Hot breath of doom

America is choosing to slurp up plutocratic bullshit:

[H]ow do you revise the historical narrative when the evidence of what led to economic catastrophe is so overwhelming and the events at issue so recent? You and your political allies just do it. And you bet on the old axiom that a lie is halfway around the world before the truth can tie its shoes.

If you are Rep. Paul Ryan, you ignore the fact that our federal budget deficit has ballooned more than $1 trillion annually since the financial collapse. ... Instead of focusing on the real cause of the deficit, you conflate today’s budgetary disaster with the long-term challenges of Medicare so you can shred the social safety net.

If you are Alan Greenspan, you retreat from your 2008 epiphany in which you acknowledged your “state of shocked disbelief” that “the whole intellectual edifice” of your deregulatory ideology had collapsed. ... [A]fter driving the economy over the cliff, you offer to give driving lessons.

If you are JP Morgan’s chief investment officer, you refute the statement that your chairman and chief executive, Jamie Dimon, made to the FCIC in 2010 blaming the failures of major financial institutions on “the management teams 100 percent and . . . no one else.” ...

If you are most congressional Republicans, you turn a blind eye to the sad history of widespread lending abuses... You refuse to acknowledge what went wrong and then try to stop efforts to make it right.

Societies that fail to learn true and hard lessons from events, fail. Failure is the path that our richers and betters have chosen for us. They have propagandized vast portions of the population into believing that liberals are blame, when we are the exact people who have been most right about how to structure an economy to nurture the middle class and grow the fastest. Instead, like the Russians before us, we are destined for oligarchy, authoritarianism, and the end of the American dream.

I think we're past the tipping point. After the Bushists fucked up everything, and Democrats swept into office in droves, Karl Rove's thousand-year permanent majority for government by wealth is tantalizingly within reach for the forces of reaction. And all Democrats can do is dither and cave.

Republicans will buy the 2012 election, the Supreme Court has put it on the block. They will own all three branches of government. They will kill the filibuster, as we should have, and consolidate their already firm grip on the federal judiciary. They will sweep away the twentieth century to restore the Gilded Age, despite the repeated clear and dismal failures of their economic policies. But this century's Vanderbilts and Rockefellers will be ecstatic. That's what they're buying.

Col. Klink defense

So-called Maestro Alan Greenspan, still pining for Ayn Rand's seductively simplistic rationalization of infantile selfish fantasy, reasserts all the things he "knows" that the Great Recession has disproven. As the Great Depression which birthed him had disproven before.

Only an honest man could abjure the convictions of a lifetime, based on new (to him) experience. Instead, Greenspan quote-mines his inscrutable mumbles for something, anything exculpatory:

He pointed out that the Fed had warned about subprime lending and low-down-payment mortgages in 1999, and again in 2001.

There's no time - or authority - left for Greenspan to redeem himself. He had a run of luck, and then the maelstrom... He can't fix it, so he can't let himself regret letting it blow up.

Citigroup's executives, fat and happy and well-paid to ignore the truth, essay instead the Sgt. Schultz defense.

“No one, including myself, ever conceived we would see real estate prices plunge 30 to 40 percent, with homeowners walking away from homes en masse for the first time ever,” Thomas Maheras, the former co-head of Citi’s investment bank who oversaw its mortgage activities, said.

Lots of people knew there were problems. If educational TV is running "Flip That House" marathons, warning! People with no special training were wondering where all the buyers for million dollar houses would come from. Maheras was raking in too much money to notice.

Brooksley Born gets the last word:

“The Fed utterly failed to prevent the financial crisis,” she said. “The Fed and other banking regulators failed to prevent the housing bubble, they failed to prevent the predatory lending scandal, they failed to prevent our biggest banks and holding companies from engaging in activities that would bring them to the verge of collapse without massive taxpayer bailouts.”

Mystery achievement

Here's what I want to know: How can it be that I can anticipate so many of the points of one prescient economist (PDF), when I don't have a Ph.D. or even an undergraduate major in economics? Clips (all typos mine since the fricking document won't allow cut and paste):

Competition forces them to flirt continuously with the limits of illiquidity.
...
My main concern has to do with incentives. ...
...
First, the way compensation relates to returns implies there is typically less downside and more upside from generating investment returns. Managers, therefore, have greater incentive to take risks. Second, their performance relative to other peer managers matters, either because it is directly embedded in their compensation, or because investors enter or exit funds on that basis.

The knowledge that managers are being evaluated against others can induce superior performance, but also a variety of perverse behavior.

One is the incentive to take risks that are concealed from investors - since risk and return are related, the manager then looks as if he outperforms peers given the risks he takes. Typically, the kinds of risk that can be concealed most easily, given the requirement of periodic reporting, are risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. ...

A second form of perverse behavior is the incentive to herd with other investment managers on investment choices because herding provides insurance the manager will not underperform his peers.

I think it's my constitutional lack of blind obeisance - to Alan Greenspan, in this case - and my hair-trigger bullshit detector.

Not to say that I didn't learn a lot from reading the paper. I did. Not that the financial markets aren't much more complex than I even understand. They are. Nonetheless, I saw the clear outlines and their dangerous implications.

It was probably because I was reading Paul Krugman.

(h/t the estimable Krugman)

Oops, my bad

Click image for full Bruce Plante/Tulsa World cartoon.

Twenty-five-year-old lie

What's the trouble with Social Security?

Twenty-five years ago, Alan Greenspan chaired a panel that recommended fiscal reform of Social Security in face of an unfunded shortfall due to the demographic bulge of retiring Baby Boomers. Ronald Reagan and the then-Democratic Congress accepted the bulk of the panel's recommendations, and the result was later benefits, higher payroll taxes, and taxable benefits for the affluent.

Higher payroll taxes had the biggest long-term impact. Basically, this was pitched as us Boomers salting away money for our retirements. Fair enough.

The trouble, though, is that we as a nation didn't actually salt the money away. We used it to make the deficit appear smaller.

Now, Serious people keep coming back to the well to say things like this:

"Social Security's negative cash flow becomes so horrendous -- hundreds of billions of dollars a year -- that our nation's 20- and 30- somethings aren't going to let the government cover it, regardless of how many Treasuries the trust fund holds. So forget about 2039 or whenever. Starting [sic] worrying about 2016 or 2017," [Forbes editor Allan] Sloan wrote.

(Forbes published this is March. You have to wonder what the news hook is for this. With the Republicans totally out of power in 2009, maybe it's just the last chance to push the same old story.)

As ever, here are the choices:

• Reduce benefits - Turn the program and the 1980s reform into a lie and theft to boot. Tell seniors they're screwed, and it's tough.
• Borrow trillions in seed money for privatization - Again, the 1980s reform becomes a thieving lie. The poverty reduction that was a main goal is left to the stock market, and you know how well that works.
• Tax a few hundred billion in general revenue per year to balance the accounts - This isn't pleasant, but it's a relatively small number. It also refuses to claim for fiscal convenience that the responsible act of the 1980s was actually a filthy lie.
  

Borrowing our way out of this might conceivably be another option, but we have so many other massive bills coming due (Iraq, the Wall St. bailout, at least one more stimulus, not to mention debt service on the trillions we already owe) that it's just not a credible one.

I actually support raising the retirement age, even as far as 70, despite the obviously adverse effect on me. I would also remove the cap on FICA-taxable earnings, where Barack Obama proposes new FICA taxes only on incomes over $250,000. (Either my or Obama's measure might convince Republicans that FICA actually is a tax, even though they have ignored it completely for a decade in talking about relative tax burdens.)

'Cause I'm left-handed

Transparency is a core value of open societies, but it isn't to the sort of Ayn Rand price-on-everything universe that the Bushists (and Alan Greenspan) profess to love as long as it doesn't hurt their cronies.

Corporations, of course, may use Rand-like laissez-faire rhetoric, but they really just want the playing field tilted in their favor. That's why all copyright law for the past at least twenty years has been destructive of public rights and fair use. Digital rights management, enabled by the Digital Millennium Copyright Act, gives them everything and the rest of us, whatever's left.

Heart on your sleeve

This morning's Wall Street Journal shows the news angle of its new management with this teaser above the masthead on the front page:

In Interview, Greenspan Hits Democrats, Too

If you're too thick to understand that, the headline on A3 is:

Greenspan's Dismay Extends Both Ways

Reporter Greg Ip helpfully "corrects" the impression that Greenspan is only put out with the Republicans.

Trouble is, Greenspan's opinions about Democrats aren't news, while his criticisms of Republicans - since he is one - are.

I suppose I could make the same critique of this post. Bias in the WSJ is old hat; the difference is that the Journal's news pages used to be relatively immune from the stone age politics of the editorial page.