I wasn’t sure whether to bother writing about Bernanke’s reappointment. Why? Because it’s just the status quo. But perhaps it’s worth spelling out the status quo.
Bernanke bailed out the banks and the rich. You know this, but what is not clear to many people is that bailing out the banks and fixing the banking system were not connected at the hip. It was possible to fix what was wrong with the banks by taking the big banks into receivership and then using them to lend directly. Wipe out the shareholders, write down the bondholders to the actual value of the banks, but keep lending to the real economy, and indeed increase lending and capital flows, by, say, deciding to refit every single building in America for energy efficiency and generation, and to take every clunker off the road.
The banking class, and the rich as a group, tanked the system. They committed what amounted to systematic fraud, and earned billions of dollars of bonuses for themselves by crashing out the system and daring Bernanke and other politicians (and Ben is nothing if not a pol) to do something about it. Bernanke folded, and threw trillions of dollars at them.
Despite what Bernanke’s, Paulson’s, Bush’s and yes, Obama’s, apologists say, this was not necessary. It resulted from a deep confusion of banks with what banks do, and a deep desire to keep the same class of people in charge of the economy, despite their manifest failures. Ben Bernanke, Paulson, Geithner, Bush, Obama and so on could not imagine taking out their friends—could not imagine letting them suffer the consequences of their results—could not even understand that their friends were parasites who were not necessary for the continuation of the system but were instead the people who had caused it to collapse.
The end result of this is going to be two things.
First – a lost decade or more, just like Japan (I prefer the phrase “bright depression”.)
Second – another collapse, even worse than this one.
The books have not been cleared, the garbage has been left on them, just like in Japan, but the US is not Japan, it is not a suprlus society which sells more than it consumes. It is, itself, a parasitical society which needs blood from donors to survive. Furthermore the American ruling elite left in place by this decision is much sicker and more shameless than the Japanese one (where people comitted suicide in shame over what had happened). Having gotten away with it once, they will do it again, indeed the huge bonuses they are paying themselves indicates they still think of themselves as the smartest people in the room, and they’re right in a sense. They sold America a pig-in-a-poke, and took America for trillions of dollars. Rule number one of running scams is never give a sucker (that’s you) an even break. They aren’t going to, and the end result will be another crisis, which is even worse.
Japanification is not a stable solution set given the realities of America’s deep structural deficit and the essential con-artist nature of its elites.
All Bernanke’s reappointment tells you is that the game is still on. While Bernanke did save the rich, they still lost a lot of money. They want it back. And they’re going to get it back, even if it means they suck the last drop of America’s blood and the host drops dead.
Welcome the new American century. Unless you’re in the charmed circle of con artists and grifters, you aren’t going to enjoy it much.
someofparts
My friends have asked me to stop sending them links to things like your post here. They are already depressed and worried and seem to feel that knowing the details of how fucked we are just makes them feel worse.
What always surprises me about such reactions is the sense of powerlessness it shows. Are they right to think that folks like us don’t have a chance? Or is it part of what is wrong in this country that the idea of organizing and fighting back doesn’t occur to them or feel like a realistic option even if they do think of it?
Sean Paul Kelley
Not to put to glib a point on it, Someofparts, but organizing and protesting is so ‘French’ you know? Far too many Americans think that democracy is won or lost at the ballot box. They forget that it was actually won at the barricades.
marku
The threat of a “lost decade”? Look around, we’ve already had one. The first trough-to-trough business cycle with no increase in median wage, or numbers of private sector employment.
And voting? I’m through with voting. After seeing the feedback to congress running 100 to 1 against the banker bailout, and the damn thing passes anyway, I’m sorry, this democracy is DEAD.
Nothing will change until we have millions in the streets, and soccer moms setting themselves afire in congressman’s offices because their child died of a curable illness but they couldn’t afford the insurance or the care.
Mandos
Well Brad DeLong thinks that Bernanke’s appointment is just peachy, so it has the stamp of academic approval and is therefore Scientific.
Sean Paul Kelley
DeLong even used the word ‘serious.’
Mandos
Oh yes, DeLong is nothing if not Serious(tm).
This is as good as it gets people. Forget Obama or Nobama: this is where Official America is at. Everyone should rent “Yes, Prime Minister” to understand how this works.
tjfxh
Between the financial manipulation and the constitutional crisis, the Obama administration is continuing the criminal conspiracy that the Bush administration began. If that’s the “status quo” then liberal democracy is over in America. This is looking uncomfortably like Italy under Mussolini, where extreme nationalism and corporate statism ruled. why have a constitution and laws if the government is just going to ignore them?
S Brennan
“…This is looking uncomfortably like Italy under Mussolini”
I had been making something like this observation before Obama showed up on the scene. [Try to remember until 2006 he was a junior member of a state legislative body…outside of some very (powerful/insider/rich) donors…a nobody]
However, since he showed up on the national stage and started striking those staged poses that he does…well, now we have a guy who actually thinks it’s cool to strike Mussolini-like poses. And the likeness is uncanny. It’s the first thing I noticed when a high school classmate who writes a national column told me to look into him prior to his convention speech. That’s why I’ve been using the term “creepy” to describe him. It is unimaginable to me that Americans as a group don’t notice that Obama likes to strike poses that match one the twentieth century’s worst villains*. It really is creepy.
* yes, there were a lot of ’em.
jbaspen
It’s worth a few quips from that Venerable Bear of Bears, James Grant now 75 years old.
In the August 7th issue of Grant’s Interest Rate Observer, Grant quotes Janet Yellen (Governor of the San Francisco Fed) :” But the Fed’s analytical prowess is top-notch and our forecasting record is second to none “. Grant retorts: “we can think of a few minor analytical slips on the part of the Federal Reserve, such as precipitating the late credit crisis with low interst rates and regulatory neglect, but then having got on the ground floor of the disaster, failed to anticipate any small part of the consequences of its own handiwork”. (8/7/09)
These arrogant bastards believe to a moral certainty that they saved the planet. In a June missive, Grant asserted that “We will go as far as to say that if the Fed’s own Examiners were handed the Fed’s own financials (unlabeled, of course) and asked to render a regulatory decision, they would order the place shut down”. What the new “Supersize Fed” has done is “piled a huge superstructure of risky assets on a tiny sliver of capital”. And, what is the new disease created by the genuises at the Fed? Look at the wretched Balance Sheets of American Banks for something called “excess reserves”. Soon this methamphetimine should total a trillion dollars. Bernanke opines that he can control the potential explosion via a tool labeled IOER (interest on excess reserves). Can anyone realistically control both price AND supply long-term? “It will precipitate a crisis in the dollar and the dollar-based monetary system, sustained as it is by false confidence…”. Grant – 8/7/09
Ian Welsh
Much as I like DeLong, he has a long record of very bad judgment in economic matters.
Mandos
Isn’t it funny? Economics is his job. He had a hand in shaping policy, and it is a fact that the People Who Matter listen to him on economics matters, even as they may ignore him on anything else he might actually be right about. This is not an accident.
Cujo359
The books have not been cleared, the garbage has been left on them, just like in Japan, but the US is not Japan, it is not a suprlus society which sells more than it consumes.
As someone who isn’t an economist, there are two things that strike me about Bernanke’s first term. First, he didn’t see this problem coming. That seems to be the opinion of most of the folks whose opinions are worth listening to. What’s worse, once he realized what was going on (or did he?), what he did to help the situation has left us with dim prospects for the next couple of decades.
So perhaps you can be an idiot savant economist and still understand why this could be bad.
lambert strether
S Brennan — Which poses did you have in mind? Is it the angle of the chin?