Americans have had enough of the nightmare of irresponsible big institutions getting bailed out by the US government using their tax dollars. The average citizen on Main Street should not pay for the risky and reckless behavior of corporate giants on Wall Street.
Bailout is the most unpopular word in the language today. In Texas, the Republican nomination for governor was decided when the heavy favorite, Kay Bailey Hutchinson, was derided as “Kay Bailout”, for her vote in the U.S. Senate.
Now, the Senate Democrats have proposed legislation to overhaul financial markets by establishing government scrutiny and regulation to almost any financial product, from payday loans to workers to derivative trades by investment bankers.
The bill's prospects are unclear. So far it has no Republican support and the lobbyists hired by financial interests are already on the attack. But their defense was destroyed when they took the bailout money to remain solvent. When they begged the US government to loan them trillions of dollars to save them from bankruptcy, they put themselves in the hands of the federal government obligated to make sure it never happens again.
Hence the absolute requirement for regulation of trading, for adequate capital, for consumer protection, for mortgage regulation, for transparent records, etc. When an institution needs a rescue to survive, it gives away part of its independence. If they are too big to fail because their failure will have negative consequences to the entire American and world economies, they must be restrained in conducting business in a manner that increases the risk of failure.
We all know that financial institutions and big business have enormous power in Washington. They will resist most serious reforms and effective regulation or at least try to weaken them. The battle will be a serious test of American democracy. If serious regulation does not establish controls over outright gambling with other people's money, over deceptive practices, over risk-taking for bonus payments, the nation will have capitulated to practices that could bring down the Republic.
We can't have anymore of this business of, heads I win, tails you lose. The national interest must be protected. No more gambling with depositors’ money with the assurance that the government will bail out the losses and a fat bonus will await the gambler if the house wins.
Showing posts with label the economy. Show all posts
Showing posts with label the economy. Show all posts
Tuesday, March 16, 2010
Tuesday, February 9, 2010
Soft Power vs. US Military Budget
President Obama has proposed a freeze on 17% of the discretionary items in the federal budget over the next three years. These cuts affect domestic social expenditures that improve conditions of living in the United States. They are regrettable because they diminish US standard of living and reduce part of the government stimulus to our faltering economy.
At the same time, the President increased the US military budget significantly. His budget request for defense is 708 billion dollars but this number does not include spending for nuclear weapons and other military expenses tucked neatly into the budgets of other departments. In addition, every year the Congress makes supplemental appropriations to pay for current wars. The grand total for the year will be at least $1 trillion, spending more on the US military than all other nations on earth combined.
Since September 11, 2001, the Pentagon's budget has more than doubled in just nine years and a significant portion is spent outside the US to finance two unpopular wars and 761 American military bases in 147 countries. The size of America’s armed forces is about one and one-half million (1,500,000) and about five hundred thousand (500,000) are stationed overseas The people of every nation dislike military occupation by foreign soldiers. But American soldiers in foreign countries can give the rulers of these countries, dictators or democrats, a sense of security in the implied promise of US military support in crises. Is this an involuntary commitment to intervention? Does the American military presence inhibit those seeking change?
.
With President Obama's 2011 budget, 42 cents of every dollar the federal government spends will have to be borrowed. Foreign investors are lending us about half of our national debt and China and Japan provide half of that sum. China’s share is growing faster.
Some at the Pentagon are worrying that America's destiny, financial and political, may be in the control of a potential rival - and all without a shot being fired. Can we afford to be the policeman of the world? Are we overextending ourselves financially and militarily? Or do we believe that we can take unnecessary risks because we are too big to fail?
From the dawn of recorded history, no nation has surrendered its preeminence – and the United States shouldn’t and wouldn’t. Is there an alternative to our current outrageous waste of lives, money and resources? Joseph S. Nye Jr, Professor at Harvard University with hands-on experience in statecraft, advocates Smart Power, combining hard and soft power. "The United States can become a Smart Power by once again investing in global public goods - providing things that people and governments in all quarters of the world want but cannot attain on their own. Achieving economic development, securing public health, coping with climate change… all require leadership from the United States. By complementing its military and economic might with greater investments in its soft power, the United States can....... tackle tough global challenges.”
At the same time, the President increased the US military budget significantly. His budget request for defense is 708 billion dollars but this number does not include spending for nuclear weapons and other military expenses tucked neatly into the budgets of other departments. In addition, every year the Congress makes supplemental appropriations to pay for current wars. The grand total for the year will be at least $1 trillion, spending more on the US military than all other nations on earth combined.
Since September 11, 2001, the Pentagon's budget has more than doubled in just nine years and a significant portion is spent outside the US to finance two unpopular wars and 761 American military bases in 147 countries. The size of America’s armed forces is about one and one-half million (1,500,000) and about five hundred thousand (500,000) are stationed overseas The people of every nation dislike military occupation by foreign soldiers. But American soldiers in foreign countries can give the rulers of these countries, dictators or democrats, a sense of security in the implied promise of US military support in crises. Is this an involuntary commitment to intervention? Does the American military presence inhibit those seeking change?
.
With President Obama's 2011 budget, 42 cents of every dollar the federal government spends will have to be borrowed. Foreign investors are lending us about half of our national debt and China and Japan provide half of that sum. China’s share is growing faster.
Some at the Pentagon are worrying that America's destiny, financial and political, may be in the control of a potential rival - and all without a shot being fired. Can we afford to be the policeman of the world? Are we overextending ourselves financially and militarily? Or do we believe that we can take unnecessary risks because we are too big to fail?
From the dawn of recorded history, no nation has surrendered its preeminence – and the United States shouldn’t and wouldn’t. Is there an alternative to our current outrageous waste of lives, money and resources? Joseph S. Nye Jr, Professor at Harvard University with hands-on experience in statecraft, advocates Smart Power, combining hard and soft power. "The United States can become a Smart Power by once again investing in global public goods - providing things that people and governments in all quarters of the world want but cannot attain on their own. Achieving economic development, securing public health, coping with climate change… all require leadership from the United States. By complementing its military and economic might with greater investments in its soft power, the United States can....... tackle tough global challenges.”
Wednesday, July 15, 2009
Eliminate Unemployment
Eliminate Unemployment
By Jerome Grossman
7.2 million people have lost their jobs since the start of the recession. The effects of these layoffs have been horrendous on the workers and their families. The recession is making us sick, the employed as well as the unemployed. For most, losing your job means losing your health insurance. You drop your gym membership if you have one. You delay medical care to save the cost. You eat cheaper, less healthy foods. You roam the streets applying for jobs below your skill level, even part-time jobs at low wages just to bring something home. Your skills deteriorate. Your confidence in yourself, in your future and your country begins to melt away.
And it wasn't even necessary
At the office or factory that had trained you in their products and procedures, the decline in business was 20%, so 20% of the capable and trained workers or salespeople or executives were let go. All that experience, all that know-how put onto the street to worry and scrounge and beg the government or another employer for crumbs. Don’t break up an effective organization. Share the pain. Divide the available work among all workers. Prepare for a better future.
The cost reductions to the organization would be the same as the cost reductions realized with layoffs but the organization would remain intact poised for the eventual economic recovery. The cost to the government for unemployment relief would be much lower. Public and private morale would be higher. Increased hope and optimism would improve our mental and physical health. Crime induced by poverty and desperation would decline. Confidence would help to restore our economy. This is the America where we share the pain, help each other out, or do we?
By Jerome Grossman
7.2 million people have lost their jobs since the start of the recession. The effects of these layoffs have been horrendous on the workers and their families. The recession is making us sick, the employed as well as the unemployed. For most, losing your job means losing your health insurance. You drop your gym membership if you have one. You delay medical care to save the cost. You eat cheaper, less healthy foods. You roam the streets applying for jobs below your skill level, even part-time jobs at low wages just to bring something home. Your skills deteriorate. Your confidence in yourself, in your future and your country begins to melt away.
And it wasn't even necessary
At the office or factory that had trained you in their products and procedures, the decline in business was 20%, so 20% of the capable and trained workers or salespeople or executives were let go. All that experience, all that know-how put onto the street to worry and scrounge and beg the government or another employer for crumbs. Don’t break up an effective organization. Share the pain. Divide the available work among all workers. Prepare for a better future.
The cost reductions to the organization would be the same as the cost reductions realized with layoffs but the organization would remain intact poised for the eventual economic recovery. The cost to the government for unemployment relief would be much lower. Public and private morale would be higher. Increased hope and optimism would improve our mental and physical health. Crime induced by poverty and desperation would decline. Confidence would help to restore our economy. This is the America where we share the pain, help each other out, or do we?
Wednesday, March 11, 2009
Too Big to Fail
Too Big to Fail
By Jerome Grossman
At least twenty oversized American banks have histories of reckless behavior, including bad lending and gambling with derivatives, that have left them insolvent, in fact, bankrupt. They have poisoned the economy and should pay the price for their mistakes just like every other business.
However, because their machinations affect so many investors, depositors and other businesses, they have been given a pass, saved by massive injection of federal government funds. By basic capitalist standards, this is a gross violation of business integrity, weakening the structure of our economic system. The violated principle is summarized as “Too big to fail.” One Nobel Prize winning economist called it “looting”.
The managers of such institutions knew how to take advantage of their special status. They took excessive risk for mountainous profits that would entitle them to massive bonuses if successful - or a government bailout if the investment failed. The techniques were often complicated; but some were based on inadequate reserves that purposely underestimated the financial exposure. The managers were in financial clover: heads I win, tails you lose, “Too big to fail.”
In the current crisis, the government is rescuing the managers once again, lending $700 billion as bailout money. That amount, leveraged on an accepted basis of ten to one, could have supported $7 trillion of lending capacity in a new or reorganized bank, more than enough to serve the nation's business. We didn’t go that route; they are “Too big to fail.” President Obama has given primary responsibility for the financial crisis to Lawrence Summers, head of the National Economic Council, and Timothy Geithner, Secretary of the Treasury. The president can do better than these two conventional figures stuck in the past.
There may be an uncomfortable analogy in the position of the United States in world affairs: “Too big to fail.” Decade after decade we overspend on military equipment, organize the largest military budget the world has ever seen, enter failed military quagmires in Vietnam, Iraq and Afghanistan, yet we get token troop support from nations around the world even though their populations disapprove of our military invasions. A remarkable 737 American military bases with hundreds of thousands of American troops are situated in 130 countries, a worldwide presence that protects the governing elites on virtually every continent. Is the U.S.A. “Too big to fail” because its collapse would upset the political and military status quo all over the world?
Where does the U.S. get the money to finance its domestic and foreign errors? In large part from China, Japan, Saudi Arabia and the other countries that buy U.S. Treasury bonds in the hope that they will be redeemable despite our enormous national debt of $10,942,165,294,650.89 or roughly eleven (11) trillion dollars. China's economy depends on the sales of goods to the U.S. The Saudis have big investments in the U.S. and depend on U.S. military power to protect them from their own people and keep the oil flowing. The Japanese are inheriting our automobile business
In spite of their mistakes, the banks and the U.S. maintain their prime positions in the world because they are “Too big to fail.” How long can it last? Their gross errors of management are too expensive, depressing profits and living standards by forcing greatly increased costs on the entire world. Adam Smith, the patron saint of capitalism, would tell the nation and the world that these arrangements are too inefficient and unstable to be continued indefinitely.
By Jerome Grossman
At least twenty oversized American banks have histories of reckless behavior, including bad lending and gambling with derivatives, that have left them insolvent, in fact, bankrupt. They have poisoned the economy and should pay the price for their mistakes just like every other business.
However, because their machinations affect so many investors, depositors and other businesses, they have been given a pass, saved by massive injection of federal government funds. By basic capitalist standards, this is a gross violation of business integrity, weakening the structure of our economic system. The violated principle is summarized as “Too big to fail.” One Nobel Prize winning economist called it “looting”.
The managers of such institutions knew how to take advantage of their special status. They took excessive risk for mountainous profits that would entitle them to massive bonuses if successful - or a government bailout if the investment failed. The techniques were often complicated; but some were based on inadequate reserves that purposely underestimated the financial exposure. The managers were in financial clover: heads I win, tails you lose, “Too big to fail.”
In the current crisis, the government is rescuing the managers once again, lending $700 billion as bailout money. That amount, leveraged on an accepted basis of ten to one, could have supported $7 trillion of lending capacity in a new or reorganized bank, more than enough to serve the nation's business. We didn’t go that route; they are “Too big to fail.” President Obama has given primary responsibility for the financial crisis to Lawrence Summers, head of the National Economic Council, and Timothy Geithner, Secretary of the Treasury. The president can do better than these two conventional figures stuck in the past.
There may be an uncomfortable analogy in the position of the United States in world affairs: “Too big to fail.” Decade after decade we overspend on military equipment, organize the largest military budget the world has ever seen, enter failed military quagmires in Vietnam, Iraq and Afghanistan, yet we get token troop support from nations around the world even though their populations disapprove of our military invasions. A remarkable 737 American military bases with hundreds of thousands of American troops are situated in 130 countries, a worldwide presence that protects the governing elites on virtually every continent. Is the U.S.A. “Too big to fail” because its collapse would upset the political and military status quo all over the world?
Where does the U.S. get the money to finance its domestic and foreign errors? In large part from China, Japan, Saudi Arabia and the other countries that buy U.S. Treasury bonds in the hope that they will be redeemable despite our enormous national debt of $10,942,165,294,650.89 or roughly eleven (11) trillion dollars. China's economy depends on the sales of goods to the U.S. The Saudis have big investments in the U.S. and depend on U.S. military power to protect them from their own people and keep the oil flowing. The Japanese are inheriting our automobile business
In spite of their mistakes, the banks and the U.S. maintain their prime positions in the world because they are “Too big to fail.” How long can it last? Their gross errors of management are too expensive, depressing profits and living standards by forcing greatly increased costs on the entire world. Adam Smith, the patron saint of capitalism, would tell the nation and the world that these arrangements are too inefficient and unstable to be continued indefinitely.
Sunday, January 25, 2009
A Stimulus Project That Works
A Stimulus Project That Works
By Jerome Grossman
President Obama is pressing for a quick jolt to the economy to make up for the dramatic decline in public consumption that has left our business system gasping. The dream of endless consumption of goods and services has no limits as our species chews up the planet in the race between endless population growth and the finite resources of Mother Earth.
In the current economic crisis, we are all Keynesians, followers of John Maynard Keynes, who believed that a program of government spending on public works would increase national purchasing power and promote employment. The latest proposal considered by Congress calls for spending $825 billion, including $550 billion "For spending on infrastructure, science, energy and education programs over two years” and $275 billion "For tax cuts for individuals and businesses."
That bill will not give Obama his quick jolt. In total dollars it is inadequate: The stimulus needs to be $1 trillion for each of the next two years. From past experience in the US and Japan much if not most of the income generated will be put into bank accounts or used to pay debts. The proposed spending on infrastructure et al takes time to organize and is subject to delays, sometimes as long as two years. The tax credits to business are unlikely to stimulate investment and employment, which depend on an increased flow of sales.
Furthermore, the Congress program is too complicated, trying to correct social deficiencies when the problem is how to stimulate a quick jolt to restore purchasing power to give business the incentive to hire workers and invest in equipment. First things first.
Here is a simple plan to accomplish the objectives immediately and effectively without a new bureaucracy. For numerical simplicity, assume that there are one hundred million families in our nation of 300 million people. Mail to each family a numbered coupon giving ten thousand dollars for the purchase of goods and services only, a total of one trillion dollars. The coupon must be used within 60 days, and then sent to the U.S. Treasury by the vendors within 60 days. Repeat: only for goods and services, not for deposit in banks, not for payment of debts. Every family would participate in the plan, would understand it, and would benefit.The coupon would be worthless if not spent within 60 days, encouraging immediate spending.
This program gives the economy an immediate jolt of $1 trillion. The operating cost is minimal. No delay to set up a bureaucracy. The U.S. Treasury and Census Bureau have all the names and addresses. Repeat the $1 trillion project in 2011 to encourage business by promising the continuance of the purchasing power.
We are all Keynesians now, Democrats, Republicans, and Independents. Let’s use a Keynesian formula and objective in its purest form. Will it cost too much? Professor Martin Feldstein, Harvard economist and chief economic advisor to President Reagan said, “Without that rise in government spending the economic downturn would be deeper and longer.” The production lost in a deeper and longer recession would amount to at least $5 trillion. The Keynesian formula will pay for itself.
By Jerome Grossman
President Obama is pressing for a quick jolt to the economy to make up for the dramatic decline in public consumption that has left our business system gasping. The dream of endless consumption of goods and services has no limits as our species chews up the planet in the race between endless population growth and the finite resources of Mother Earth.
In the current economic crisis, we are all Keynesians, followers of John Maynard Keynes, who believed that a program of government spending on public works would increase national purchasing power and promote employment. The latest proposal considered by Congress calls for spending $825 billion, including $550 billion "For spending on infrastructure, science, energy and education programs over two years” and $275 billion "For tax cuts for individuals and businesses."
That bill will not give Obama his quick jolt. In total dollars it is inadequate: The stimulus needs to be $1 trillion for each of the next two years. From past experience in the US and Japan much if not most of the income generated will be put into bank accounts or used to pay debts. The proposed spending on infrastructure et al takes time to organize and is subject to delays, sometimes as long as two years. The tax credits to business are unlikely to stimulate investment and employment, which depend on an increased flow of sales.
Furthermore, the Congress program is too complicated, trying to correct social deficiencies when the problem is how to stimulate a quick jolt to restore purchasing power to give business the incentive to hire workers and invest in equipment. First things first.
Here is a simple plan to accomplish the objectives immediately and effectively without a new bureaucracy. For numerical simplicity, assume that there are one hundred million families in our nation of 300 million people. Mail to each family a numbered coupon giving ten thousand dollars for the purchase of goods and services only, a total of one trillion dollars. The coupon must be used within 60 days, and then sent to the U.S. Treasury by the vendors within 60 days. Repeat: only for goods and services, not for deposit in banks, not for payment of debts. Every family would participate in the plan, would understand it, and would benefit.The coupon would be worthless if not spent within 60 days, encouraging immediate spending.
This program gives the economy an immediate jolt of $1 trillion. The operating cost is minimal. No delay to set up a bureaucracy. The U.S. Treasury and Census Bureau have all the names and addresses. Repeat the $1 trillion project in 2011 to encourage business by promising the continuance of the purchasing power.
We are all Keynesians now, Democrats, Republicans, and Independents. Let’s use a Keynesian formula and objective in its purest form. Will it cost too much? Professor Martin Feldstein, Harvard economist and chief economic advisor to President Reagan said, “Without that rise in government spending the economic downturn would be deeper and longer.” The production lost in a deeper and longer recession would amount to at least $5 trillion. The Keynesian formula will pay for itself.
Thursday, November 27, 2008
Where is the Change?
Where is the Change?
By Jerome Grossman
Is it too early to criticize Barack Obama for his program, his appointments, and his policies? He is not yet president but he is dominating the news and influencing markets and foreign-policy as though he had already been inaugurated. At the same time, he tells us that we have only one president at a time and that president is George W. Bush.
Personnel indicates policy, often determines policy, and Obama's appointments are from the establishment on both domestic and foreign affairs. Yet Obama's prime message during his meteoric rise to power was "change". How can establishment figures from both parties install significant change?
Obama’s foreign and military policies will be developed by four power centers: Vice President Joe Biden, Secretary of State Hillary Clinton, Secretary of Defense Robert Gates, and National Security Adviser, Marine General James Jones. All supported the invasion of Iraq; none advocate immediate withdrawal from that country or revision of US world-wide military involvement.
Obama's economic team is dominated by veterans of the Clinton and Bush administrations, who participated in the repeal of financial regulations, an act that precipitated the current crisis. Robert Rubin guided Citicorp to its current bankrupt position, Lawrence Summers was the prime mover for the repeal and Timothy Geithner is a Bush appointee. How can Obama entrust the American economy to these failures?
During his campaign Barack Obama exhorted the adoring crowds of supporters with, “We are the people we have been waiting for". Well, where are these people? He promised reform ideas for fundamental change of the system. The voters projected on him their personal ideals and idiosyncratic hopes for change. They are sure to be disappointed at Obama’s emphasis on traditional experience by establishment figures who brought us to the current crisis.
And a large part of the Obama vote came from liberals. It's fair to ask, "Where are the liberals in the Obama administration?" Obama is seeking support from conservative Republicans, offers to include their ideas and opinions in his programs, and appoints them to key positions, a process that pushes the Obama agenda in a conservative direction.
Do the liberals have the abilities and experience to manage these bureaucracies, to furnish the necessary ideas? For answers consult the Nobel Prize winners, the faculties of our finest universities, the managers of some of our largest businesses. The liberals are there, in big numbers, but not on Obama’s list.
Obama needs to answer important questions about his administration. Where are the liberals? Where are the people who voted against the war? Where are the prescient who warned against financial deregulation? Where are the advisors who will give Obama a full range of policy options to make him a better problem solver and successful president?
By Jerome Grossman
Is it too early to criticize Barack Obama for his program, his appointments, and his policies? He is not yet president but he is dominating the news and influencing markets and foreign-policy as though he had already been inaugurated. At the same time, he tells us that we have only one president at a time and that president is George W. Bush.
Personnel indicates policy, often determines policy, and Obama's appointments are from the establishment on both domestic and foreign affairs. Yet Obama's prime message during his meteoric rise to power was "change". How can establishment figures from both parties install significant change?
Obama’s foreign and military policies will be developed by four power centers: Vice President Joe Biden, Secretary of State Hillary Clinton, Secretary of Defense Robert Gates, and National Security Adviser, Marine General James Jones. All supported the invasion of Iraq; none advocate immediate withdrawal from that country or revision of US world-wide military involvement.
Obama's economic team is dominated by veterans of the Clinton and Bush administrations, who participated in the repeal of financial regulations, an act that precipitated the current crisis. Robert Rubin guided Citicorp to its current bankrupt position, Lawrence Summers was the prime mover for the repeal and Timothy Geithner is a Bush appointee. How can Obama entrust the American economy to these failures?
During his campaign Barack Obama exhorted the adoring crowds of supporters with, “We are the people we have been waiting for". Well, where are these people? He promised reform ideas for fundamental change of the system. The voters projected on him their personal ideals and idiosyncratic hopes for change. They are sure to be disappointed at Obama’s emphasis on traditional experience by establishment figures who brought us to the current crisis.
And a large part of the Obama vote came from liberals. It's fair to ask, "Where are the liberals in the Obama administration?" Obama is seeking support from conservative Republicans, offers to include their ideas and opinions in his programs, and appoints them to key positions, a process that pushes the Obama agenda in a conservative direction.
Do the liberals have the abilities and experience to manage these bureaucracies, to furnish the necessary ideas? For answers consult the Nobel Prize winners, the faculties of our finest universities, the managers of some of our largest businesses. The liberals are there, in big numbers, but not on Obama’s list.
Obama needs to answer important questions about his administration. Where are the liberals? Where are the people who voted against the war? Where are the prescient who warned against financial deregulation? Where are the advisors who will give Obama a full range of policy options to make him a better problem solver and successful president?
Saturday, November 22, 2008
Don't Help GM and Ford
Don't Help GM and Ford
By Jerome Grossman
Please don't help General Motors and Ford. Loaning them $25 billion to ride out the world-wide economic perfect storm would be a waste of money. Every patriotic American knows that it is more important to save Baghdad than Detroit, or to put 100,000 Sunnis on the US payroll in Anbar Province for doing nothing, our current policy. Money for the automobile companies could be better spent in Iraq looking for Saddam Hussein's fictitious weapons of mass destruction. The funds saved in Michigan could be given to the Halliburton Corporation for one of their no-bid contracts. There will be plenty of opportunities to spend even more in Iraq now that the government there is about to authorize our presence for the next three years - and maybe longer if enough Iraqis rebel against our occupation and Iraq doesn’t run out of oil. No problem about the money. We have already spent about one trillion dollars in Iraq on an invasion based on lies told to the United Nations and the US Congress. And we didn’t even have a plan, ask Bush and Rumsfeld. Just like GM and Ford don't have a plan. And the generals and government officials and Members of Congress get to fly to Iraq in specially equipped US military jets, flights that cost $100,000 each, just to get their names in the newspapers to tell us that we are winning but whisper that we must stay as long as Iraq has oil and favors US oil companies. Hey, it's only money, better spent in Baghdad than Detroit or to pay for the 700 military bases we have in 130 other countries. First things first.
By Jerome Grossman
Please don't help General Motors and Ford. Loaning them $25 billion to ride out the world-wide economic perfect storm would be a waste of money. Every patriotic American knows that it is more important to save Baghdad than Detroit, or to put 100,000 Sunnis on the US payroll in Anbar Province for doing nothing, our current policy. Money for the automobile companies could be better spent in Iraq looking for Saddam Hussein's fictitious weapons of mass destruction. The funds saved in Michigan could be given to the Halliburton Corporation for one of their no-bid contracts. There will be plenty of opportunities to spend even more in Iraq now that the government there is about to authorize our presence for the next three years - and maybe longer if enough Iraqis rebel against our occupation and Iraq doesn’t run out of oil. No problem about the money. We have already spent about one trillion dollars in Iraq on an invasion based on lies told to the United Nations and the US Congress. And we didn’t even have a plan, ask Bush and Rumsfeld. Just like GM and Ford don't have a plan. And the generals and government officials and Members of Congress get to fly to Iraq in specially equipped US military jets, flights that cost $100,000 each, just to get their names in the newspapers to tell us that we are winning but whisper that we must stay as long as Iraq has oil and favors US oil companies. Hey, it's only money, better spent in Baghdad than Detroit or to pay for the 700 military bases we have in 130 other countries. First things first.
Wednesday, November 12, 2008
The War on Recession
The War on Recession
By Jerome Grossman
The success of the Obama administration will be measured primarily by its performance in reviving the United States economy, now sliding toward widespread unemployment, corporate bankruptcy, with a desperate middle-class that has lost its life savings.
The Bush administration, with the assent of the Democratically-controlled Congress, has initiated fiscal policies that point the way for the Obama administration: give federal government money to banks and other corporate entities considered “Too big to fail”; accept in return partial ownership and a measure of control over the subsidized companies. To this menu, subsidies for the citizens must be added. Everybody should be on the gravy train.
This degree of government intervention would have been unthinkable only a few months ago, especially with a conservative Republican president. President Obama will build on the Congressional and Bush precedents by vastly increasing the already sanctified programs, extending them to include many more economic entities under financial pressure, relaxing the qualifications to save or help those with lesser clout. George W. Bush has given Barack Obama political cover.
Opposition to this dramatic and expensive program will be minimal. Some will decry expansion of government power and they will be correct. Others will cite waste and fraud as thousands of companies and millions of individuals get in line for federal dollars and they will be right. In justification of its extension of Bush policy, President Obama needs only to declare a “War on Recession”, the battle to save the American economy from defeat, from deflation, from massive unemployment, from the collapse of US world financial hegemony, from the diminution of Social Security and Medicare, from the possibility that other nations might take advantage of our plight, even challenging us militarily.
The people of America will respond positively to the call to war as they have so many times in the past: the war on terror, the war to save democracy, the war to end war, the Cold War, the war on drugs, the war on poverty, etc., etc. The amount that will be spent on this war will be many times the $700 billion already appropriated but only a fraction of the losses sustained by corporations and private investors. The safety of the nation is at stake. The price is not the decisive factor. We will spend any amount to insure economic stability and to guard against social disruption. All we need is a slogan, The War on Recession to rally public support and achieve focus. The rest is history and it begins on January 20, in President Obama’s inauguration address.
By Jerome Grossman
The success of the Obama administration will be measured primarily by its performance in reviving the United States economy, now sliding toward widespread unemployment, corporate bankruptcy, with a desperate middle-class that has lost its life savings.
The Bush administration, with the assent of the Democratically-controlled Congress, has initiated fiscal policies that point the way for the Obama administration: give federal government money to banks and other corporate entities considered “Too big to fail”; accept in return partial ownership and a measure of control over the subsidized companies. To this menu, subsidies for the citizens must be added. Everybody should be on the gravy train.
This degree of government intervention would have been unthinkable only a few months ago, especially with a conservative Republican president. President Obama will build on the Congressional and Bush precedents by vastly increasing the already sanctified programs, extending them to include many more economic entities under financial pressure, relaxing the qualifications to save or help those with lesser clout. George W. Bush has given Barack Obama political cover.
Opposition to this dramatic and expensive program will be minimal. Some will decry expansion of government power and they will be correct. Others will cite waste and fraud as thousands of companies and millions of individuals get in line for federal dollars and they will be right. In justification of its extension of Bush policy, President Obama needs only to declare a “War on Recession”, the battle to save the American economy from defeat, from deflation, from massive unemployment, from the collapse of US world financial hegemony, from the diminution of Social Security and Medicare, from the possibility that other nations might take advantage of our plight, even challenging us militarily.
The people of America will respond positively to the call to war as they have so many times in the past: the war on terror, the war to save democracy, the war to end war, the Cold War, the war on drugs, the war on poverty, etc., etc. The amount that will be spent on this war will be many times the $700 billion already appropriated but only a fraction of the losses sustained by corporations and private investors. The safety of the nation is at stake. The price is not the decisive factor. We will spend any amount to insure economic stability and to guard against social disruption. All we need is a slogan, The War on Recession to rally public support and achieve focus. The rest is history and it begins on January 20, in President Obama’s inauguration address.
Thursday, October 9, 2008
The Best and the Brightest (Part 2)
The Best and the Brightest (Part 2)
By Jerome Grossman
Yesterday I blamed financial leaders and gurus for the financial turmoil destabilizing our country and the world without mentioning their names.
Today's New York Times, October 9, has the errors and the perpetrators in full gory detail led by Robert Rubin, Lawrence Summers, and especially Alan Greenspan. The heroes, ignored and unacknowledged, who tried and failed to establish an adequate regulatory process were Edward Markey and Brooksley Born.
Read the story and weep, then make sure that the people who made the mistakes do not get another opportunity to repeat.
/ | October 9, 2008
The Reckoning: Taking Hard New Look at a Greenspan Legacy
By PETER S. GOODMAN
Derivatives have long had a great supporter in the former Federal Reserve Chairman Alan Greenspan
By Jerome Grossman
Yesterday I blamed financial leaders and gurus for the financial turmoil destabilizing our country and the world without mentioning their names.
Today's New York Times, October 9, has the errors and the perpetrators in full gory detail led by Robert Rubin, Lawrence Summers, and especially Alan Greenspan. The heroes, ignored and unacknowledged, who tried and failed to establish an adequate regulatory process were Edward Markey and Brooksley Born.
Read the story and weep, then make sure that the people who made the mistakes do not get another opportunity to repeat.
/ | October 9, 2008
The Reckoning: Taking Hard New Look at a Greenspan Legacy
By PETER S. GOODMAN
Derivatives have long had a great supporter in the former Federal Reserve Chairman Alan Greenspan
Tuesday, October 7, 2008
The Best and the Brightest
The Best and the Brightest
By Jerome Grossman
The current financial crisis is widely perceived as the greatest threat to the stability of the USA. This threat was
• Not caused by radical Islamic terrorists
• Not by Colombian drug lords
• Not by organized crime
• Not by radical right-wingers
• Not by radical left wingers
• Not by inner-city street gangs
This crisis was created by the best and the brightest Americans
• Educated at our finest universities
• The elite of our society by virtue of talent and riches
• The leading donors to our most deserving charities
• With the blessing of government leaders of both parties
Am I playing the blame game? You bet I am. The best and the brightest profited with enormous salaries, the adoration of the media, the perks accruing to the leaders of society. But they have failed and must step aside for new leaders. David Halberstam warned us that the best and the brightest would fight displacement by blaming others and impersonal forces for their failures as they did in the fiascos of Vietnam and Iraq. We must not allow that to happen.
By Jerome Grossman
The current financial crisis is widely perceived as the greatest threat to the stability of the USA. This threat was
• Not caused by radical Islamic terrorists
• Not by Colombian drug lords
• Not by organized crime
• Not by radical right-wingers
• Not by radical left wingers
• Not by inner-city street gangs
This crisis was created by the best and the brightest Americans
• Educated at our finest universities
• The elite of our society by virtue of talent and riches
• The leading donors to our most deserving charities
• With the blessing of government leaders of both parties
Am I playing the blame game? You bet I am. The best and the brightest profited with enormous salaries, the adoration of the media, the perks accruing to the leaders of society. But they have failed and must step aside for new leaders. David Halberstam warned us that the best and the brightest would fight displacement by blaming others and impersonal forces for their failures as they did in the fiascos of Vietnam and Iraq. We must not allow that to happen.
Tuesday, September 23, 2008
How to Spend One Trillion Dollars
How to Spend One Trillion Dollars
By Jerome Grossman
Why should the American taxpayer bail out selected bankers and financial institutions from the consequences of their poor economic decisions, their business mistakes?
Why should the American taxpayer bail out selected homeowners who knowingly signed mortgages they could not afford?
If our objective is to avoid an imminent recession or another Great Depression, why doesn't the United States government spend the $1 trillion by giving it away to the 300 million Americans, every man woman and child, each receiving about $3000, a better way to stimulate the economy?
That stimulus package would immediately find its way into businesses delivering goods and services or into the banks as personal savings. The impact of this money flow would support commercial activity at every level, encourage business investment, and refurbish the capital of banks in the traditional manner.
To clear the question of bank solvency, the U.S. Treasury could declare a brief bank holiday, send bank examiners to every bank to determine solvency by measuring the value of failed loans and investments against valid assets. Then the solvent banks would be given the right to borrow from the U.S. Treasury the discounted value of the failed loans and investments, the borrowed amount to be repaid within a fixed time period, and if not to lose its license.
The best way to avoid recession and economic stagnation is to put purchasing power into the hands of the entire population. We should not subsidize the people and institutions at the top of the financial pyramid. We should subsidize everybody for a jump start and to assure universal participation and quick approval.
By Jerome Grossman
Why should the American taxpayer bail out selected bankers and financial institutions from the consequences of their poor economic decisions, their business mistakes?
Why should the American taxpayer bail out selected homeowners who knowingly signed mortgages they could not afford?
If our objective is to avoid an imminent recession or another Great Depression, why doesn't the United States government spend the $1 trillion by giving it away to the 300 million Americans, every man woman and child, each receiving about $3000, a better way to stimulate the economy?
That stimulus package would immediately find its way into businesses delivering goods and services or into the banks as personal savings. The impact of this money flow would support commercial activity at every level, encourage business investment, and refurbish the capital of banks in the traditional manner.
To clear the question of bank solvency, the U.S. Treasury could declare a brief bank holiday, send bank examiners to every bank to determine solvency by measuring the value of failed loans and investments against valid assets. Then the solvent banks would be given the right to borrow from the U.S. Treasury the discounted value of the failed loans and investments, the borrowed amount to be repaid within a fixed time period, and if not to lose its license.
The best way to avoid recession and economic stagnation is to put purchasing power into the hands of the entire population. We should not subsidize the people and institutions at the top of the financial pyramid. We should subsidize everybody for a jump start and to assure universal participation and quick approval.
Saturday, March 15, 2008
Heads I Win, Tails You Lose
Heads I Win, Tails You Lose
By Jerome Grossman
In a key scene in a famous movie, "The Graduate", the young Dustin Hoffman is cornered at the graduation party by an older man who whispers enigmatically, “plastics", a hot business of that decade. Ten years ago the same bore would have whispered "Real Estate." Welcome to our world of capitalism, where boom and bust often alternate, where the quickest make a killing and the slower have trouble sleeping.
Subprime lending on mortgages with little or no money down followed by securitization of debt in derivatives was born out of the illusion of permanent high demand. The housing industry was overbought and oversold and of course would never collapse - until it did.
The banks and financial institutions that invested in this "sure thing" were gambling with OPM, Other People's Money. They couldn't lose: if the market turned they were too big to fail, they would be bailed out by the government, then after a few years the gambling would begin again. Not protected were the consumers who signed the mortgages, nor the small businesses affected by the decline in trade. Only the big boys: heads they win, tails, the taxpayers lose.
Now the White House offers a plan to resolve the growing credit crisis made worse by eroding home prices. The plan relies on the same banks and mortgage brokers and Wall Street firms that are to blame for the current crisis. Yet there is no plan to prevent a recurrence in the future. No significant regulation is provided and the federal government has only a limited role in the regulation. The plan is to leave regulation to the states. We know how that has worked out on other issues such as taxation: the states compete with each other awarding breaks to the businesses in order to attract or keep them.
There is a larger question. If banks and financial institutions are so important to economic life that they need to be rescued repeatedly from their own mistakes, they become virtually a public utility that ought to receive a certain guaranteed profit but be barred from speculative investments. That was once the law under the Glass-Steagall Act enacted under the New Deal in 1933 after the stock market crash of 1929 but repealed in 1980. If we want to keep the bankers conservative and protect the depositors, perhaps Glass-Steagall should be reenacted to limit our worries and our losses.
By Jerome Grossman
In a key scene in a famous movie, "The Graduate", the young Dustin Hoffman is cornered at the graduation party by an older man who whispers enigmatically, “plastics", a hot business of that decade. Ten years ago the same bore would have whispered "Real Estate." Welcome to our world of capitalism, where boom and bust often alternate, where the quickest make a killing and the slower have trouble sleeping.
Subprime lending on mortgages with little or no money down followed by securitization of debt in derivatives was born out of the illusion of permanent high demand. The housing industry was overbought and oversold and of course would never collapse - until it did.
The banks and financial institutions that invested in this "sure thing" were gambling with OPM, Other People's Money. They couldn't lose: if the market turned they were too big to fail, they would be bailed out by the government, then after a few years the gambling would begin again. Not protected were the consumers who signed the mortgages, nor the small businesses affected by the decline in trade. Only the big boys: heads they win, tails, the taxpayers lose.
Now the White House offers a plan to resolve the growing credit crisis made worse by eroding home prices. The plan relies on the same banks and mortgage brokers and Wall Street firms that are to blame for the current crisis. Yet there is no plan to prevent a recurrence in the future. No significant regulation is provided and the federal government has only a limited role in the regulation. The plan is to leave regulation to the states. We know how that has worked out on other issues such as taxation: the states compete with each other awarding breaks to the businesses in order to attract or keep them.
There is a larger question. If banks and financial institutions are so important to economic life that they need to be rescued repeatedly from their own mistakes, they become virtually a public utility that ought to receive a certain guaranteed profit but be barred from speculative investments. That was once the law under the Glass-Steagall Act enacted under the New Deal in 1933 after the stock market crash of 1929 but repealed in 1980. If we want to keep the bankers conservative and protect the depositors, perhaps Glass-Steagall should be reenacted to limit our worries and our losses.
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