backing away now, but the reasons for that are obvious. You folks didn’t want to do your jobs. Your party’s made improvement of government a problem, because for you folks, improvement of government just invites people to want more of it, and we just can’t have that.

It’s really simple folks, liberals can’t take care of themselves and need government to tell them what to do and when to do it. Liberals can’t tolerate failure and insist that those who are successful must be dishonest or just “lucky”. Liberals rely upon group-think as they are incapable of thinking for themselves. Liberals pollute the mind and promote dependency upon government.

Do you have a cute kitten or baby whose head we could smash in on national television? Because obviously we’re all scum of the earth, and would just like the opportunity to demonstrate it.

Seriously, now. We’re not living in log cabins anymore. We rely on each other more than ever before. Because some idiots fouled something up on Wall Street, many businesses that were essentially doing the right thing in the former economy are now going belly up. We’re seeing the first recession in almost twenty years, and guess what? It’s going to get worse!

You say government brought corruption. I say corruption dwells anywhere where power reigns without accountability, private or public sectors included. You take these bonuses. Wall Street types were getting them during similar economic downturns. Now logically, you should give those to people who do good, but apparently, this is justified, even now, on the basis of the need to retain talent.

Yeah, the same talent that got us in this mess. The truth is, Wall Street, given all that power by a government unwilling to wield it in moderation of them, became essentially a financial mutual appreciation society, with the system rigged to make the top tier richer, even while everybody else took a bath.

And what we face now is a consequence of that.

The Republicans wanted to believe that they didn’t have to be serious managers of the economy, or anything else, that the system that they inherited from liberals and moderate Republicans who did care about good government and public works could just be treated with benign neglect, or torn down as necessary to let their paradise of non-interference bloom.

But the fact is, America got to the top of the game through hard work and discipline, and it was squandered under those who felt that American Dominance came easy, and could be used cheaply.

Posted by: Stephen Daugherty at January 31, 2009 2:58 PM
Comment #274693

Jim M said: “Conservatives are not anti-government,”

B.S. I repeatedly hear House and Senate Republicans on the Congressional floor repeat the refrain that government is the problem, not the solution, and that government will always be fraught with the frailties and failures of the people within it.

And they are the elected representatives Conservatives by and large, voted for, making them the conservative’s choice in government. Ergo, by direct association, conservatives, a great many anyway, are anti-government.

The libertarians, a very conservative lot, are often heard saying the best government is that which governs least. I.E., the less government, the better. These are anti-government sentiments.

As opposed to the view that the problem with government is the caliber of politicians. Improve the caliber of politicians (the responsibility of the Parties, presumably) and you improve governing and government. Or the view touted often in the Independent column, that the we get the government we deserve and vote for, as citizens of a democracy. I.E., improve the education and information of voters regarding government and their ballot choices will improve and so will government.

Conservatives however, lean very heavily toward the government is a necessary evil and people should demand the least government possible regardless of what suffering or privations that approach may invite.

Posted by: David R. Remer at January 31, 2009 5:31 PM
Comment #274694

Mark and S.Daugherty, you can argue that FDR’s actions, both constitutional and unconstitutional, may have prevented the depression from being even worse, but, you CANNOT accurately state that his policies ended the sequence of recessions which we call the Great Depression.

The Great Depression ended as a result of massive government hiring of military personnel for WWII and the massive government contracts with the private sector for building up the war machine. That is what ended the Great Depression and NOTHING before that.

You cannot just dismiss the recession of 1939 to make your case, or the unemployment numbers prior to the Pearl Harbor attack. To do so is to engage in partisan revisionist history.

Massive government spending to create jobs for whole new industries based on the latest technologies would serve to act the same as WWII ramping up in economic terms.

The one big difference is we face the entitlement crisis just ahead which Americans in the 1940’s and 50’s didn’t have to be concerned with. Hence the current economic imperative that government become a shareholder in the profits of the industries it helps fund and get underway, to insure the taxpayers of the present and next generation are reimbursed for their massive jobs stimulus government spending without exacerbating the coming entitlement crisis.

Posted by: David R. Remer at January 31, 2009 5:41 PM
Comment #274701

David,

I find it entertaining that you worry about me engaging in partisan revisionist history in behalf of FDR’s economic policies.

It’s true doing something is better than nothing at a time like the Great Depression or now. I will give FDR’s policies credit for keeping it from getting worse. But the long term consequences of them have been monstrous. How would you guarantee that government seizure of the financial industry doesn’t become the welfare system of the 21st century?

Government hiring for WWII energized the economy like nothing else could have. But it wasn’t just the jobs themselves. George W Bush wishes he had enlistment numbers half as good as FDR. The army tried by offering abbreviated contracts and by drastically lowering enlistment standards.

The difference is that Americans were united in the cause after Pearl Harbor and throughout the war. That’s why they joined the military in droves. Bush had a surge of that following 9-11, but he soon squandered it.

Why didn’t our economy go back into the toilet immediately when WWII was over? Think of the massive lay-off that came with that. It was because people were primed to keep it going. They had confidence in the American system. Everyone wanted a house, a car and six kids. It was the boom era of Madison Avenue.

I can’t give Keynes all the credit for ending the Depression. IMO, it’s a post hoc argument that borrowing trillions from our grandkids to create new jobs, by itself, will lead to thriving new industries. That’s proverbially giving a man a fish, unless there’s something for people to rally around.

Posted by: Mark at January 31, 2009 9:31 PM
Comment #274702

David R. Remer-
The Republican line is that FDR’s new deal policies were a failure. This guy, a writer over at Daily Kos and Huffington Post presents a logical, empirical case for what that’s not the case.

One part of that case is that much of the economic damage from the Great Depression had been repaired within FDR’s first term from the genuinely horrible leavings of Hoover’s sole term.

I wasn’t arguing that the Great Depression was ended before WWII. In fact, as I recall it, the man whose arguments I base mine on concedes this point. The question though is not whether the New Deal solved it, but whether the Republicans are right in saying that FDR should have used Republican’s methods, balancing budgets, cutting spending and letting the free market do its magic.

These people don’t realize it: The Free Market was at that point no longer function as it was supposed to. They got to realize that there are shocks to the economic system that can be so strong that they undermine the ability of that system to do what it’s supposed to do.

But of course, forgetting that, forgetting the dangers of a free market where free always means unregulated, rather than where private choice predominates is that a wave of deception, theft and fraud will come along that is so massive and convoluted that everybody has to stop to figure out what the hell everything is worth, which is a disaster in and of itself.

The Republicans would like folks to take a wait and see attitude. I would remind them that the last president who did that lost his party the initiative for the next half century. It is not coincidence that FDR’s arrival signaled an upturn, at the end of the long decline that characterized the Hoover Administrations slide into infamy.

I’m not saying that what FDR did was magic or perfect. What I’m saying is, we dug a deep hole with the 1929 crash and with the 2007-2008 debacle, and in both cases, waiting to see how deep the hole goes is a failure to get in front of a problem before time and circumstance make it deeper and wider. If a friend of yours is on the side of an opening chasm, you don’t wait until the chasm fully forms to lend them a hand. You get them off that edge before you lose the chance to save them.

Posted by: Stephen Daugherty at January 31, 2009 9:39 PM
Comment #274722

Mark said: “But the long term consequences of them [FDR Policies] have been monstrous.”

It is not the policies that survived that became monstrous, Mark. It was the failure to adapt, modify, and reform along the way as changing cultural, actuarial, medical, and economic conditions warranted. Do not confuse a good policy that becomes inappropriate for a future time as a bad policy.

I will give you the perfect example. Limited suffrage as envisioned by the founding fathers who saw fit to extend voting only to those most likely to be literate, educated, vested in consequences of government action, and most likely to pay due attention and diligence to object when those in government overreach their authority or mandate.

It was a wise and good policy for its day. It would be a wise and good policy for today as well, except that it was enormously badly managed as was the educational system that was supposed to insure literal and educated voters as suffrage moved toward greater universality.

Shortening the death toll and length of WWII using the atomic bomb can be defended as a good decision. But, there never was and can never be a good argument for mutually assured destruction via the global proliferation of atomic and hydrogen and neutron bombs.

Often, good ideas are grotesquely mismanaged overtime, and it is that mismanagement that becomes monstrous, not the initial good idea.

Posted by: David R. Remer at February 1, 2009 11:42 AM
Comment #274723

S.D., I don’t disagree with your argument. But, your argument is a different one than my previous one. FDR’s policies failed to rectify the depression because 1) many of those policies were long term objectives and did not address the short term recessionary cycles underway (social security for example), 2) his stimulus was too small, and too regional (though this short sightedness was not his alone but shared by Congress scared crapless by large deficit spending), and 3) his focus on job creation was spot on the mark, but, his failure to accompany jobs programs with adequate oversight and regulatory protections to insure tax dollars created ONLY jobs and not silver linings in middleman’s trousers, was a gross oversight.

I make these arguments because they are relevant for what our government is doing today in trying to address today’s recessionary cycle. History is a most adequate teacher, if only the students would take the subject matter seriously and wholly for all it can teach.

A pork laden wish list 825 billion dollar stimulus bill almost half of which will be frittered away without creating permanent jobs to offset lost jobs constitutes a failed student in the lesson of the FDR years. Obama would serve the people and this nation mightily by vetoing this bill, and sending Congress back to craft a stimulus bill that is focused like a laser on job loss mitigation and job creation.

I still hold out hope Obama will do just that, making him a true and very capable student of history with A+ grades.

Posted by: David R. Remer at February 1, 2009 11:55 AM
Comment #274725

Mark,

It’s accurate to say that 40% of the world’s wealth has vanished, because much of this money existed in markets and ways of investing that will never exist again. They should have never existed in the first place. It wasn’t wealth based on real assets to begin with…

As far as the FDR argument goes, FDR himself said that his policies didn’t cure the depression, it was Dr. WWII that did that. As far as whether or not things like Medicare and Medicaid are draining the lifeblood out of our economy, I ask you to think about what it would cost for you to care for the elderly in your own family? I find Republicans to be incredibly shortsighted on any kind of preventative measure that will save us money. Case in point, the money that was going to be allocated to condoms in the latest bailout bill. This would have saved a lot of money, believe it or not.

Finally, I’ve GOT to point out that over the last eight years we’ve funneled more than 800 billion into tax cuts for the top 1 or 2 percent in this country. What a give away. That money did absolutely nothing for the economy.

Posted by: Max at February 1, 2009 12:21 PM
Comment #274734

Max, whether or not the condoms allocation would have saved us money 5 or 10 years out, is irrelevant. The immediate priority this nation faces is jobs. The condom pork project failed utterly to address our number one priority, and therefore had no place in this Economic stimulus recovery bill.

I am very hard on conservatives and Republicans for spinning the relevant away in favor of their ideological drothers. Now Democrats are in control, and they and their mouth pieces will receive no less objective critique from me and other Independents who now control elections.

If you want Democrats to succeed, and hence our nation to survive this crisis, INSIST that they prioritize and focus like a laser on the top priorities. STD spread and unwanted pregnancies, while important issues, are NOT the crises our nation faces at this moment. Demand Democrats focus on the immediate threat to our economic existence, the loss of jobs and the fear of the employed that they may be next to lose theirs, causing them to halt all non-essential consumerism and spending, which in turn, is causing more job losses.

Posted by: David R. Remer at February 1, 2009 3:25 PM
Comment #274738
Stephen Daugherty wrote: This is not a natural, cyclical recession we have here, but the direct result of a predatory system of credit, and lax regulations.
That’s exactly right.

The debt pyramid, 52 consecutive years of inflation, 52 consecutive years of federal deficit spending, and the ever growing federal and nation-wide debt is crushing most Americans.

The banks are loan sharking like crazy (yet another example of legal plunder), and all with Congress’ blessing.

Nation-wide debt has almost quintupled since 1956, and has never been larger ever both as a percentage of GDP and per-capita.

The $10.7 Trillion national debt has never been larger in size and per-capita, and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 Million baby-boomer bubble approaching.

Many economic conditions have never been worse ever, and/or since the Great Depression.

And I don’t see how all of the pork-barrel and waste in this $825 Billion stimulus BILL is going to create jobs. Even if it created 2-to-4 Million jobs, there are now 11.1-to-24.6 Million unemployed and millions are under-employed. Unemployment is growing by about 125,000 per week. That’s fueling 9,000-to-10,000 foreclosures per month.

Yet, Congress not only gave itself its 10th raise in 12 years, but Congress also just gave each member of Congress an additional $93,000 for petty cash. Cha Ching!

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at February 1, 2009 4:11 PM
Comment #274740

David,

I think we are agreed about what FDR’s programs did in the short term. They were helpful but they weren’t a magic bullet to end the Depression. I’ll even give you that they might have stayed helpful with proper maintenance. But as they were left alone, we would have been better off without them.

My point in making that comment was that the current policies to take over the financial sector could easily end up equally as detrimental to our society if they are not modified and faded out with time. It’s true that the immediate disaster calls for drastic action. I would never be OK with the government doing this under normal circumstances. But I don’t plan to ever stop harping on them to release those assets until we are completely free of ownership.

Max,

I agree that there was a lot of so called wealth without assets. When we all realized those enterprises were full of air, they collapsed. That’s why we call them bubbles. I have a hard time calling that kind of imagined value wealth. Many people thought they were making windfall profits before the collapse without questioning how or why. Or they got loans they never should have been given. Then it all deflated and they were devastated about losing all that money. They were wrong on both counts. The market had just corrected itself. Unfortunately, I don’t believe everyone who made that imaginary money are the same ones who lost it. That stinks.

I will also indulge your second off-the-topic point. I agree with you about prevention being more cost effective than a cure. Still I don’t know that a government program to pay for it is the only way to make that happen. Short sighted people are, by definition, averse to prevention no matter what side they’re on. They are the primary benefactors of these kinds of programs because, to keep with your example, they aren’t willing to go out and buy their own damn condoms.

Posted by: Mark at February 1, 2009 6:12 PM
Comment #274744

FDR:

  • in 1942, issued Executive Order 9066, suspending the civil rights of Japanese Americans.

  • via Executive Order 6102 in year 1933, allowed the federal government to confiscate all privately owned gold in the U.S. Following the confiscation, the U.S. dollar was devalued by 40%. Possession of gold was punishable by a fine of up to $10,000 and imprisonment for up to 10 years.

  • sent a major portion of the U.S. Pacific Naval Fleet to Pearl Harbor, making it a sitting duck, and then his administration ignored communications and warnings about probable attacks on Pearl Harbor.

  • stripped the U.S. Pacific Naval Fleet of a quarter of it’s strength prior to Pearl Harbor.

  • blamed the Great Depression on employers and investors, and believed that the redistribution of wealth via higher taxes on wealthy individuals and businesses would spur economic recovery. The New Deal tax hikes reduced the disposable income of already financially-strapped individuals, and businesses then found it difficult to hire employees, and high unemployment persisted.

  • introduced the Agricultural Adjustment Act (1933) sought to increase farm incomes to repay farmers who helped him clinch the 1932 Democratic nomination. The Act taxed food processors to subsidize farmers who followed government-mandated crop reduction guidelines. This law, while benefiting big farmers, devastated the poorest farmers, who were mostly sharecroppers.

  • and the New Deal relief spending was channeled away from the poorest people. Relief and public works projects went mostly to affluent western states, while southern states benefited the least. Why? Political self-interest. FDR was buying votes to guarantee his re-election in 1936. In fact, research has shown that more money went to western states where FDR won less than 60% of the vote in 1932. The South got less funding because it was already heavily Democratic; southern votes were already bought and paid for.

  • carried on a poorly concealed lifelong love affair with Lucy Mercer Rutherford (cheating on his wife, Eleanor).
FDR did some good things too, but I’ll never understand the fawning over FDR.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at February 1, 2009 7:45 PM
Comment #274746

Mark, nationalization of some of the biggest failed banks may be the only alternative to keeping our financial system functional. That said, there is nothing preventing such legislation from mandating the government’s sale of such banks back to the private sector at such time as the taxpayers can be made whole by the private sector’s offer to buy it, them.

This has been done and is being done in a host of other nations, and can be done here. There are enough Blue Dog Democrats and Republicans who would oppose nationalization of any banks UNLESS such a provision were at the heart of such legislation. Ergo, there really isn’t even any political risk of our government nationalizing banks in perpetuity. Such a bill proposal would never see a passing vote.

Posted by: David R. Remer at February 1, 2009 7:54 PM
Comment #274747
The Only Thing to Fear: Money Vanishing into Thin Air?
The real thing to fear is trillions of new money being created out of thin air, and the potential inflation that will result, which could then result in another well-known econmic terror: hyperinflation

Already, $3.2-to-$8.5 Trillion have been pumped into the banks.

We have had 52 consecutive years of inflation.
We have had 52 consecutive years of deficit spending.
Anyway, how is doubling, tripling, or N-tupling the money-supply not going to create more inflation?

Where will the money come from to merely pay the INTEREST on $54-to-$67 Trillion of nation-wide debt , much less the money to reduce the current PRINCIPAL debt of $54 Trillion to- $67 Trillion , when that money does not already exist? Especially when now, 80% of the U.S. population owns only 17% (or less) of all wealth, and 1% owns 40% of all wealth (up by 20% from 20% in year 1976); a wealth disparity gap that has never been worse since the Great Depression. Especially when 90%-to-95% of all U.S. dollars in existence in the U.S. exists as debt (since money is created at a steep ratio of 9-to-1 of debt-to-reserves by the Federal Reserve Federal Ponzi Monetary System).

Especially if the federal debt an nation-wide debt are near (if not already) untenable?
Obviously, no one knows, which in itself is a bad sign.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at February 1, 2009 8:00 PM
Comment #274748

d.a.n, yep, FDR never deserved SaintHood status, even among Democrats. He damn near achieved it though for all the partisan propaganda designed to hide his incredible flaws and faulty decisions. He was nonetheless, a pathfinding president pointing the way out of a very dark and bleak period of our history in many respects and put laissez faire ideology up on the critic’s block where it rightly belonged. He hired people for government jobs who might otherwise have died of poverty. He brought electricity and the 20th century to 10’s of thousands of children who would have otherwise remained ignorant and doomed to lives of poverty, pregnancy and moonshine running.

For a very large number of people in the 1930’s, 40’s and 50’s, some of his decisions having saved their families from abject poverty, illiteracy, and barter economics, made him appear saint worthy to them. But, anyone who believes in the rule of law and sanctity of the U.S. Constitution has to admit that FDR shat upon the Constitution and the people protected by some of its provisions, unless they are partisan sophists blinded by the Party’s propaganda.

Posted by: David R. Remer at February 1, 2009 8:02 PM
Comment #274757

David R. Remer-

But, anyone who believes in the rule of law and sanctity of the U.S. Constitution has to admit that FDR shat upon the Constitution and the people protected by some of its provisions, unless they are partisan sophists blinded by the Party’s propaganda.

Or maybe I could counter by saying that anybody who believes FDR “shat” on the constitution is one of the partisan sophists blinded by their party’s propaganda.

I can believe that FDR may have done some questionable things, including the internment of Japanese Americans. But I think you run the danger here of feeding into some contradictory arguments towards your own cherished convictions.

Which is to say that you have not clearly defined what you mean by unconstitutional, nor whether that designation of unconstitutionality is somebody’s opinion, or that of the court itself.

Some Republicans on the far right see government as it currently is as unconstitutional, declaring all the regulatory agencies that you would have strengthened to be illegal in their opinion.

Or am I wrong? That’s the problem here. More to the point, your language is unnecessarily inflammatory. You could easily say that FDR stretched or even exceeded his authority under the constitution, and was rebuffed by the courts for it. That’s a matter of fact, and a better start for good discourse.

The unfortunate thing here, from my point of view, is that you are participating in the very kind of political bias you’re denouncing, the heightened rhetoric, the fallacious logic, the lack of specific backing details.

If we want to really get productive political discourse going, rather than the recreational dance of insubstantial positions that so many of us have come to hate in this country, then we have to start discussing the real world more than we do our opinions of it.

Let’s take this “pork-laden wishlist” argument for example. A lot of pungent language there, but what’s the basis for the claim. What’s the proportion of this kind of spending to the kind of jobs-generating projects that this bill is supposed to fund? And who’s making the distinction?

The Republicans acted unilaterally to rebuff any outreach on the matter. They’re calling it pork-laden, but how so? Remember who’s saying this, whose talking. And Remember that the bill in question is purposefully a make-work kind of bill. Many of these provisions, genuine job creators, would be weeds in other bills. Here they’re the crop. So what does define pork in this bill, and how much of this waste actually exists there?

I don’t think that the political discourse goes anywhere useful if all we’re doing is being evenhanded in our acceptance of substance-poor rhetoric from both sides.

The claims that Obama are making about this bill are modest. This won’t save us. If done right, it may keep us from going further into recession. At the end of the day, though, you have to recognize that there are some who are so wrapped up in their political ambitions, in their ideology, that they’ll willingly derail any legislation that doesn’t suit their agenda, and that this is part of what we were trying to prevent in this last election. The government needs to be capable of doing something about the issues that face it.

Posted by: Stephen Daugherty at February 2, 2009 8:21 AM
Comment #274768

Mark,

Because money is an imaginary metric it is not what it is intrisically. It is only what consensus believes it to be. Because of that it does not behave exactly like a real asset economically.

Hard money people (think Ron Paul fanatics) like to point to the M1 figures that are hardly ever reported any more and say of them that the vast volume of new money supply is a sure sign of inflation to come. Real people, though, see only the reporting about jobs and real spending. Their sense of ‘wealth’ is tremendously eroded because they don’t see where the dollars after the ones they have today run out are going to come from.

This is where Obama’s people, the Paul Krugmans of the world, and apologists like Stephen Daugherty are desperately and fatally wrong. The volume of money and government make-work-to-squeeze-by programs are irrelevant. What counts is whether people feel secure that the spending on which their jobs depend is strong. That is the foundation of their sense of wealth.

When people feel secure in the future of their income they will spend. If they don’t they will not. Daugherty glows over the supposed successes of the Roosevelt administration by 1937. I will answer that with this paragraph from Roosevelt’s second inaugural- in 1937:

But here is the challenge to our democracy. In this nation I see tens of millions of its citizens, a substantial part of its whole population, who at this very moment are denied the greater part of what the very lowest standards of today call the necessities of life. I see millions of families trying to live on incomes so meager that the pall of family disaster hangs over them day by day; I see millions whose daily lives in city and on farm continue under conditions labeled indecent by a so-called polite society half a century ago; I see millions denied education, recreation, and the opportunity to better their lot and the lot of their children; I see millions lacking the means to buy the products of farm and factory and by their poverty denying work and productiveness to many other millions; I see one-third of a nation ill-housed, ill-clad, ill-nourished.
That is just the sort of recovery we can expect with the Obama “stimulus”.

Posted by: Lee Jamison at February 2, 2009 11:41 AM
Comment #274776

There are many parallels between this mini depression and the great depression of the ‘30’s. What we can learn from the great depression is that to have the government do nothing as Mellon allowed during the Hoover administration will not lessen the impact of the current depression just like it only served to worsen the great depression.
Hoover’s policies were the start of the new deal and served the people of this country well during the depression. The banks and stock market collapsing in ‘29 started the skid into the depression. That sounds familiar. Hoover was in office only 8 months prior to the stock market crash and served one term that ended in January of ‘33. Hoover’s mistake was to believe that the private sector would cooperate with the public sector and do what was necessary to get out of the depression. Again that sounds familiar.

FDR rectified that mistake and moved forward with legislation to get things moving again. Some things worked some didn’t but things picked up relative to the degree that the government spent money to get out of the mess.

Another problem during the ‘30’s was the drought that ruined many family farms and uprooted people to the cities. Make work programs worked to keep these people from starving and may help this time around. Keeping people working and shoring up jobs will keep the unemployment figures from becoming even more dismal than they are.

So during the 3 terms of the FDR presidency there was a depression, drought, the rise of Nazism and fascism which lead to a world war in which this country was attacked. And we wonder today why FDR was considered so highly by the people of this nation? What other president can come close in this past century? Surely we can use some of the lessons learned on his watch.

Posted by: j2t2 at February 2, 2009 12:33 PM
Comment #274778

Lee Jamison-
There is a psychological element to it, but that element is not the primary issue. The primary issue is coordination of the distribution of wealth and the healthiness of its circulation.

People are reacting to a real problem, from their point of view: a credit crunch that makes it harder to buy things, harder to keep businesses going, and which is encouraging businesses to lay people off. Unemployment, by the way, is another real circumstance that makes people psychologically less secure in spending.

But longer term, what makes this problem so harmful is that you have a society that, owing to the direction that regulations have taken, has become more and more dependent on credit to maintain standards of living. As I can attest from personal experience, it’s extraordinarily difficult to subsist without credit cards. and now even those are locking up.

This is what allowed the nation to throw away the stability of greater job security, to throw away the need to respond to the upward pressure on wages.

What we need isn’t boosterism, half as much as an economy that allows the majority of people in the market to earn and spend what they need to earn and spend. This has long been a consumer economy, and recently been one that tries to continue being a consumer economy with policies better suited to supporting a luxuries and commodities-based economy.

That contradiction has to resolve itself, and its going to be messy and scary.

As for the success of the FDR Administration, I would submit that the successes must be measured relative to the failure that preceded them. You would fault FDR for not totally restoring the economy, despite the fact that empirical evidence showed vast improvement under FDR. Do we have any solid reason to believe that the continuation of Republican policies would have granted a magic market fairy miracle where the economy spontaneously recovered from the real world effects of capitalism’s worst episode of economic self-destruction on its own? When’s the last time you saw somebody reduce unemployment from a quarter to just ten percent? When’s the last time you saw somebody completely restructure the banking and securities trading industry?

Ultimately, The Hoover and Bush strategies of benign neglect, followed by panicked regulation and bailouts, has not worked. The Government can neither be on the sidelines, nor fumbling and bumbling around when that inattention brings about disaster. It’s time for the government to act like a government.

Posted by: Stephen Daugherty at February 2, 2009 12:43 PM
Comment #274800

Lee, sorry, but I have to point the obvious correlation between the this economic slide and that of the 1930’s. Conservative ideology facilitated the banking failures and stock market crash of 1929. Democrats oversaw that mending process to prosperity again. Republican rule and conservative ideology facilitated the financial breakdown that built up from the passage of the GLB Act to the meltdown and run on money market funds in late 2007. Now, again, it is Democrats the people turn to, (as if there were any other choice), to mend the process and restore prosperity again.

You can legitimately debate how effective or efficient FDR’s or the current lot of Democrats efforts will be in mending the economy, but, there is no escaping the parallel that conservative ideology leads to economic meltdowns in both these cases, and liberals are who voters turn to for mending the economy in their behalf.

I would suggest, that conservatives and Republicans come to grips with this parallel and find the flaws in their ideology and governance that precipitated such colossal economic failures, before contemplating winning any influence with the electorate, again.

To a very large degree, Democrats now control government because Republicans paved the road and pushed them down it, in 1929 and in 2007. Accept that reality and historical reality, and the GOP may just be able to reinvent themselves abandoning their destructive ideology for a more pragmatic approach to governance that focuses on balance between business and consumer, between capital and discretionary consumerism, between taxes and debt and spending, and between responsibility for future prosperity and present prosperity.

The GOP has demonstrated nearly complete absence of observance of these balances as both essential to, and ethically mandated by, the electorate’s well being present, and future. The first and foremost responsibility of the GOP is to insure highly qualified candidates for office and leadership. GW Bush reflected a catastrophic failure in the GOP’s first and foremost duty and obligation as a political party.

Hard lessons to swallow, but, failure to swallow the medicine will not heal what ails the GOP.

Posted by: David R. Remer at February 2, 2009 4:20 PM
Comment #274802

Stephen D. said: “I can believe that FDR may have done some questionable things, including the internment of Japanese Americans.”

WOW! What a sophist’s confession. No, Stephen. To be objective, you must acknowledge that FDR DID pollute the Constitution and violate our fundamental basic human rights laws and Bill of Rights protections by arresting American citizens without representation, trial, or legal process and confiscating their entire wealth and assets without due process.

Your equivocation on this reflects a painful reluctance to dispense with your partisan blinders. The historical facts cannot be changed by your equivocal words, like “I can believe”, “FDR may have”, and “questionable things”.

FDR shat upon the Constitution and American citizen’s constitutionally defined rights as American citizens. Clear, simple, and un-mistaken historical fact, Stephen D.

If your comments cannot openly and unequivocally accede to so basic a truth as this, how can any of your other comments be regarded as non-partisan and objective?

Posted by: David R. Remer at February 2, 2009 4:28 PM
Comment #274828

Lee,

You make a good point. Money is an imagined commodity. And it’s value rests entirely on the collective confidence of those who use it. I think this makes my case even stronger that those who set agendas in our country are doing real harm by portraying our situation in the worst possible light either for ratings, votes, or any other reason. Indeed, people spend based on confidence of future income. This is a perfect case study for symbolic interactionism.

Stephen D,

This doesn’t mean people don’t have real concrete problems. But the herd psychology we are experiencing, I believe, is still the central issue. The substance of a credit crunch is lenders unwilling to lend for fear of not getting their money back. The same dilemma everyone else is in.

To change the status quo, we need something to get the ball rolling. But we also need something to garner confidence in the markets again to keep it moving. I’m wary about the whole idea of Obama’s stimulus package, but I can’t say I know a better to get the ball rolling.

Posted by: Mark at February 2, 2009 9:30 PM
Comment #274833
Which is to say that you have not clearly defined what you mean by unconstitutional, nor whether that designation of unconstitutionality is somebody’s opinion, or that of the court itself.
Well, perhaps we should create a dozen committees and allocate $100 Billion to research that for a decade.

That reminds me of a joke:

  • You and I are walking down a deserted street.
    Suddenly, a dangerous looking man with a huge knife comes around the corner and locks eyes with you, screams obscenities, raises his knife, and charges. We are both carrying a Smith & Wesson and we are both expert shots. You have mere seconds before he reaches you.
    What do you do?

    • Stephen Daugherty’s Answer: Well gee, that’s not enough information to answer the question! HMMMmmmm … does the man look poor or oppressed? Have I ever done anything to him that would inspire him to attack me? Could we run away? What does d.a.n think? Could I possibly swing the gun like a club and knock the knife out of his hand? What does the law say about this situation? Does the gun have an appropriate safety built into it? Why am I carrying a loaded gun and what kind of message does this send to society and my children? Is it possible he would be happy with just killing me? Does he definitely want to kill me or would he just be content to wound me? Perhaps I might live if I go ahead and let him stab me? This is all so confusing! I need to debate this with some friends for a few days to try to come to a conclusion.

    • d.a.n’s Answer: BANG!

By the way, Lawrence Livermore Laboratories has discovered a new element.
It is the heaviest element yet known to science.

The element, GV (Governmentium), has an atomic weight of 312 (with 1 neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy neutrons).

The 312 neutrons are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons.

Since GV has no electrons, it is inert.
However, it can be detected, because it impedes every action upon it.
A tiny about of GV can slow reactions from 4 seconds to as long as 4 years to complete.

GV has a normal half-life of 2-to-6 years, but it never completely decays.
Instead, it undergoes a reorganization in which some of the assistant neutrons and deputy neutrons exchange places.
GV also can actually increase in mass over time, by forming isodopes via each reorganization which causes more morons to become neutrons.

This mechanism of moron promotion leads some scientists to believe that GV is formed whenever morons reach a critical concentration, referred to as critical morass.

When GV is catalyzed with money, GV becomes AD (Administratium), an isodope element that radiates just as much energy, since it has half as many peons, but twice as many morons.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at February 2, 2009 10:15 PM
Comment #274846

David R. Remer-
I can easily recall your rather heated arguments over the border fence issues. While you are entitled to your opinion on whatever subjects you care to have them on, I cannot describe you as either objective or completely non-partisan. Note that I use the second term to mean what partisan typically means: a strong supporter.

You have been one over the past few years on any number of subjects. Let me make it clear that I do not see subjectivity and partisanship as somehow unnatural, or in moderation a bad thing. I see them both as the natural result of man’s incomplete, personal experience of the world.

There is value in stepping beyond ourselves, in basing our arguments on objective realities, the best we can discern them. But we have our limits. Additionally, both our lives and our world are complicated, and as such, we unavoidable tend towards believing certain things and not others. Openmindedness is great, but it is not forever, and sooner or later, many times, we come to certain conclusions about the world, conclusions that mutually exclude or cast doubt on other theories we might have had.

The best we can do is figure it out, talk it out, compete it out.

If there was an easy answer, if there was perfect objectivity in this world, if there was one way of doing things everybody could settle on, we wouldn’t need sites like this.

We need sites like this because our experience of this world is neither completely subjective, nor objective, and our opinions neither diverge nor converge perfectly. Nobody’s knowlege and wisdom are perfect or completely imperfect.

Democracy would be a terrible system if we were able to find that one guy who knew everything, who wasn’t partisan. As it is, we live in a very human world in one of the more humane of the nations on the face of the planet, so things get a little complicated and -well- human at times.

I’m not willing to stick the long knives into FDR, the way you are here. So sue me. I just simply don’t want to, and no talk about sophistry or my obligations to jazz up my objections to the internment with such loaded words is going to make me feel like bashing him.

Part of the reason, though, is that understand the issue to be more complicated than our modern appreciation of it. We have the benefit of hindsight and the liability of a distinctly modern point of view divorced from the POV’s of the time. It was bad, but the motives behind it were not monstrous: merely a product of a more expedient, more racist period in our past, which I allow for, but do not excuse.

Sorry if don’t smack FDR down. That’s just going a bit too far for me, especially for somebody who played such a critical role in our recent history.

Dan-
I might sidestep, swing for his head with the gun. I might block his arm, rap his forehead with the butt of the revolver. I might use the gun to blow his kneecap out. Or I might shoot him right between the eye. If I got the revolver and he’s got the knife, I’ve got more choices than him.

Posted by: Stephen Daugherty at February 3, 2009 2:06 AM
Comment #274891

Stephen D., First, I reject your definition of partisanship. My definition is supporting all or nearly all measures promoted by a political party. Or, at least taking an apologetic defense of same, for no other logical or rationally evident motive than the measures are promoted by a particular political party.

Anyone can label me partisan, and many have. But, my writings here stand as evidence to the contrary. I take positions on issues on their logical, practical, and probablistic merit in meeting their stated objectives, or on the merit of the objectives themselves, by the same criteria. I critique all political parties where their positions or policies fail the logical, rational, or effective tests. And conversely, I defend positions and policies that demonstrate their logical, rational, and effective merits toward consensual objectives alluded to by our founding documents.

When you say: “There is value in stepping beyond ourselves, in basing our arguments on objective realities, the best we can discern them. But we have our limits.”, the wiggle room you give your party for getting it wrong, is every bit as wide as that held out for the GOP by Republicans. It opens a political pandora’s box for excuses and reasons to justify failure.

Sure, there are times when emergency decisions must be made on less than a full study of the best options going forward. But, those are rare in history. The federal government is OBLIGATED to serve national needs first and foremost. When a political party seeks to serve state and local needs to the detriment of the nation’s long term stability and efficacy, that Party is failing America and her people.

Voters rejected Republicans for these VERY REASONS in the last two elections. If your party’s elected officials take your argument and wiggle room as their excuse for less that the best course of action for the nation and her future, then they are no better than the Republicans sent packing in 2006 and 2008.

I hope Democratic elected officials will take my words to heart and prove themselves better than the Republicans they replaced. We shall see. This Stimulus bill that came out of the House however, is not at all reassuring.

Posted by: David R. Remer at February 3, 2009 4:03 PM
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