Hard Times

[Kurt_and_Hunter]

A serious global contraction would demolish several BILLION people. (There are many tendentious posts around here explaining how big a billion is. Just imagine a human being in place of a dollar bill.)

Seriously... Do you have any idea what happens to the billions of poor people in the world when global productivity ticks down a percent, let alone ticks down a LOT?

It makes the Iraq War look like a fucking picnic.

Money is not a zero-sum game. It's not like we have a pile of money to hoard. We live on debt and survive only on economic growth. If the international credit system freezes up there will be no money next year... not for bail-outs, health care, child care, medicine or any other purpose.

This is not to say the bail-out will work, or that it is the best possible solution. But it is what it is... a desperate stab at preventing the ruin of a generation of human beings. Not Americans... we will do better than most. Human beings.

And timeliness really does matter. If the crisis is real (which one can dispute) a week is a lifetime. Spin a quarter on your desktop. If you are really coordinated you can add little kicks to keep it spinning for a long time. But at some point it begins to wobble and then quickly reaches a point where it will go down... not right away, but inevitably. Once its movements become too eccentric you cannot kick it back up to a clean spin no matter what you do.

Some want to wait for the coin to fall and then re-spin it a different way. But there are real events along that path...

Mass starvation. A generation of children whose intellectual potential is limited by childhood malnutrition. Wars... wars over food, over water, over everything.

The folks who point out that international finance is a house of cards, that money is created through debt and that the whole racket is a pyramid scheme are right. So they should be the first to recognize what happens when the game of musical chairs stops suddenly.

There is, by definition, not enough money in the world to pay the interest on the world's debt. Two years of global 0% growth is a disaster. Two years of actual contraction... forget about it. Whole nations get foreclosed, not just some houses.

For the third world the situation is FAR more dire than the 1930s. Back then the world's destitute grew a lot of their own food. They didn't have sweat-shop jobs to suddenly lose. The modern third world dweller is now like the British working class in the 19th century at the worst of the industrial revolution. (And you can scarcely imagine a much more precarious human condition than that faced by the 19th century British working class.)

The profound problems with the international financial system must be unwound through a generation of careful reform. We can no more collapse our way to prosperity than we can bomb countries into democracy.

And as to the argument, "it will happen eventually anyway." Well, maybe so. But what if someone develops cold fusion or a room temperature super-conductor five years from now? (unlikely but not inconceivable) Free power forever! It would reshape the entire global system overnight. So there is much to be said for limping along starving as few people as we can manage while working on solutions.

And as to politics... there is no socialist impulse in America. Our response to crisis will be fascism, not eternal coolness. If the system goes down Obama will be succeeded by Sarah Palin or someone worse.

---End Rant---

[abumbyanyothername]

1. But it has to stop sometime K&H

Surely even you can see that exponential growth (even at 3%/year (the real cost of money)) cannot go on forever.

It will produce a hockey stick chart, and we are in the stick part of it right now.

Contraction is mandatory at some point. Hard as it is, the sooner the softer.

[Kurt_and_Hunter]

5. You never allow dislocation.

This is a wake-up call for reform, not a chance to let the whole thing go down.

The worst excesses of capitalism have always been unwound carefully through incremental reform. Collapse and revolution have a terrible track record in benefiting actual populations. Liberal democracy has a much better track record.

We can not go on like this forever, but it's not like pulling a band-aid, it's like getting off a moving roller coaster. Slower really is better.

[abumbyanyothername]

9. Well let's start slowly by telling all the holders of Federal Reserve Notes

and Treasury Debt, if you are so worried about it, you fix it. We've done all we can to hold the rest of the world up for nearly 15 years now.

It's your turn to push.

[yourout]

2. It's not a matter of if the system goes down.......It's a matter of when.

Ultimatly the 700 billion is to buy six weeks. If the system crashes before then an Obama landslide will be assured.

[Kurt_and_Hunter]

6. You don't know that. Not because of any failing but because it is unknowable.

Nobody on Earth knows how to precisely control a complex dynamic system. Nobody.

If you face a very big horrible thing and have options you employ them. If the shit goes down I don't know why people assume we will still be ABLE to borrow 700 Billion dollars for some other purpose. Our credit rating might not be that good anymore.

And "nobody lives in the long term."

I am amazed that people on the very verge of having a halfway decent President who might be able to help ease us toward less tragic outcomes would embrace a nightmare. (Not accusing you. I was in GD reading the "I will gladly sell my children for medical experiments if it means Donald Trump has to fly coach" threads.)

[morillon]

7. Are they really planning to distribute it all before the election?

Or is just the promise of it enough to keep things from tanking?

[yourout]

8. The promise is enough to buy them the time they need.

Keep the election close and lie cheat and steal there way to a Majority in the Senate. Then make sure the money goes largly to wealthy Republicans.

[Kurt_and_Hunter]

10. It's a mass psychology thing.

So the commitment is what matters most.

[QC]

3. Sorry, but you'll never be a real armchair revolutionary at this rate!

Get with the program, dude!

[RagAss]

4. GREED !

[Kurt_and_Hunter]

11. Human nature... no miracle cure for being human

[abumbyanyothername]

12. I disagree with this also.

People need to be taught that there is scarcity, they need to be taught to be selfish, they need to be taught to be greedy.

They are born without a concern in the world whether they live or die. And definitely NOT greedy.

[Kurt_and_Hunter]

13. Assuming that is true, extreme global scarcity is a poor environment in which to teach that lesson

Whatever the origin of man's worst traits people tend to behave worse in deprived, hyper-competitive environments.

[abumbyanyothername]

14. Guess what is causing the scarcity?

Excessive consumption. Guess what is causing the excessive consumption?

Correct -- A financial monster out of control.

How many of us on DU have WAY more than enough, and yet are scared to death by this "crisis"?

If we scale back our consumption (I sold my car over a year ago in protest of the war in Iraq -- I felt I was complicit as a driver), some economies may suffer, but it is still the right thing to do.

The US does not need trade, but the US financial markets do. We can produce enough food and lord knows we have an excess of shelter for our population even without oil and credit.

I am not against trade. I am just saying that we should be smart about it.

As for this bailout, "I re-raise." (Fortunately, Congress did the same. Hopefully they will see the light before signing up for anything.)

[Kurt_and_Hunter]

16. Even if the US was to become how you envision it, it cannot best get there through

Even if the US was to become how you envision it, it cannot best get there through economic crisis.

You say we can be self sufficient. Of course we CAN if that's what we want.

The better question is whether we are prepared to be self sufficient next year.

I foreclose no future state (for purposes of this discussion), merely maintain that chaos is not, IMO, a practical or ethical component of reaching any goal.

[Eyes_wide_ open]

15. Hmm ... very sobering thoughts K&H, thanks for sharing them. n/t

[K Gardner]

17. Very well-written, thoughtful piece, K&H. Recommended.

[closeupready]

18. I don't understand your point. What do you want us to do exactly (or think)?

People will have to ask for help, and other people will have to cooperate. And if that means people have to spend their own money to help other people, so be it.

And FRANKLY, WHY IS THAT SO BAD?! That's what people SHOULD do! :mad:

[Kurt_and_Hunter]

19. I am seeking to emphasize that collapse doesn't punish the rich

There are some zero-sum assumptions running around that I disagree with.

Actions that benefit the wealthy should not be presumed to harm the poor, or visa versa.

The fact that we could spend 700B on one thing doesn't mean we could just as easily spend it on something else.

The only point of a major action in the economy is to increase future revenues. Depending on rates of growth the economy can easily create more than 700B or disappear more than 700B. We are not on the gold standard... there is no 700B pile of money in a vault. So many arguments about what that money could be spent on make no sense. The point of expenditures is to try to end up with more money, in the big fiscal picture.

I am not happy about any of this, but I do believe that an imperfect plan is, in this particular situation, superior to inaction. (When your objective is largely psychological the thought really does count.)

I am interested in Universal Health Care. I believe that something of the general scale of the bail-out (not arguing the particulars) makes UHC more likely down the road because doing nothing will most likely lead to less money all around.

There is no ethical foundation for favoring any result that harms innocents simply because it also harms the guilty... some of the depression fandom in General Discussion these days is equivalent to, "Better a thousand innocent men be punished than one guilty man go free."

I am encouraging people to be less casual when contemplating economic dislocation. It's not a progressive scenario.

[closeupready]

20. Maybe, like Krugman, we are progressive and also against the bailout.

Many progressive economists are saying that a bailout would be ineffective and counterproductive.

Are you familiar with their arguments, and if so, what are the flaws in their arguments?

[Kurt_and_Hunter]

21. I favor bail-out reform.

Krugman doesn't say that no large action could help. I favor Krugman's equity stakes stance, for instance.

I am confident Krugman would never say that economic dislocation will not primarily affect the poor and working class. I am sure he would agree that a break-down in the credit markets represents a disaster for a progressive agenda going forward.

As to the long-term wisdom of one provision versus another, I am not arguing particulars of a plan, just noting that "just put this off until after the election" isn't a good idea.

Short-term psychology is a big part of this. I believe that gestures made today will affect Obama's options six months from now.

It's not like any 700B would be borrowed soon, let alone borrowed and spent.

A broad gesture can be reformed after the fact. Make the gesture, then whittle it down when it is safer to.

Congress has the power to cancel the whole program at any time going forward. If they lack the political will to disappoint the markets at some later date then that's their failing.

Make the best deal you can make today. Then find the political will to reform it with a new president and new Sec Treas and the political good will that an incoming administration always gets