The greatest irony of the Thatcher crusade is that its economics pulled against its ethics. I doubt if the idealised abstinent, puritanical, self-respecting Grantham of her imagination ever existed in the real world. It certainly didn’t exist in her Britain. As a quick reading of the Communist Manifesto would have warned her, free-market capitalism is, of its very essence, subversive. It is restless, heaving, masterless, wonderfully dynamic and creative, but, in itself, utterly amoral. The hot breath of the cash nexus dissolves the ties of faith, community, family and tradition. And, as Friedrich von Hayek pointed out more vigorously than any critic of the free market, entrepreneurial success has nothing to do with merit or fairness. It is about satisfying wants and even at times about creating or manufacturing them; and the wants are as likely to be bad as good. The speculative frenzies and spectacular frauds that have studded its history are of its essence, too: among the forces that drive it, greed, credulity and the herd instinct loom much larger than the rationality that most economists celebrate.
Harvard historian Niall Ferguson warns that the greatest danger of the current financial crisis could be the possible collapse of economic relations between China and America.
“Quite frankly, what the market is looking for is some kind of coordinated action from central banks around the world.” said Kathy Lien, director of currency research at GFT Forex. The Paulson plan, she added, is like a “Band-Aid for a problem that stretches way beyond the banking system now.”
Also see Steven Pearlstein, who says this is no longer a financial crisis but rather “a meltdown — an uncontrolled and largely uncontrollable financial chain reaction that threatens serious harm to the broader economy” and may “take most of the global economy into recession.”
U.S. stocks plummeted in early trading today as economic turmoil rippled through Europe and investors questioned whether a bailout of the financial sector would be enough to prevent a global recession.
The Dow Jones industrial average fell more than 500 points by mid-morning but then retreated to more than 400 points lower by 11:18 a.m. It was the first time since October 2004 that the Dow fell below 10,000. The Nasdaq and Standard & Poor’s 500-stock index both fell by 6 percent but by 11:18 a.m. had come back slightly, down 5 percent and 4.7 percent, respectively.
The day started with a negative momentum that has turned into a global panic, said Art Hogan, chief market analyst at Jefferies & Co. “It is just a realization that the global economy is going to be stagnant for the next 12 to 16 months” even with the rescue plan, Hogan said.
Investors remain concerned that the $700 billion financial bailout plan enacted by the federal government last week is not enough to address the country’s fundamental economic problems, including rising unemployment and falling home prices. Banks remain reluctant to lend to each other, keeping the credit markets frozen, and overseas banks are increasingly facing problems of their own.
European officials are scrambling to bolster financial firms, and Asian investors have grown worried that a global recession will undercut their export-dependent economies.Europe has been forced to prop up other banks in recent weeks. Markets in Asia and Europe were down from between 4 and 6 percent.
“People realize that the [bailout] is not going to prevent a more serious economic downturn in the U.S., including a couple of quarters of negative economic growth,” said Marc Chandler, head of currency trading at Brown Brothers Harriman & Co. “The banking crisis spreading to Europe is another negative. It means the crisis is getting bigger.”
The price of oil fell as low as $88.89 a barrel in morning trading today, off its peak of $147 a barrel in July. The price of gold jumped as investors sought a safe haven from the market turmoil.
Glad I have today off, as I feel the need for a drink, to be quickly followed by another.
We now know that the costs to the U.S. government associated with this crash will surpass those associated with the wars in Iraq and Afghanistan. We also know that all such government cost estimates tend to be on the low side. We further know that the U.S. economy recovered quickly after 9/11 and that we are in the midst now of a global downturn that may last for many months and perhaps years. We know that there have been vastly more job losses — 600,000 recorded thus far this year in the United States — than were associated with the 9/11 shocks, and that the global job-loss totals that a recession is likely to bring will be measured in the millions. Among the poorest, the likely shocks to emerging markets caused by the United States’ inability to spend freely will take a devastating human toll.
By all the metrics available to us, then, the current financial crisis easily exceeds the post-9/11 war on terror in economic terms. Human costs are harder to measure, of course, and the tolls of both events have been devastating. But the financial crisis will certainly touch many more people in many more countries than did 9/11. And even greater crises may loom ahead, thanks to our unwitting creation of a financial Frankenstein’s monster of unregulated, risk-laden, global derivatives markets.
As the dithering U.S. governing class is grappling with the disposal of “toxic assets” in the U.S. economy, the world is moving on to debate what is widely seen as a toxic ideology: a form of market fundamentalism that promotes inequality.
This is the first time in the history of the United States that the president has sought to provoke a financial panic to get legislation passed through Congress. While this has proven to be a successful political strategy – after the House of Representatives finally passed the bank bail-out plan today – it marks yet another low point in American politics.
It was incredibly irresponsible for George Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said: “We have nothing to fear, but fear itself.”
It was even more irresponsible for President Bush to seize on the decline in the stock market five days later as evidence that his bailout was needed for the economy. President Bush must surely understand, as all economists know, that the daily swings in the stock market are driven by mass psychology and have almost nothing to do with the underlying strength in the economy.
The scare tactics of President Bush, Henry Paulson, the Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, created sufficient panic, so that by the time of the first vote on the emergency package in Congress, much of the public believed that the defeat of the bail-out may actually have had serious consequences for the economy. Millions of people have changed their behaviour because of this fear, with many pulling money out of bank and money market accounts, and adjusting their financial plans in other ways.
This effort to promote panic is especially striking since the country’s dire economic situation is almost entirely the result of the Bush administration’s policy failures.
Stepping up the Republican ticket’s attacks on Senator Barack Obama, Gov. Sarah Palin on Saturday seized on a report about Mr. Obama’s relationship with a former 1960s radical to accuse him of “palling around with terrorists.”
“This is not a man who sees America as you see it, and how I see America,” Ms. Palin, the Republican vice-presidential nominee, said in Colorado, according to a pool report. “We see America as the greatest force for good in this world. If we can be that beacon of light and hope for others who seek freedom and democracy and can live in a country that would allow intolerance in the equal rights that again our military men and women fight for and die for all of us.
“Our opponent though, is someone who sees America, it seems, as being so imperfect that he’s palling around with terrorists who would target their own country.”
See? Obama really does = Osama (or Bobby Seale’s love child–take your pick). Who sez forwarded emails can’t be trusted?
The article to which she referred, in The New York Times on Saturday [link added -mb], traced Mr. Obama’s sporadic interactions with Bill Ayers, a founder of the Weathermen who later became an education professor in Chicago and worked on education projects there with Mr. Obama, the Democratic nominee for president.
Yep, that blast from the not-so-distant past. Of course, as Steve Benen notes, more than six months down the road there still isn’t any there there, except perhaps in the feverish imagination of Stanley Kurtz. But when did such middling, inconsequential details like “facts” or “the truth” ever stop a wingnut from opportunistically picking up a heaping pile of bullshit–even a crusty, dried-out heaping pile of bullshit–and then try to smear it all over the face of an uppity, radical negro (who, as Governor Palin so helpfully observed, just isn’t like “us”, or, rather, “you”)?
“Well, I was reading my copy of today’s New York Times and I was interested to read about Barack’s friends from Chicago,” Ms. Palin said at the fund-raiser in Englewood, Colo. “Turns out one of Barack’s earliest supporters is a man who, according to The New York Times, and they are hardly ever wrong, was a domestic terrorist and part of a group that, quote, launched a campaign of bombings that would target the Pentagon and U.S. Capitol. Wow. These are the same guys who think patriotism is paying higher taxes.”
The blatant hypocrisy here, while extreme, craven and obvious, is also healthy. Hypocrisy of this sort is actually a vital part of how checks and balances are supposed to work. It is expected that political factions, when in charge of the government, will seek to obtain greater power for themselves, and the check against that is that the “opposition party” will battle and resist — not necessarily out of ideology or principle but due to raw power considerations and self-interest. That is what has been so tragically missing from our political process for the last eight years: while the GOP sought greater and greater government power, Democrats acquiesced almost completely when they weren’t complicitly enabling it. While the Executive was off the charts in terms of the power it seized, the Congress was off the charts in its passivity and eagerness to relinquish its Constitutionally assigned powers to the Bush White House. That’s what has caused the extreme imbalance, with a bloated Republican Party and virtually unlimited presidential power: the failure of Democrats and the Congress to serve as a check on any of that. As their newfound contempt for unlimited power makes conclusively clear, the executive-power-worshipping Republicans of the last eight years — if there is an Obama presidency — will quickly re-discover their limited government power “principles” and won’t be nearly as accommodating.
In terms of consequences, why should we endorse bi-partisanship? That is a fundamentally anti-democratic response. Here I am persuaded by argument by political theorists who, following Joseph Schumpeter (whose conception of democracy is, despite common caricatures, neither a ‘realist’ nor ‘minimalist’), insist that robust competition is crucial to a healthy democracy. For instance, Ian Shapiro* suggests that competition has two salutary effects: (i) it allows voters to throw out incumbents (known more appropriately as ‘the bastards’) and (ii) it pressures the opposition to solicit as wide a range of constituencies as they are able. Given these effects, Shapiro suggests quite pointedly:
If competition for power is the lifeblood of democracy, then the search for bi-partisan consensus … is really anticompetitive collusion in restraint of democracy. Why is it that people do not challenge legislation that has bi-partisan backing, or other forms of bi-partisan agreement on these grounds? …
… Among the crucial empirical observations about partisan polarization in the U.S. is that it reflects the economic bifurcation (in terms of wealth and income mal-distribution) among the population. Because the poor participate at relatively low levels, and because many recent immigrants remain unnaturalized (hence disenfranchised), the constituency for a real alternative to right-wing policies remains politically inchoate. The solution to political polarization is to attack economic inequality, to resist anti-immigration policies, and so forth. That might, in fact, require Democrats to stop their headlong rush to mimic Republicans and prompt them to seek to forge broader and deeper alliances between constituencies that do not now see one another as allies. But that would require the Dems to be political rather than play the bi-partisan game. What we need is more robust competition.
That sonic boom you heard was Johnson’s point swooping over David Broder’s shiny pate.
