Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Timothy Geithner Page 1 of 3

The Bailouts Caused the Shitty Economy, Part 2

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On February 1, 2016

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Back in 2013, I wrote an article making the argument that bailouts were responsible for the bad economy.

The reason the economy has not recovered and will not recover for at least a generation is because of the overhang of bad debt, the glorification of financial “profits” (they aren’t), the failure to de-financialize the economy, and the confirmed control of government by the rich.

There is also a section on alternatives to the what we did. “We should do something,” is not the same as, “We must do what we did.”

But, be clear, the economy would be better now if we had not done anything. Yes, the immediate two years after the financial collapse would have been worse, but we’d be better off now than we are.

I think we need to note, first, where we are.

  • We are about to go into worldwide recession. In other words, the good part of this business cycle is mostly over. In many countries, it has been over for some time.
  • Peak to peak—from the peak of the last recovery to the peak of this recovery, the employment to population ratio has not recovered. It didn’t recover in Bush’s economy either, by the way.
  • Median incomes in the US have dropped. This is true in a number of other countries.
  • All of the gains of the recovery went to somewhere between the top 3 percent to top 5 percent. And really, that means the top 1 percent, .1 percent, and so on.
  • The rich are now richer than they were before the crash.
  • China is has hit the mercantile wall. After the financial collapse, they were the engine of global demand. But with so many of their customers in austerity, this could not be maintained.

In other words, the economy never actually recovered. You can argue it did, dishonestly, by looking at stats like unemployment (which don’t consider people who have given up looking for jobs), or GDP, but for most people, this is a shit economy, at best.

It has, however, been a good economy to be rich in.

Now, as I’ve been writing about what Capitalism is this last week, I think it’s worth noting something very fundamental.

The 2000’s economy was sick. It was doing the WRONG THINGS. It was doing them with trillions of dollars. Derivatives such as CDOs, vast expansion of borrowing for stock buybacks, the housing bubble, and so on.

It was doing things which had negative real returns–even measured in money. That these actions had negative, real returns was revealed in the financial collapse when those derivatives were worth ten cents or less on the dollar, and by the fact that central banks and governments had to spend trillions on the bail out.

Measured in human welfare, the mal-investment was worse. When you measure this in “opportunity cost,” meaning what we could have done with those resources instead, which would have increased human welfare, the cost was beyond vast: There are no words.

Capitalism is a system where markets make the primary economic investment decisions through price signals and the availability of money (these are not always identical, which is why I separate them).

More to the point, markets say, “If you are making money, do more of what you are doing.” The assumption is that if you’re making money, other people want what you’re doing, and that what people want is what has the most social utility—the greatest welfare for the buck.

I trust it is obvious to anyone but those brainwashed by the cult of economic utility that, in the 2000’s, the individuals who were making the most money were not creating welfare. They were, instead, reducing human welfare, absolutely and relative to other options.

The other case for capitalism and markets is that they are supposed to be self-correcting. People may make money doing the wrong thing due to market failures, but eventually they will lose that money.

They did.

I repeat, they did. The people making the wrong decisions lost all their money. They lost more than all their money.

We have a shitty economy now because we bailed them out. They then went back to doing all the wrong things, but with a huge debt overhang and more power.

What we needed was new economic decision makers. We needed the people who had all that money to lose their money and thus their political power, making it possible for a different set of people to make money.

Those people would have started off with a lot less money, and a lot less power, and that means there would have been a lot less money in politics, which would have fixed a swathe of problems political, social, and economic.

All that was required for this to happen was to DO NOTHING. Let the banks and brokerages and so on go out of business, and allow the process of law to proceed. The laws on the books at the time made most of what bankers and shadow bankers and various other decision makers doing illegal. Rather than allowing them to pay fines to indemnify themselves against law breaking, actually apply the law. Start with RICO statutes (conspiracy), grab their emails, and prosecute for fraud. (They were, essentially, all engaged in some fraud or another, though I don’t have time to go into that in this piece).

As an additional slice, all their remaining assets would have been seized as proceeds of crime, and they would have had to rely on public defenders.

This is what happens if you just follow the laws and regulations on the books. No special action is needed. None. Except to ensure laws are actually followed, I guess. That it requires special action for rich people to be subject to the law, is, however, part of the point.

So, we have a shitty economy now because we did not get rid of the people making terrible decisions who caused the financial collapse. We have a shitty economy because of the bailouts.

I went into personal decline in 2009 because I recognized that a watershed opportunity had been missed. It was our last chance to get off the train to Hell, really. Oh, we’ll get off that train one day, but we’ll already be in Hell.

The bailouts caused this shitty economy.

Much of what happened was a case of Obama’s decision making, either through action or inaction. TARP passed because he pushed it, for example. Bankers were not properly prosecuted because his DOJ chose not to do so. Many consider the actions of the Fed beyond his purview, but they are wrong.

The full argument is in my pieces “What Can Obama Really Do?” written in 2010, and “Could Obama Have Fixed the Economy?” written in 2014, though I also wrote an absurd number of pieces at Firedoglake on specific policy in real-time. I know for a fact that those articles reached the White House (though I don’t know if Obama ever read them). I know they were included in Dodd’s briefings.

Many other people were writing good proposals at the time as well. People more famous than I. The ideas were available.

So, I once said I don’t hate Clinton. I don’t hate Obama any more, but I did for a long time. He had a historic opportunity to be the next FDR. He deliberately chose not to be, and to instead help and defend the people who caused the financial crisis.

Obama triumphalists who go on about what a great president he is are either misinformed or cockroaches. The true cost of anything is the opportunity cost, and Obama’s opportunity cost is beyond large. Everything he could have done, and did not even try to do.

This is a bad economy, in terms of the numbers that matter to ordinary people. Less have work, and those who do make less money. It is about to get worse. Obama, and yes, Bernanke at the Fed, and Tim Geithner, and various other central bankers and politicians (including, yes, Bush), are responsible for how bad this economy is.

I will add that the most logical, good stimulus, would have been a massive energy project, in which America’s buildings were all retrofitted to be at least energy neutral. It would have directly put to work the people who needed that work, it could not be offshored, with some fairly simple policy, it could have created a solar manufacturing industry in America, and so on.

This means that some of the losses of climate change will also be Obama’s responsibility. Opportunity cost, again.

Enough.

The Obama presidency will go down as a huge failure to historians looking back in even 20 years. The larger point is this: Capitalism does have some virtues, and one of them is wiping out people who are doing the wrong thing. That doesn’t mean that “all bailouts” were a bad idea, but bailouts of the people who caused the crisis (bankers, shadow bankers) were. The primary bailouts caused the lousy economy.

There will be another crisis. Learn the lesson of the last one. If we don’t, well, crises will continue until we do.

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Catching Up with the Obama Dilemma

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On June 21, 2010

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I haven’t had much to say the last bit, because the rest of the blogosphere and even mainstream pundits are catching up to where I was a while ago.  Let’s see where we are, and where we’re going.

To recap:

1) the stimulus bill was neither big enough, nor well enough put together to do the job.  However many jobs it “saved and created” they weren’t enough.

2) Obama is not in the least interested in doing progressive things unless great pain is inflicted on him, personally.  This is most likely because he is not a progressive.

3) On civil liberties, Obama is probably actually worse than Bush.  Yes, that’s quite an accomplishment, but there you have it.

4) He’s an incompetent leader, who over-centralizes decision making, refuses to delegate, then makes decisions slowly and badly.

5) His courtiers are not the problem (although they’re almost all scum), he is the problem: he chose them.

6) The spring job recovery is already petered out, and around the world virtually every major economy other than China is turning to austerity, including the US.  US cities and States are in a horrible state, gross income is down, and bank lending is still not recovering.  The US economy has become more oligopolistic and more sclerotic than ever before, with the major firms who run the economy making their money by squeezing little people who have nowhere to turn.  Thanks to Bernanke, Paulson, Geither, Bush and Obama’s bailouts, and refusal to engage in meaningful restructuring of the economy or the financial industry, their profits have recovered.  That means, to them, that the crisis is over.

7) Election results in the midterms are looking really bad.  I was warning about this in beginning of 2009, because if Obama’s economic policies didn’t work, and if he continually alienated the base, it was going to cause problems.  The only thing Obama and Congressional Dems have going for them is how bloody awful the Republicans are.  But being the lesser evil isn’t always enough.  Liberals and progressives can’t vote Republican, but they can refuse to donate, not volunteer, and in many cases, not vote.

Going forward Obama is faced with a choice.  He won’t do enough to make the base happy, because he genuinely doesn’t believe in any progressive ideals.  What he can do, however, is goose the economy. He has most of the TARP slush fund to play with.  He could dump it into the economy post-haste in order to rescue the mid-terms.

Whether to do so is a dilemma for him.  On the one hand standard methodologies are still showing that the Dems (barely) hold onto the House, and keep the Senate.  But it isn’t much of a stretch for the Republicans to win the House.

If they do so, Obama’s presidency is effectively over.  The Republicans will Clintonize him, tying him down in a blizzard of subpoenas and fake scandals.  He will get nothing done for the next two years, and will probably lose re-election.

On the other hand, if he spends the money in 2010, it won’t be there in 2012, and after all, Dems might squeeze through without it.

Choices, choices…

I’d feel sorry for him, but he’s made clear that he isn’t a Democratic president, and he isn’t a liberal or a progressive, so I see no point in wasting any angst on personal problems he himself created.  All of this was totally predictable, and was, in fact predicted by multiple people.

Obama never made a sincere effort to fix the economy, to end the wars, to stop civil liberties abuses or to revamp the financial industry.

As he reaps, so he sows.  It is unfortunate Americans have to suffer even more than he does (he’ll be taken care of after he leaves the Presidency, never fear), but such is life.  Maybe it’s time to stop voting for people who say they love Reagan and that they don’t believe in Democratic solutions to problems.

Coming up…

We’re still in a Depression

and

Why it is never in Congress’s interests to look after Americans

What Left?

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On May 22, 2010

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David Sirota nails it:

Behold, for instance, major environmental groups’ attitude toward the Gulf oil spill.

We know that before the disaster, President Obama recklessly pushed to expand offshore drilling. We also know that his Interior Department gave British Petroleum’s rig a “categorical exclusion” from environmental scrutiny and, according to the New York Times, “gave permission to BP and dozens of other oil companies to drill in the Gulf without first getting required [environmental] permits.” Worse, we know that after the spill, the same Interior Department kept issuing “categorical exclusions” for new Gulf oil operations, and Interior Secretary Ken Salazar still refuses “to rule out continued use of categorical exclusions,” as the Denver Post reported (heckuva job, Kenny!).

Undoubtedly, had this been the behavior of a Republican administration, “the left’s” big environmental organizations would be scheduling D.C. protests and calling for firings, if not criminal charges. Yet, somehow, there are no protests. Somehow, there have been almost no calls for the resignation of Salazar, who oversaw this disaster and who, before that, took $323,000 in campaign contributions from energy interests and backed more offshore drilling as a U.S. senator. Somehow, facing environmental apocalypse, there has been mostly silence from “the left.”

So true.  On virtually everything.  Principles which change depending on who is in power are not principles.

But don’t think this gets donors and readers off the hook.  I can’t tell you the number of times I have been told “we can’t run with that, our readers won’t tolerate it.  They /want/ to believe in Obama.  They need to believe in Obama.”  (Well, actually, who knows if it gets them off the hook or not. I never believed it.  I believe you can tell people the goddamn truth and still get traffic.)

That has waned somewhat, but in early 2009 the number of things I wanted to say that I couldn’t either get published or front paged was rather extraordinary.  What happens in such situations is that writers, even when not explicitly edited, start self editing.  “Everyone knows” certain things, but hardly anyone says them, which is why you get the weird sight of people saying “everyone knew”, but then you look into the person’s archives and find they never said what “everyone knew”.

Of course, everyone didn’t know, but even before Obama took office, and especially in the month after, those of us whose jobs it was to watch closely say who he was appointing, and with a few exceptions, his appointments (or lack of appointments, as when he left Bush USA’s in office, something no other President had done) told the tale.  At that point anyone whose need to believe wasn’t Hindenburg sized, knew that liberals were about to get royally screwed up by Obama.

Oh well.

Obama, Congress and Bernanke did not save the world from a Great Depression

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On May 14, 2010

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Sorry, they simply did not. The baseline IMF forecast before the bailouts and before the stimulus bill tracks almost exactly what happened.

The bailouts were an actual net drag on the economy.  Instead of cleaning up banks balance sheets, they allowed zombie banks to continue to exist, banks which are crippled when it comes to lending.  In order to make sure these banks can pay down their bad debts, the Fed not only had to take on huge amounts of their paper at par when it was worth 20 cents at most, it has had to lend to them at concessionary rates, pay extra interest to them, and let them leverage that to make obscene profits from what lending they are doing (why did your credit card rate go up, that’s why?) and from trading on a captive market.

As best I can figure the stimulus was large enough to counteract the negative effect of the bailout.

The net, is a wash.

Furthermore, there were far, far more intelligent things which could have been done.  The crisis was, as the tired phrase goes, also an opportunity to break the power of monied interests, so that ordinary Americans could prosper again and could reclaim their government.  The stimulus was an opportunity to restructure the US economy to allow real, widespread growth in the future.

Both those opportunities were wasted, and they were wasted by Obama.  TARP would not have passed without him, and once he was in power he could have demanded that Bernanke do as he commanded (break the banks) or step down, if Bernanke wouldn’t, he could have easily impeached him.  The stimulus was his stimulus.

Obama, Congress, Bernanke, Geithner, Paulson—none of them saved anybody except the banks and the rich from apocalypse.  I understand that partisan Democrats want to pretend Dems saved the world, but they did no such thing.

(Addendum. See Rosenbert here (h/t Sean-Paul):

There are classic signs indeed that the recession in the U.S. ended last summer — output, sales, etc. But the depression is ongoing and the reason we say that is because real personal income, excluding handouts from the government, has barely budged. In fact, real organic personal income is nearly $500 billion lower now than it was at the peak 16 months ago and this has never occurred before coming out of any technical recession. It is a depression, as the chart below attests — that is the trendline for real household incomes, until the government comes in to top them off with handouts, subsidies and extended jobless benefits . . .

Real consumer spending is up $200 billion over the past 16 months and everyone believes we have a sustainable recovery even though organic income is down almost $500 billion. Think about that for a second because once the stimulus wears off, and with a 10% deficit-to-GDP ratio and concerns surfacing everywhere about sovereign credit risks, there is little out there to support future growth in consumption.)

Oh Bullshit, Gay is not “something you call yourself”

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On May 11, 2010

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So, we have Digby approvingly quoting this:

I don’t know if Elena Kagan sleeps with women or men. I don’t know if she sleeps with anyone at all. I don’t care. What I do know is that she has never claimed to be a lesbian, that she’s never spoken out in the first-person as an advocate of gay rights and that she has never publicly discussed a romantic relationship with a woman. Gay isn’t some genetic or soulful essence; it’s a name you call yourself–and Kagan has not done that. So in my book, case closed. Elena Kagan is not gay. Is she straight? I don’t know, and again, I don’t care. Why does she have to have a sexuality at all?

No, gay is about who you have sex with.  If you have sex predominantly will adults of the same gender, you’re gay.  Unless, of course, you want to say that all those male Republicans screwing other men aren’t gay, I guess.

Now, I don’t personally care if Kagan is gay, what I care about is that she has almost no record which will indicate how she’ll vote and much of what we do know, isn’t good.

What I do care about is that Obama’s word is not “good enough” for me, nor should it be good enough for anyone, given his record on civil liberties and his constant actions against liberal interests.

If the left had any balls at all, it would attempt to sink Kagan, insisting on the left wing equivalent, ideologically, or Scalia or Roberts—someone whose legal philosophy we don’t have to guess about.  But it’s true that Kagan isn’t like Miers, because the left isn’t like the right—its leaders have no guts.

Which is to say, all hail Justice Kagan.

Aka: a pig in a poke.

Why, Virginia, Would You Think the President Isn’t Willing to See Abortion Rights Slip Away?

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On April 14, 2010

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If only the king will save us:

While anti-choice zealots may have the necessary votes to uphold the 20-week ban regardless of John Paul Stevens’ replacement, this is why the Court matters so much. The right has used judicial appointments in a blatantly political fashion, and unless the President is willing to see basic rights stripped away, he must act boldly.

Now, odds are that the new nominee will be pro-abortion rights.  But anyone who thinks Obama isn’t willing to sell abortion rights down the river in exchange for things he values more (like giving money to corporations) wasn’t paying attention during the health care reform fight, were they?

If pro-choice organizations want to make sure their rights aren’t sold down the river any further, they need to make clear that if they are, Obama will pay a price. Obama doesn’t respond to left-wingers asking nicely, he doesn’t pre-emptively make concessions to left wingers.  He only does those things for right wingers, as with giving away off-shore drilling without getting anything in return.

Given pro-choice organizations impotence during the HCR, I think we’d best just pray that whoever Obama wants on the court is pro-choice by happenstance.

Insanity is Doing the Same Thing and Expecting Different Results: Real Reform Means Reinstituting Glass-Steagall at Full Strength and Breaking Up Financial Conglomerates

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On April 10, 2010

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Ok, enough already. I’m sick of people talking about modern markets as if they are something wonderful. No, they aren’t. Obama was absolutely right during the election, they completely fell down on their job, not just for the last 8 years, but for most of the last 28 —whenever Republicans were in charge, and a fair bit when Dems were in charge. Ordinary people haven’t had a raise in damn near 30 years. This is success?

I simply, completely, and utterly fail to see what is so wonderful about the process of securitization. Sure, it allows you to create more financial products. Sure, it reduces the cost of capital somewhat. But are we really better off because of securitization? Of course we aren’t. Without securitization this current market meltdown would have been a hell of a lot milder. What securitization does is take the risk and spread it from the people who might be able to understand it and control it (the people actually issuing the mortgages, for example) to a ton of people who could not possibly know the risk even if they wanted to.

Ratings agency reform is not the solution, they completely fell down on the job and even if incentives were changed they are still not in a position to know whether a mortgage from Mr. Smith is legitimate. Are they going to visit the property? Talk to Mr. Smith? Call his employer? Of course not, they can’t. The only people who can are the people who issued the original mortgage.

Nor should risk be transfered much if at all. Risk must stay with the people who issue the mortgage. If they know it’ll be off their books they won’t do proper due diligence, and no one else can do it. At most, risk should be transfered once and must be transfered in whole and understandable form, rather than taking 20 different incomes steams (or more), melding them together, chopping them into tranches and selling them to people who really have no idea what they’re buying, while you’ve booked your profit and washed your hand, so even if you sold them crap, hahahah, it’s their crap now (or so you think.) Risk must be assumed only by people who can understand it and manage it and who are exposed to the consequences of their decisions. (Ability to manage risk, but knowledge that if they don’t they will get hurt.)

Now let’s talk about this idea that the Fed should basically regulate everyone, with the SEC occasionally peeping over it’s shoulder to see whether market manipulation is ocurring. This is necessary because there are, as Obama points out, no longer clear cut differences between banks, insurance companies, investment banks, brokerages and so on. The repeal of Glass-Steagall put an end to those differences. Glass-Steagall, remember was put in place during the Great Depression to stop another Great Depression from occuring. One of the things that people who lived through the 20s believed caused the Great Depression was not having clear cut boundaries between the businesses, again so that risk was divided appropriately and so that fewer companies became “too large to fail”.

But somehow we think we know better than the people who lived through the last Great Depression; the people who lived through the 20’s and the last great market crackup. So we’ve repealed most of Glass-Steagall and allowed everyone to be in everyone else’s pockets, huge financial conglomerates to mushroom into monstrosities, and allowed unregulated “innovative” financial “products” like collateralized debt obligation (CDOs) to grow into such monstrosites that financial markets were huge multiples of the entire real world economy.

Then it all comes crashing down and people claim to be surprised.

Enough, already. Yes, the world is not exactly the same as it was in the 20’s and 30’s, but we didn’t start having these disasters till after Glass-Steagall and other Depression era securities laws started getting repealed. First set in the 80’s, followed by most of the remainder in 99.

It’s time to break up the great financial conglomerates. Force them to cut themselves up and divide back into brokerage houses, investment banks, retail banks, insurance companies and so on. Put them all under the clear control of regulaters. Reinstitute Glass-Steagall, with very mild modernization, and get rid of most complex derivatives, excessive leverage, the carry trade and so on.

Obama was right during the primaries, the philosophy of the past 28 years has been a failure. Why don’t we, why doesn’t he, treat it as so, and re-institute what worked, re-regulate, then slowly modify from there, with complete transparency and strong regulation.

Financial markets exist to serve ordinary Americans and non-financial American businesses. They haven’t been doing that properly. Time to make sure they do.

This is a repost from September 16th 2008.  Very minor changes made to indicate when Obama said it, otherwise it stands the test of time remarkably well—which should tell you that nothing has been done since then.  The greatest economic disaster since the Great Depression, and a year and half later nobody has tried to fix what caused it to happen.  Priorities, priorities…

The American Death Wish

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On April 4, 2010

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(Kicking this back to the top, it’s eternal, particularly in light of the continued efforts to spin health care reform.)

I’ve been struggling with how to write this post for quite some time. It’s the conversation you have to have with a friend where you have to say “it’s nice that you’re trying as hard as you can George. I even believe you are, but it doesn’t matter. Because George, your best just isn’t good enough.”

Or, as Captain Jack Sparrow would put it, all that matters is what a man can do and what a man can’t do.

Sometimes the world doesn’t grade us on a curve. You need to jump a fence, and you can’t. You need to climb a rock face, and you aren’t good enough. You’re running away from a bear, and you don’t run fast enough. And now you’re dead. You wanted to get into a good grad school, but you don’t have the grades or test scores. You’re in a fight, and the other guy wins, and you wind up on the ground and he puts the boots to you and you’re crippled for life. You tried “your best”, but you lost and you’re going to pay the price for losing for the rest of your life. Maybe you lost because he fought dirty, and you’d rather take a chance of being crippled for life than kick someone in the balls. Maybe you lost because he trained harder than you, and you’d rather go have a drink with your friends.

Or maybe you needed to pay for health care, and you didn’t have the money, and someone you loved died. And they died because you didn’t have the money, and because your country didn’t have universal health care. And maybe you always worked as hard as you could, and you campaigned for health care with all your heart. It doesn’t matter, your child, your wife, your husband—they’re still dead. Your best wasn’t good enough.

Now this is where America is. This is the real world. The United States in aggregate has been living beyond its means for over 30 years now. You have been shipping the real economy overseas. Ordinary families have been going in debt. The government has been going in debt. You’ve been voting yourself lower taxes and not paying for infrastructure reinvestment, or education, or anything else that matters, really. You’ve been spending too much money on guns, not enough on butter. You’ve been pushing the bill off into the future.

And whenever I write about what needs to be done to fix this—simple things like universal healthcare, which we know for a fact reduces health care costs by 1/3, because it has worked for every single other country that’s ever done it, people come out of the woodwork and they tell me “that’s not politically feasible.” Or perhaps I suggest a 55 mile an hour speed limit “that’s not feasible”. Or spending significantly less on the military since half the world’s military spending is a bit overboard. “That’s not politically feasible.” Or raising taxes, “that’s not feasible”. Or… but why go on, the list is endless.

Then Obama comes out with a Stimulus bill which simply will not do the job.  It is not big enough.  It is not well constructed enough.  It has no vision.  It won’t work.  This isn’t really in question, even their own report(pdf), which has the thumb heavily on the scale, shows it won’t work if you take the time to look at the job charts.

A lot of people think this is some academic debate that doesn’t matter in the real word, like “how many angels can dance on the head of a pin”. It’s not, it’s deadly practical. The US is in severe decline, it is past the point where any other country would have flamed out and had an economic collapse (Argentina collapsed with better numbers than the US has now, for example). Because of America’s privileged position in the world, it’s been able to stagger on.

Now folks can say “Ian those things aren’t necessary, I think the following steps will fix it” and that’s fine. Could be I’m wrong. Obviously I don’t think so, or I wouldn’t write what I write, but hey, plenty of people have been dead certain they were right, and dead wrong.

But what gets me is that so often what I hear is “that isn’t politically feasible. We can’t do that”. Now, by can’t they don’t mean “those things are impossible” or “we don’t have the means”, what they really mean is “we won’t do them, because they would be hard or they’re outside our ideological comfort zone.”

Fair enough. But if those things are necessary, and if you don’t do them, then the consequence is going to be catastrophe. I don’t mean disaster. New Orleans was a disaster, and it wasn’t enough to wake America up. The current financial crisis was a disaster, and so far it’s looking like it wasn’t enough to convince people that real fundamental changes are needed.

So because no one will do what is necessary, catastrophe will happen. What I mean by this is a severe decline in the US standard of living, probably between 20% to 40%, starting in 4 to 6 years and taking place for a decade. Might happen sooner if folks keep refusing to do what needs to be done to fix the financial crisis and stop it from turning into a worldwide Great Depression.  Even before it happens, you’re going to see real wages declining for Americans while their assets collapse in price.

To see what a precipitous decline in standard of living is like, read up on Russia’s history in the 90’s. A lot of people will die of starvation, of cold, of heat, of lack of medical help and from violence.

That’s just the way it’s going to be. Because while there are no problems that America has that America can’t fix, there also appear to be no problems America has that America is willing to fix properly. And it doesn’t matter why. It just doesn’t matter. The bear doesn’t care why you couldn’t run fast enough when it mauls you to death. When the economy finally goes into full bore collapse, when all the bills come due and everyone decides to stop paying Americans to consume, it won’t matter why Americans thought they could suspend the economic laws of gravity forever and live beyond their means for decades.

It just won’t matter. You can either do what it takes to fix the problems or you can’t. If it’s true that you can’t, then I quite seriously, sadly, and with utmost sincerity suggest that you either start learning how to survive in a societal meltdown, or you get out, or you hope that your number comes up in the next few years so you don’t have to pay the bill that comes due when people think they can live in fantasy land, on credit, forever.

America elected Barack Obama. He’ll have, essentially, two chances to fix things. He’s failing the first one already, with his botched stimulus bill and that’s going to be disastrous. If he fails the second one, that’ll be catastrophe.

So I sure hope that, yes America can.

(Originally posted January 18, 2009 at FDL.  It’s pretty clear now that, no, America can’t.)

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