© 2008, The Institute for Applied Common Sense
There are significant problems associated with being an eternal optimist, and always hoping for the best. I’ve often been described as naïve and unsophisticated. I’ve generally responded that I’m usually aware of the dangers and the negative side of things, but that I do not like to occupy my time watching my back.
As a general proposition, I always assume that people will do the right thing at least 51% of the time, and that at least 51% of people are good.
There is another character trait which has been problematic on occasion, that being that I’ve never seen any real reason for conflict. In my view of the world, it’s just not frigging necessary. I mean, why spend your time that way?
For over a year now, I have been absolutely amazed at the vituperative and acrimonious nature of the debate about the various candidates, both during the primaries, and after their respective selections. I’ve watched both sides draw lines in the sand, denigrate one another, and accuse the other of the most heinous acts. That people think that this is acceptable is an issue for another day.
What has most fascinated me is the manner in which party loyalists have lined up to support their candidate’s or party’s position, to the point of being disingenuous. Intellectual honesty has largely been absent. On both sides.
I mean, come on, let’s face it. This disaster has been decades in the making. Anyone who suggests otherwise is just not being honest. It can not be traced to one event in 1999 when a Democratic president was in office, and it can not be traced to any one single event during the Bush administration. Both the Democrats and the Republicans have been complicit in running this country into the ground.
It’s been pretty obvious to common folk. It’s only the intellectuals, the upper middle class, and the talking heads who have managed to convince themselves otherwise, or that the other party was primarily responsible. It’s always been my understanding that the first step in addressing a problem is to take responsibility for having participated in its creation.
It’s just common sense to me.
And the other countries of the world watched this whole thing with amazement.
And while I understand the importance of not creating panic and thus avoiding the generation of emotionally charged negative economic momentum, to have so many in our society (and they’re all responsible) tell us only weeks or months ago that the American economy was strong, and for this meltdown to occur “virtually overnight,” left my head spinning.
Who are these people? Was this a movie that I just watched?
And so it was with some delight, and relief, that I watched the Senate Banking Committee hearing on Tuesday, as they grilled the Chairman of the Federal Reserve, and the Treasury Secretary.
I first detected a hint of bipartisan outrage. I thought I observed and heard Senators from both sides of the aisle ask some tough, and not unreasonable, questions. I noted the absence of the speeches typically made before the speakers pose their questions which always telegraph their positions.
At the conclusion of the hearing, I said to myself, “We might actually get something done here.”
Not being quite sure as to whether my perceptions were shared by others, I then watched the news coverage throughout Tuesday evening. Much to my delight, they generally had the same impression as did I. Apart from the banter about the media’s access to vice-presidential candidate Palin during her U.N. visit, it appeared as though some civility had been established.
I managed to miss the political news all during the morning and early afternoon on Wednesday. At roughly 3:30 pm on Wednesday, I saw candidate McCain participating in a news conference indicating that he would suspend his campaign to focus his efforts on the economic situation. He further indicated that he had spoken with the Obama campaign, and that he had suggested that first debate be postponed.
I actually said out loud, “Finally, now we’re talking,” and a huge smile came on my face. Not only had the system worked, but we had finally come together as a country.
I did question why Senator Obama, who has painted himself as able to cross party lines, did not initiate this seemingly collaborative effort. And then reality set in, and the usual partisanship revealed its ugly head.
The Obama campaign had purportedly initiated the contact at 8:30 am, and had suggested a joint statement. The McCain campaign had not gotten back to them until 2:30 pm, and wanted something beyond a statement, and shortly thereafter, the news conference was held.
There were accusations on both sides. “Obama thinks the campaign is more important than the financial crisis.” “McCain is afraid to debate Obama, and is unprepared.” “Obama refuses to respond to McCain’s statesmanlike gesture.” “McCain tried to upstage Obama.”
A joint statement was issued, which was not actually joint. The party loyalists, once again, joined in lock step support of their particular candidate. The noise of the talk show hosts, and their talking heads, reached a fever pitch.
And the band played on….
And I realized that I had been had.
“They” had actually faked me out.
I felt like a fool for having had faith that they could have dealt with this thing collaboratively.
Perhaps I shouldn’t take it so personally. It’s not the first time that a member of the American public has been faked out.
My concern is whether I’ll be able to whip up my enthusiasm again, and again, and again….
© 2008, The Institute for Applied Common Sense
Thursday, September 25, 2008
Wednesday, September 24, 2008
Post No. 45a: Where is Adam Smith’s "Invisible Hand?"
Where is Adam Smith’s "Invisible Hand? "
1. Thus far, 53,000 babies have become sick, and 4 have died from this product. I imagine that if you are in a country of 1.4 billion, that’s small change. But do we here in America care? Check out the latest on the global milk scandal.
http://www.cnn.com/2008/WORLD/asiapcf/09/24/china.milk/index.html?iref=newssearch
2. By the way, some have suggested that there is a common element which exists between the motives of those behind the Chinese global milk problem and those individuals who led our country into its current financial mess. It might be instructive for us to revisit the ideas of Adam Smith. http://en.wikipedia.org/wiki/Adam_smith; or http://encarta.msn.com/text_761556047___0/Adam_Smith.html
3. Finally, we previously examined the failure of our government to address, three years later, the basic living standards of some of the Louisiana residents ravaged by Katrina. Earlier today, the news reports showed long lines of cars containing Galveston, Galveston Island, and other South Texas residents heading back to their homes. http://www.cnn.com/2008/US/weather/09/24/galveston.ike/index.html?iref=newssearch. Does our country have the political will and economic resources to return these folks back to the status they enjoyed prior to the storm? If so, will any Louisiana residents still be in limbo after the needs of Galveston residents are theoretically addressed?
Just stuff to think about today other than our current financial and economic complications…. You know, maybe we have created a false sense of expectations in this country. When you take people’s money through taxation, they develop expectations about what the government can and should do, and I can guarantee you that the expectations vary in amount and degree.
1. Thus far, 53,000 babies have become sick, and 4 have died from this product. I imagine that if you are in a country of 1.4 billion, that’s small change. But do we here in America care? Check out the latest on the global milk scandal.
http://www.cnn.com/2008/WORLD/asiapcf/09/24/china.milk/index.html?iref=newssearch
2. By the way, some have suggested that there is a common element which exists between the motives of those behind the Chinese global milk problem and those individuals who led our country into its current financial mess. It might be instructive for us to revisit the ideas of Adam Smith. http://en.wikipedia.org/wiki/Adam_smith; or http://encarta.msn.com/text_761556047___0/Adam_Smith.html
3. Finally, we previously examined the failure of our government to address, three years later, the basic living standards of some of the Louisiana residents ravaged by Katrina. Earlier today, the news reports showed long lines of cars containing Galveston, Galveston Island, and other South Texas residents heading back to their homes. http://www.cnn.com/2008/US/weather/09/24/galveston.ike/index.html?iref=newssearch. Does our country have the political will and economic resources to return these folks back to the status they enjoyed prior to the storm? If so, will any Louisiana residents still be in limbo after the needs of Galveston residents are theoretically addressed?
Just stuff to think about today other than our current financial and economic complications…. You know, maybe we have created a false sense of expectations in this country. When you take people’s money through taxation, they develop expectations about what the government can and should do, and I can guarantee you that the expectations vary in amount and degree.
Tuesday, September 23, 2008
Post No. 45: CEO America by Guest Author "Mark Twain"
CEO America
© 2008, The Institute for Applied Common Sense
Shortly after the election of George W. Bush to the presidency, someone commented that for the first time in American history, we might see a president who would run the country like a corporate CEO.
Few of us appreciated, at the time, the prescience of that statement.
We are now at a tipping point.
We have two, very, very good guys... individuals who make their own party finance people squirm and sit up nights worrying about their own futures... running for president... and, ladies and gentlemen, the game has changed.
When Congress gets done, we, the American taxpayers, will be on the hook for about $1 trillion, to guarantee that the derivatives, sub prime mortgage bundles, and a host of other questionable financial vehicles, we were repeatedly told we were "not sophisticated enough to understand."
(Tell me if I am alone; however, I know very few regular, working class people, who would have tried to pull this B.S. off, at least not in good conscience.)
What this means is that neither candidate will get to do any spending on behalf of his financial backers.
There is not enough difference between these two guys, with respect to the leadership qualities which really matter, to overload a mosquito in flight.
We are forty something days away from an election that will decide the future of our country... and we are being inundated with paid for advertisements debating the meaning of putting lipstick on a pig.Talk about putting lipstick on a pig.
What is more interesting is how the talking heads and spokespeople who engage in this ridiculous banter generate more in annual income than the average American family.
The first question I want to hear answered in the upcoming debates is: "Where would you put your opponent in your cabinet?"
And the second is, "Who would you put in charge of the economy?"
In 1975, car sales fell 50% below 1974 levels.
Sure the Arabs had something to do with it...but the bigger problem was our own federal government's "Seat Belt Interlock Law."
A law that fixed no problem I know of... and I fear without some serious discussion of what has got us into this financial hole, we will see another such idiotic piece of legislation promoted to the public as the solution to the rape Congress is currently debating.
Of course, I could always be wrong... but I am part of the emergency medical staff the local politicians are bragging about... and as best I can tell, they have no intention of paying me for my services... but I’ve got a few creditors out there who want some serious bucks from me... and want them right now... for services rendered to me and my family which were far more pressing and necessary than padding the wallets of some greedy business types.
Go figure....
Yeah, you business types may consider me unsophisticated, but I’m mad at hell… and, for good reason.
© 2008, The Institute for Applied Common Sense
© 2008, The Institute for Applied Common Sense
Shortly after the election of George W. Bush to the presidency, someone commented that for the first time in American history, we might see a president who would run the country like a corporate CEO.
Few of us appreciated, at the time, the prescience of that statement.
We are now at a tipping point.
We have two, very, very good guys... individuals who make their own party finance people squirm and sit up nights worrying about their own futures... running for president... and, ladies and gentlemen, the game has changed.
When Congress gets done, we, the American taxpayers, will be on the hook for about $1 trillion, to guarantee that the derivatives, sub prime mortgage bundles, and a host of other questionable financial vehicles, we were repeatedly told we were "not sophisticated enough to understand."
(Tell me if I am alone; however, I know very few regular, working class people, who would have tried to pull this B.S. off, at least not in good conscience.)
What this means is that neither candidate will get to do any spending on behalf of his financial backers.
There is not enough difference between these two guys, with respect to the leadership qualities which really matter, to overload a mosquito in flight.
We are forty something days away from an election that will decide the future of our country... and we are being inundated with paid for advertisements debating the meaning of putting lipstick on a pig.Talk about putting lipstick on a pig.
What is more interesting is how the talking heads and spokespeople who engage in this ridiculous banter generate more in annual income than the average American family.
The first question I want to hear answered in the upcoming debates is: "Where would you put your opponent in your cabinet?"
And the second is, "Who would you put in charge of the economy?"
In 1975, car sales fell 50% below 1974 levels.
Sure the Arabs had something to do with it...but the bigger problem was our own federal government's "Seat Belt Interlock Law."
A law that fixed no problem I know of... and I fear without some serious discussion of what has got us into this financial hole, we will see another such idiotic piece of legislation promoted to the public as the solution to the rape Congress is currently debating.
Of course, I could always be wrong... but I am part of the emergency medical staff the local politicians are bragging about... and as best I can tell, they have no intention of paying me for my services... but I’ve got a few creditors out there who want some serious bucks from me... and want them right now... for services rendered to me and my family which were far more pressing and necessary than padding the wallets of some greedy business types.
Go figure....
Yeah, you business types may consider me unsophisticated, but I’m mad at hell… and, for good reason.
© 2008, The Institute for Applied Common Sense
Post 44b: Anxious in America by Thomas Friedman
This is a reprint of an op-ed piece by Thomas Friedman originally published on June 29, 2008
Copyright 2008, The New York Times
June 29, 2008
Op-Ed Columnist
Anxious in America
By THOMAS L. FRIEDMAN
Just a few months ago, the consensus view was that Barack Obama would need to choose a hard-core national-security type as his vice presidential running mate to compensate for his lack of foreign policy experience and that John McCain would need a running mate who was young and sprightly to compensate for his age. Come August, though, I predict both men will be looking for a financial wizard as their running mates to help them steer America out of what could become a serious economic tailspin.
I do not believe nation-building in Iraq is going to be the issue come November — whether things get better there or worse. If they get better, we’ll ignore Iraq more; if they get worse, the next president will be under pressure to get out quicker. I think nation-building in America is going to be the issue.
It’s the state of America now that is the most gripping source of anxiety for Americans, not Al Qaeda or Iraq. Anyone who thinks they are going to win this election playing the Iraq or the terrorism card — one way or another — is, in my view, seriously deluded. Things have changed.
Up to now, the economic crisis we’ve been in has been largely a credit crisis in the capital markets, while consumer spending has kept reasonably steady, as have manufacturing and exports. But with banks still reluctant to lend even to healthy businesses, fuel and food prices soaring and home prices declining, this is starting to affect consumers, shrinking their wallets and crimping spending. Unemployment is already creeping up and manufacturing creeping down.
The straws in the wind are hard to ignore: If you visit any car dealership in America today you will see row after row of unsold S.U.V.’s. And if you own a gas guzzler already, good luck. On Thursday, The Palm Beach Post ran an article on your S.U.V. options: “Continue to spend upward of $100 for a fill-up. Sell or trade in the vehicle for a fraction of the original cost. Or hold out and park the truck in the driveway for occasional use in hopes the market will turn around.” Just be glad you don’t own a bus. Montgomery County, Md., where I live, just announced that more children were going to have to walk to school next year to save money on bus fuel.
On top of it all, our bank crisis is not over. Two weeks ago, Goldman Sachs analysts said that U.S. banks may need another $65 billion to cover more write-downs of bad mortgage-related instruments and potential new losses if consumer loans start to buckle. Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion.
My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.
I continue to be appalled at the gap between what is clearly going to be the next great global industry — renewable energy and clean power — and the inability of Congress and the administration to put in place the bold policies we need to ensure that America leads that industry.
“America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so,” Wall Street Journal columnist Gerald Seib noted last week. “A political system that expects failure doesn’t try very hard to produce anything else.”
We used to try harder and do better. After Sputnik, we came together as a nation and responded with a technology, infrastructure and education surge, notes Robert Hormats, vice chairman of Goldman Sachs International. After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. After Social Security became imperiled in the early 1980s, we came together and fixed it for that moment. “But today,” added Hormats, “the political system seems incapable of producing a critical mass to support any kind of serious long-term reform.”
If the old saying — that “as General Motors goes, so goes America” — is true, then folks, we’re in a lot of trouble. General Motors’s stock-market value now stands at just $6.47 billion, compared with Toyota’s $162.6 billion. On top of it, G.M. shares sank to a 34-year low last week.
That’s us. We’re at a 34-year low. And digging out of this hole is what the next election has to be about and is going to be about — even if it is interrupted by a terrorist attack or an outbreak of war or peace in Iraq. We need nation-building at home, and we cannot wait another year to get started. Vote for the candidate who you think will do that best. Nothing else matters.
Copyright 2008, The New York Times
Copyright 2008, The New York Times
June 29, 2008
Op-Ed Columnist
Anxious in America
By THOMAS L. FRIEDMAN
Just a few months ago, the consensus view was that Barack Obama would need to choose a hard-core national-security type as his vice presidential running mate to compensate for his lack of foreign policy experience and that John McCain would need a running mate who was young and sprightly to compensate for his age. Come August, though, I predict both men will be looking for a financial wizard as their running mates to help them steer America out of what could become a serious economic tailspin.
I do not believe nation-building in Iraq is going to be the issue come November — whether things get better there or worse. If they get better, we’ll ignore Iraq more; if they get worse, the next president will be under pressure to get out quicker. I think nation-building in America is going to be the issue.
It’s the state of America now that is the most gripping source of anxiety for Americans, not Al Qaeda or Iraq. Anyone who thinks they are going to win this election playing the Iraq or the terrorism card — one way or another — is, in my view, seriously deluded. Things have changed.
Up to now, the economic crisis we’ve been in has been largely a credit crisis in the capital markets, while consumer spending has kept reasonably steady, as have manufacturing and exports. But with banks still reluctant to lend even to healthy businesses, fuel and food prices soaring and home prices declining, this is starting to affect consumers, shrinking their wallets and crimping spending. Unemployment is already creeping up and manufacturing creeping down.
The straws in the wind are hard to ignore: If you visit any car dealership in America today you will see row after row of unsold S.U.V.’s. And if you own a gas guzzler already, good luck. On Thursday, The Palm Beach Post ran an article on your S.U.V. options: “Continue to spend upward of $100 for a fill-up. Sell or trade in the vehicle for a fraction of the original cost. Or hold out and park the truck in the driveway for occasional use in hopes the market will turn around.” Just be glad you don’t own a bus. Montgomery County, Md., where I live, just announced that more children were going to have to walk to school next year to save money on bus fuel.
On top of it all, our bank crisis is not over. Two weeks ago, Goldman Sachs analysts said that U.S. banks may need another $65 billion to cover more write-downs of bad mortgage-related instruments and potential new losses if consumer loans start to buckle. Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion.
My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.
I continue to be appalled at the gap between what is clearly going to be the next great global industry — renewable energy and clean power — and the inability of Congress and the administration to put in place the bold policies we need to ensure that America leads that industry.
“America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so,” Wall Street Journal columnist Gerald Seib noted last week. “A political system that expects failure doesn’t try very hard to produce anything else.”
We used to try harder and do better. After Sputnik, we came together as a nation and responded with a technology, infrastructure and education surge, notes Robert Hormats, vice chairman of Goldman Sachs International. After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. After Social Security became imperiled in the early 1980s, we came together and fixed it for that moment. “But today,” added Hormats, “the political system seems incapable of producing a critical mass to support any kind of serious long-term reform.”
If the old saying — that “as General Motors goes, so goes America” — is true, then folks, we’re in a lot of trouble. General Motors’s stock-market value now stands at just $6.47 billion, compared with Toyota’s $162.6 billion. On top of it, G.M. shares sank to a 34-year low last week.
That’s us. We’re at a 34-year low. And digging out of this hole is what the next election has to be about and is going to be about — even if it is interrupted by a terrorist attack or an outbreak of war or peace in Iraq. We need nation-building at home, and we cannot wait another year to get started. Vote for the candidate who you think will do that best. Nothing else matters.
Copyright 2008, The New York Times
Post No. 44a: An Argument for Further Deliberation about Our Financial Situation
Copyright 2008 The New York Times Company
September 22, 2008
Op-Ed Columnist
Cash for Trash
By PAUL KRUGMAN
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.
There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.
Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.
So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”
The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?
Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.
Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.
That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.
I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.
But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.
Copyright 2008 The New York Times Company
September 22, 2008
Op-Ed Columnist
Cash for Trash
By PAUL KRUGMAN
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.
There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.
Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.
So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”
The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?
Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.
Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.
That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.
I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.
But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.
Copyright 2008 The New York Times Company
Monday, September 22, 2008
Post No. 44: At What Price Dumbing Down?
© The Institute for Applied Common Sense
One of the somewhat overlooked ironies of this campaign year is that a black man, who was born outside of this country and the product of a broken home, and who managed to beat the odds and become a reasonably well educated public servant after attending two Ivy League institutions, is currently being framed as an “elitist” in our society.
That this should occur should cause us all to pause.
Last spring I managed to get myself involved is scoring reading and writing competencies for some of the prospective graduates of one of our state institutions.
The state wide results just came in reflecting an, on average, 2% decrease in reading comprehension, and a 17% increase in writing communication.
Not surprisingly, the schools that scored worst are challenging the test.
Even less surprisingly, I will be spending the last half of October explaining my scoring.
My guess is that this anomaly can be explained by the Internet.
Computers have got kids writing, seriously, earlier than ever before in history... but to paraphrase Mr. Gossage (http://adage.com/century/people023.html), they write about what interests them.
If we continue to dumb down and politically correct our text books, year after year, to revise the content to match whatever we consider to be the prevailing political winds... we shouldn't be surprised if our children choose to read that which seems to be of more immediate, personal, value.
And the more we chose to force our teachers to keep to the politically correct curriculum of the day, the less opportunity these mostly right headed people will have to inspire and challenge their students...absent which we are well and truly screwed.
Advertising is not a bad example of what has gone wrong with our culture.
There is nothing more expensive in the marketing business than a failed campaign. But agency holding companies have gotten into bed with client purchasing departments, often offering to provide their services for free, and earned back their 20 - 30% margins by eliminating the people who actually do the work... not to mention any semblance of a training program
The result is often a single ad that offends nobody world wide... mostly because it is so innocuous nobody world wide notices it...supported by intergalactic media buys.... The Olympics come to mind...that cost nothing to negotiate... can be promoted as being available at some fictional discount only because of the agency's "massive media clout," and get bought on the discount rather than their effectiveness.
All of which we do under the umbrella of branding...and we ought to be ashamed of ourselves.
This is not the way people buy stuff.
Jim Jordan [http://en.wikipedia.org/wiki/James_Jordan_(publicist)], a giant in the marketing field, once said. "It's not creative unless it sells."
Bill Bernbach (http://en.wikipedia.org/wiki/William_Bernbach), also a giant, said, "It won't sell unless it's creative."
They were both right.
The problem is the people who now run their agencies got their jobs by buying things cheap... and that's what they talk to the client about when they sit down for their quarterly "state of the account dinners."
Unfortunately, expressing any of the above in front of current agency and client management can produce chronic underemployment.
More unfortunately, if somebody doesn't stand up pretty quick, we are on our way to becoming a supplier of natural resources to countries that have mastered the art of adding value.
In the immortal words of Jimmy Williams, "When you stop taking pride in what you make, you have hitched your star to a wagon."
Which I believe is Mr. Friedman's (http://en.wikipedia.org/wiki/Thomas_Friedman) point as well, in his discussion of innovation, global competition, and the future position of the United States. (http://theviewfromoutsidemytinywindow.blogspot.com/2008/09/post-no-41b-television-worth-viewing.html.)
At the end of the day, it really is all about creativity and innovation…. It’s what ultimately sells.
Always has, always will.
© The Institute for Applied Common Sense
One of the somewhat overlooked ironies of this campaign year is that a black man, who was born outside of this country and the product of a broken home, and who managed to beat the odds and become a reasonably well educated public servant after attending two Ivy League institutions, is currently being framed as an “elitist” in our society.
That this should occur should cause us all to pause.
Last spring I managed to get myself involved is scoring reading and writing competencies for some of the prospective graduates of one of our state institutions.
The state wide results just came in reflecting an, on average, 2% decrease in reading comprehension, and a 17% increase in writing communication.
Not surprisingly, the schools that scored worst are challenging the test.
Even less surprisingly, I will be spending the last half of October explaining my scoring.
My guess is that this anomaly can be explained by the Internet.
Computers have got kids writing, seriously, earlier than ever before in history... but to paraphrase Mr. Gossage (http://adage.com/century/people023.html), they write about what interests them.
If we continue to dumb down and politically correct our text books, year after year, to revise the content to match whatever we consider to be the prevailing political winds... we shouldn't be surprised if our children choose to read that which seems to be of more immediate, personal, value.
And the more we chose to force our teachers to keep to the politically correct curriculum of the day, the less opportunity these mostly right headed people will have to inspire and challenge their students...absent which we are well and truly screwed.
Advertising is not a bad example of what has gone wrong with our culture.
There is nothing more expensive in the marketing business than a failed campaign. But agency holding companies have gotten into bed with client purchasing departments, often offering to provide their services for free, and earned back their 20 - 30% margins by eliminating the people who actually do the work... not to mention any semblance of a training program
The result is often a single ad that offends nobody world wide... mostly because it is so innocuous nobody world wide notices it...supported by intergalactic media buys.... The Olympics come to mind...that cost nothing to negotiate... can be promoted as being available at some fictional discount only because of the agency's "massive media clout," and get bought on the discount rather than their effectiveness.
All of which we do under the umbrella of branding...and we ought to be ashamed of ourselves.
This is not the way people buy stuff.
Jim Jordan [http://en.wikipedia.org/wiki/James_Jordan_(publicist)], a giant in the marketing field, once said. "It's not creative unless it sells."
Bill Bernbach (http://en.wikipedia.org/wiki/William_Bernbach), also a giant, said, "It won't sell unless it's creative."
They were both right.
The problem is the people who now run their agencies got their jobs by buying things cheap... and that's what they talk to the client about when they sit down for their quarterly "state of the account dinners."
Unfortunately, expressing any of the above in front of current agency and client management can produce chronic underemployment.
More unfortunately, if somebody doesn't stand up pretty quick, we are on our way to becoming a supplier of natural resources to countries that have mastered the art of adding value.
In the immortal words of Jimmy Williams, "When you stop taking pride in what you make, you have hitched your star to a wagon."
Which I believe is Mr. Friedman's (http://en.wikipedia.org/wiki/Thomas_Friedman) point as well, in his discussion of innovation, global competition, and the future position of the United States. (http://theviewfromoutsidemytinywindow.blogspot.com/2008/09/post-no-41b-television-worth-viewing.html.)
At the end of the day, it really is all about creativity and innovation…. It’s what ultimately sells.
Always has, always will.
© The Institute for Applied Common Sense
Sunday, September 21, 2008
Post No. 43a: Special Edition of CBS 60 Minutes: Both Presidential Candidates
Special edition. Interviews of both McCain and OBama. 7:30 pm Eastern. Check your local listings for other time zones.
Friday, September 19, 2008
Post No. 43: A Few Thoughts about the Current Political Climate
© The Institute for Applied Common Sense
I believe that there is a strong argument which can be made for the abolition of both the Democratic and Republican parties.
The thinking public, I would suspect, has very little respect for either of them, based on the behavior of the parties during the past two years. Leaders, on both sides of the aisle, who I once regarded as intellectually sound stalwarts for their respective parties, have stooped to employ whatever means advances their party’s short-term interests, and have relegated the nation’s most pressing and long term interests to a tertiary consideration.
And there is another concept which appears to have been lost, that being, "taking responsibility for one's actions." One must be careful to avoid being caught in the volley of partisan accusations.
That we even engage in, or report on, conversations about “lipstick on a pig” during a period when we should be collaboratively applying triage principles to remedy significant problems, is, quite frankly, disillusionment at its worst.
Is the basic underlying assumption that we should play to the fears of the masses, because it “works?”
Is another basic underlying assumption that lying is justified if it "works?"
This is just sick. All of us, who have been fortunate enough to receive a decent education and have the luxury to engage in conversations about the major issues of the day (and not have to worry about child care, shitty schools, transportation, basic food, drive-by shootings, and the lack of health insurance), should say to the leaders of both parties that “enough is enough.”
I'll tell you this, if only the poor and disenfranchised were allowed to vote, they wouldn't vote in this type of con-man, or con-woman.
That we sit here and allow them to do this to us, and as a consequence, simultaneously convey certain messages and images to our children, is an abdication of our responsibilities as responsible citizens.
Where is the party of “common sense?”
Where is the party of “collaboration?”
Where is the party of “execution?”
Where is the party of "getting s___ done!?”
What is more troubling is that once the Democrat or Republican label is attached to an individual, then the lowest or wildest conduct, attributable to one member of that party, is so conveniently and swiftly attributed to others within the same.
This is insanity. The real change should be voting them all out.
Otherwise, I’m concerned that I just might not ultimately care. And that’s disturbing to me, on a personal level.
What's even more disturbing is that I believe that there is a 95% chance that they will get away with it unscathed.
© The Institute for Applied Common Sense
I believe that there is a strong argument which can be made for the abolition of both the Democratic and Republican parties.
The thinking public, I would suspect, has very little respect for either of them, based on the behavior of the parties during the past two years. Leaders, on both sides of the aisle, who I once regarded as intellectually sound stalwarts for their respective parties, have stooped to employ whatever means advances their party’s short-term interests, and have relegated the nation’s most pressing and long term interests to a tertiary consideration.
The recent collapse of several significant financial institutions is evidence enough of that, not to mention our continued dependence on foreign oil.
“Group Think,” and “Group Speak” rule the day. What ever happened to intellectual honesty? Have we as a society eliminated the words “irrelevant,” “specious,” and “disingenuous” from our lexicon?And there is another concept which appears to have been lost, that being, "taking responsibility for one's actions." One must be careful to avoid being caught in the volley of partisan accusations.
That we even engage in, or report on, conversations about “lipstick on a pig” during a period when we should be collaboratively applying triage principles to remedy significant problems, is, quite frankly, disillusionment at its worst.
Is the basic underlying assumption that we should play to the fears of the masses, because it “works?”
Is another basic underlying assumption that lying is justified if it "works?"
This is just sick. All of us, who have been fortunate enough to receive a decent education and have the luxury to engage in conversations about the major issues of the day (and not have to worry about child care, shitty schools, transportation, basic food, drive-by shootings, and the lack of health insurance), should say to the leaders of both parties that “enough is enough.”
I'll tell you this, if only the poor and disenfranchised were allowed to vote, they wouldn't vote in this type of con-man, or con-woman.
That we sit here and allow them to do this to us, and as a consequence, simultaneously convey certain messages and images to our children, is an abdication of our responsibilities as responsible citizens.
Where is the party of “common sense?”
Where is the party of “collaboration?”
Where is the party of “execution?”
Where is the party of "getting s___ done!?”
What is more troubling is that once the Democrat or Republican label is attached to an individual, then the lowest or wildest conduct, attributable to one member of that party, is so conveniently and swiftly attributed to others within the same.
This is insanity. The real change should be voting them all out.
Otherwise, I’m concerned that I just might not ultimately care. And that’s disturbing to me, on a personal level.
What's even more disturbing is that I believe that there is a 95% chance that they will get away with it unscathed.
© The Institute for Applied Common Sense
Tuesday, September 16, 2008
Survey No. 1: Can You Indentify a Republican vs. a Democrat
Identification of Republicans vs. Democrats
I spend a tremendous amount of watching C-Span.
As a result, I watch many U.S. Senate and House proceedings.
Quite often, I turn off the sound for some unrelated reason, and when I turn around and focus on the TV screen, I usually see the face of an elected official speaking. However, since I do not have the benefit of sound, I am unable to determine the subject about which the person is speaking.
Frequently, there is a banner below the person identifying their state, whether that individual is a Representative or Senator, and the party affiliation.
I've found myself playing a game with myself, trying to guess the party of the person without looking at the banner, and without listening to his or her position. Although I have not actually kept score, I believe that I can, within 10 seconds, tell a Democrat versus a Republican, simply by looking at them, based purely on physicality, with an accuracy of roughly 95%. Can you?
Do you think that there are some distinguishing physical characteristics?
I spend a tremendous amount of watching C-Span.
As a result, I watch many U.S. Senate and House proceedings.
Quite often, I turn off the sound for some unrelated reason, and when I turn around and focus on the TV screen, I usually see the face of an elected official speaking. However, since I do not have the benefit of sound, I am unable to determine the subject about which the person is speaking.
Frequently, there is a banner below the person identifying their state, whether that individual is a Representative or Senator, and the party affiliation.
I've found myself playing a game with myself, trying to guess the party of the person without looking at the banner, and without listening to his or her position. Although I have not actually kept score, I believe that I can, within 10 seconds, tell a Democrat versus a Republican, simply by looking at them, based purely on physicality, with an accuracy of roughly 95%. Can you?
Do you think that there are some distinguishing physical characteristics?
Sunday, September 14, 2008
Post No. 42: If You Really Want to Do Some Thinking
Reprint of Article of Interest: What Makes People Vote Republican by Jonathan Haidt
Yesterday, a friend of many years sent me the article the link for which appears below. It is a fascinating piece of work. For my purposes, quite frankly, it is way too deep for me to process within an hour or two after reading it. Even a day or two would be insufficient time to be honest. There are segments of it which are intellectually and emotionally appealing. I will probably read it five to ten more times before trying to work through it.
I’ll tell you this at this point. As a general rule, I try to identify internal consistencies when reading someone’s analysis of an issue. There is one line which I think provides the essence of the argument: “Most democrats don’t understand that politics is more like a religion than it is like shopping.”
I saw George Will on Charlie Rose a couple of months ago. He essentially said that conservatism has the upper hand because it is “pure.” The problem with liberalism, according to Will, is that it comes off as elitist, in that it essentially says that “we can do a better job of thinking about your interests than you can.”
I’ve been processing Will’s comment for the past two months. This piece provides a little more meat around which I can place my arms.
This is work. This one will keep me up tonight. As the individual who sent it to me suggested, please read it in its entirety. It’s a journey that….
http://www.edge.org/3rd_culture/haidt08/haidt08_index.html
Yesterday, a friend of many years sent me the article the link for which appears below. It is a fascinating piece of work. For my purposes, quite frankly, it is way too deep for me to process within an hour or two after reading it. Even a day or two would be insufficient time to be honest. There are segments of it which are intellectually and emotionally appealing. I will probably read it five to ten more times before trying to work through it.
I’ll tell you this at this point. As a general rule, I try to identify internal consistencies when reading someone’s analysis of an issue. There is one line which I think provides the essence of the argument: “Most democrats don’t understand that politics is more like a religion than it is like shopping.”
I saw George Will on Charlie Rose a couple of months ago. He essentially said that conservatism has the upper hand because it is “pure.” The problem with liberalism, according to Will, is that it comes off as elitist, in that it essentially says that “we can do a better job of thinking about your interests than you can.”
I’ve been processing Will’s comment for the past two months. This piece provides a little more meat around which I can place my arms.
This is work. This one will keep me up tonight. As the individual who sent it to me suggested, please read it in its entirety. It’s a journey that….
http://www.edge.org/3rd_culture/haidt08/haidt08_index.html
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