Thursday, September 18, 2008

Want to Understand What's Really Happening
To the Economy? This Fellow Explains it Well

'What we are witnessing may be the greatest destruction of financial wealth that the world has ever seen -- paper losses measured in the trillions of dollars. Corporate wealth. Oil wealth. Real estate wealth. Bank wealth. Private-equity wealth. Hedge fund wealth. Pension wealth. It's a painful reminder that, when you strip away all the complexity and trappings from the magnificent new global infrastructure, finance is still a confidence game -- and once the confidence goes, there's no telling when the selling will stop. But more than psychology is involved here. What is really going on, at the most fundamental level, is that the United States is in the process of being forced by its foreign creditors to begin living within its means.'
--From an article today on the scramble to clean up the Category 4 financial storm, by the Washington Post's uniquely brilliant columnist Steven Pearlstein, who is following and explaining the unfolding crisis better than anyone I've seen anywhere. He's a pro at cutting through the macroeconomic complexity to describe what's really happening and why. In this online chat earlier in the week, he also delivered a moral rebuke to Wall Street (we think it carries considerably more moral authority than similar rebukes delivered by presidential candidates who've taken millions of dollars from their handy new targets of abuse): "Wall Street doesn't care a fig about Main Street or the economy -- it really doesn't. And it doesn't really expect the rest of us to help them because it is so arrogant it never contemplates the fact that we might need to. Wall Streeters live in a self-contained bubble, and they see any government involvement simply in terms of market dynamics, not in terms of the impact on real people or the real economy." He'll be online again today fielding questions at 11 a.m. eastern time. You might consider sending a question his way.

6 Comments:

At 11:34 AM, Anonymous Anonymous said...

This mess is getting so scary I don't even like to think about it, but it does occur to me that all of this should put an end to any further discussion of privatizing social security.

I also question the endless mergers. (Have the feds disapproved any in recent year?) They produce more companies who are "too big to fail."

 
At 11:41 AM, Blogger John Ettorre said...

Indeed. Bill Greider, who wrote a great book on the Fed some years ago, just wrote in The Nation that with the AIG bailout, "for the first time in this unfolding crisis, I felt personally scared by the news." He's not alone. The story is here:

http://www.thenation.com/doc/20080929/greider2

 
At 1:00 PM, Anonymous Anonymous said...

Good point, Mike. I thought about the privatizing social security movement a few years back and thought how lucky we are that it didn't prevail, given the mess the American economy is in now.

I don't know this for a fact, but didn't McCain support privatizing social security?

 
At 7:11 PM, Blogger John Ettorre said...

Miles, always good to see your name in the comments. Actually, the absurd far-right-wing notion of privatizing Social Security was dead on arrival quite some time ago, as Bush staked all the capital he accumulated from his re-election on a full-court press to get that done in the first year of his second term. He went on a national speaking blitz, pounding away at it as his #1 priority, took it to the country, and the country soundly (and rightly) rejected it as a foolish idea. They saw that it equaled repealing the cornerstone of the most visionary and humane part of FDR's New Deal, and when it comes to a direct choice between FDR's vision and reputation for humaneness for his fellow citizens vs. that of the Frat Boy-in-Chief, he never stood a chance.

As for your point about mergers, Mike, I've often thought in recent years that the only ones really making out in all that were the sign makers, who were forever taking down the signage of the old companies and putting up signage of the new. That's been the one enduring growth sector.

 
At 9:33 PM, Anonymous Anonymous said...

Appreciated your commentary a great deal. In all your reading have you come across an economist you respect a great deal commenting on the financial soundness of respective party platforms, and of the presidential candidates in particular? I hope you find this comment since I am still catching up with some of your links.

Thanks.

 
At 9:40 AM, Blogger John Ettorre said...

I'd recommend Paul Krugman, who's a two-fer. Besides being a NYTimes columnist, he's among perhaps the half-dozen most prominent economists in the world, and is unparralled in his knowledge of subjects at the intersection of politics and the economy. You can sample from his columns below:

http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html

 

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