We’ve got to make sure that banks are recapitalized in Europe so that investors have confidence. And we’ve got to make sure that there is a growth strategy to go alongside the need for fiscal discipline, as well as a monetary policy that is promoting the capacity of countries like a Spain or an Italy to put in place very tough targets and some very tough policies …. We’ve got to put in place firewalls that ensure that countries outside of Greece that are doing the right thing aren’t harmed just because markets are skittish and nervous. — Barack Obama, at the G-8 meetings.
If there ever was any remaining doubt about Barack Obama’s supine posture toward the financial and banking industries, this should dispel it once and for all.
This is gobbledygook on so many levels it’s hard to know where to begin. First of all, banks have already been “recapitalized” in Europe to the tune of 1 trillion (with a “t”) Euros just three months ago and they simply rat-holed the money, just as with the TARP bailout here in the US. Has any of that “quieted” the markets? Stimulated business and consumer lending? Unleashed the mighty power of the “job creators”? Of course not.
And what’s this nonsense about a “growth strategy alongside fiscal discipline”—all the while maintaining “tough targets and very tough policies”? How in the hell is that supposed to work? If the answer is to get back to “growth” (it’s not the answer, it’s just another way to kick the can down the road, but that’s another much larger and much more holistic and ecological discussion) then that means more spending, since that’s how our economic edifice works; you just don’t get increased spending running alongside “fiscal discipline” and “tough targets” (code for austerity). Fiscal discipline is less spending, by definition.
A photo of the economy, taken just last week by the Hubble Space Telescope.
Firewalls. What the hell is that? In this context (Greece, predominantly, and Spain and Italy etc peripherally) it means a pile of public money to backstop the assets of power and privilege; it means shoring up institutions that are already quite possibly insolvent anyway because they’re “too big to fail” without cratering the whole economy. Banks. Finance Houses. Insurance Companies. It means doing those things with public money, and continuing the transfer of wealth from public to private hands.
No mention of holding any of the Banking sector to account for their compulsive gambling habits. No mention of reinstating regulations which prevented most of the worst excesses quite successfully for decades. No mention of requiring financial institutions to mark their assets to current market values in a fully transparent way, so that it’s possible to know just what the situation actually is. No mention of regulating the size of any of these institutions so that if (when, more like) they screw up and become insolvent they can just be allowed to fail without crashing everyone’s life. (We have no idea of the actual condition of most of these institutions, since they are not required to value their assets at current market rates, nor are they required to divulge exactly how they are valuing them, even to their own shareholders. Thus any real picture of actual liquidity is quite opaque.)
Obama has been taking heat from the right for being economically illiterate, and it’s looking more and more as if that’s truly the case, though not remotely for the reasons which engender the criticism. It’s hard to imagine what he, or any other President, could do to coddle the usual suspects any more than he is already doing. That he should be demonized, with no small amount of success, as a rabid socialist is almost beyond belief.
In any case, it’s clear that the ballooning problems in Europe are not being resolved by forcing ordinary people to just suck it up, and now the IMF and other organizations are warning, finally, of consequences that have been obvious for a long time to anyone with an IQ exceeding their shoe size. The onerous policies championed by the northern EZ nations, principally Germany, have now failed miserably, and to top it off the political players responsible are increasingly getting hammered in the election process. What this portends is not yet clear, though the preparations to throw Greece under the bus are proceeding apace.
What happens when the situation in Spain and Portugal, which are now about where Greece was a year or so ago, deteriorates further is anyone’s guess. Not to mention Italy and quite possibly France waiting in the wings.
This is not just another blip on the “boom/bust” cycle radar—this is structural, it’s deep, and it’s global. It’s going to be a rough ride.
I suppose we could take bets on whether we’ll make it through the election before things get really interesting. It’s hard to imagine how Greece can just bump along as is until November, and judging by the sustained capital flight from Greek banks over recent months, almost nobody expects it to. Greece will almost certainly default, that much is increasingly clear, as we are now seeing a blizzard of articles in the press downplaying how serious that outcome is likely to be, and how it will all be “manageable”.
Given how much work has gone into ringfencing Greece in the last year, it probably will be, though since the true state of affairs in the financial sectors is unknown, and unknowable, through lack of transparency, the effects will not be revealed until they actually happen. Beyond that, it’s all brand new territory for which there really are no accurate maps at all.
http://www.huffingtonpost.com/charles-ferguson/how-wall-street-became-a-_b_1536475.html
Welcome back Gunny. Had a good eclipse?
yeah, we had a fun trip. Met some friends down there and watched the eclipse (didn’t get as dark as I expected—the moon was in its perigee phase. Or is it apogee?) then went out to dinner. Talked to a couple of galleries down there about carrying some of my work, so the whole trip can be a write-off.
Ate some damn fine food, including a dead wasp baked into my bread pudding dessert.
Me, to the waiter, and quietly; “I think you might like to tell the chef about this.”
Waiter; “It looks like a raisin.”
Me; “Raisins don’t have legs, I think.”
Waiter; “Oh.”
Me; “Nor are they black and yellow striped, no?”
Waiter; “Oh dear.”
Good change of pace for the both of us, after a rather grim winter and early spring with some heavy duty family stuff. Perfect weather. I gotta say though that the drive down there and back revealed some horrendously dry conditions in the countryside generally. Could be a really bad fire season. Several fires already burning in fact, and the haze from them is almost state-wide.
Good to have you back.
I am very worried about the world situation, and about the increasing likelihood of a republican win in November. The GOP refuses to learn the lessons of Europe so will repeat the same mistakes here.
The future suddenly does not look so bright.
You’ll like Nick Hanauer on TED. Forwarded from an old school friend who works with the homeless in Sydney Australia.
Elena
I’m curious about where that sense of “impending doom” is coming from. Is it that you think the duct tape may not hold the economy together until November, and that the electorate will then turn to the GOP (or simply away from BO) reflexively?
Or is it something else?
Polls are very tight. Although Intrade, which I have a huge amount of respect for, puts Obama at 58% to win.
And I know the electoral college still shows Obama with an advantage.
But I am very worried about Europe. Not Greece so much because, as you so rightly point out the damage may be ring fenced.
But the other countries? If they fail, if the Euro fails, the fall out could consume the world in another recession/depression.
Not very Polly-annaish today, Gunny.
And by the way, CIF is just getting worse. I can’t even bring myself to comment there, although I have to tell you that Sib is one remarkable commenter. He seems to be deftly fielding all republican talking points in ways that I can only dream about.
Good for him (her?)
And by the way, Gunny, I think Bain is a distration. Sure, Obama needs to bring it up. Its important to challenge the Romney “I have business experience and therefore I will fix the economy” fantasy.
But if that’s all he’s got, we’re in trouble.
Obama needs to get down to it and actually tell people why hope change did not work out the way we all expected. Tackle it head on.
And explain what he is going to do in his second term even if he has a congress that won’t pass anything.
Elena – perhaps Tom Wolfe was right that….
This in today’s Scotsman newspaper from Nick Clegg.
(Haven’t surfed their before – whacky comments)
CiFA does suck, and i hate the new format. It’s occured to me that they probably do it as a feed page now, and that the full CiFA page shows many of the UK comenters now, because the launched CiFA after MT left has been probably an unqualified failure. What happened to Ollie? That didn’t last too long.
Expat – interesting quote.
I am not worried about fascism here, but I am worried about control of government and corporations being increasingly in the hands of a few people.
I am worried about the fact that special interests can get whatever they want in this country if they have enough bucks.
I guess it has always been that way. But at least a few years ago – when we were all young – it was possible to aspire to join the people that make a difference.
They were saying on the news last night that the Facebook fiasco proves that the financial system is absolutely loaded in favor of insiders. Its increasingly unlikely that a guy off the street can make a ton of money from Wall Street investments.
Porn – yes Ollie seems to have faded. You would think in this election year they would get somebody really special for CIF AMerica with a significantly more prolific output than either AMC or Ollie.
I still enjoy reading Mike T over on the DB, but the commenting there is so dire I just gave up. If I see you or lefthalfback I may jump in from time to time.
Elena -
Yes, the comment system really sucks over there at the Beast. I think Lefty got it right a few threads ago over there – MT should be at the Graun but it’s too late now, and things have probably just moved on. I’ve left a message or 2 over there to Kevin, but couldn’t find the posts later on to check back. Gunny – anyway you can get in touch with Kevin and get him back on here?
A few days ago just for the pure joy of schaudenfreude i had the google graph of Facebook trading on for the last hour or two of trading for the day, it was kind of fun to watch it tank in real time. I think part of the lesson there is that people really aren’t actually as stupid as they’re made out to be – investors realized that the emperor had no clothes.
PS
Didn’t know he had left. I figured he was busy with his new job and would surface again whenever he got the time.
Am I missing something?
Agree about the commenting on TDB, and also think that Tomasky is ever more immersed in the DeeCee bubble, consequently less and less able to see the wood for the trees, but then you know how I am.
It’s not even June yet, and his obsession with every little blip in the polling is tiresome, at least to me. I really don’t think he quite understands what’s actually going on, and he thinks that we’ll be able to “grow” our way out of the present economic slump if only the GOP could be successfully dissuaded from their political intransigence. The full implications of our new baseline energy/resource conditions have not yet penetrated, and the notion that our modernity (not just in the US, now) is not sustainable in anything like its present form has not yet crystallized for him.
And I still haven’t forgiven him for his gung-ho support of the Afghanistan occupation, which is precisely the disaster it was always going to be, along with a few other neo-con leanings which he tends to support. Torture, not least. Only when “necessary” of course. He’s a hawk at heart, and a big believer in US “power”. He seems to think that what we’re looking at now is a repeat of historical conditions somehow, and the “answers” can be found in his (considerable) historical scholarship. He’s in for a rude awakening, methinks.
Gunny -
As to Kevin – i’ve seen him on TDB every now and again. He seems to have disappeared from here though.
Re: MT – Yeah, definitely too much Inside Baseball. It’s reminding me of what used to irritate me at the Graun. Every now and again he needs a reminder that the shit that happens in congress isn’t a chess game, the pawn that gets sacrificed corresponds to an actual poor slob that gets hurt.
Elena, you’re very kind. Thank you for the encouragement!
If it helps to clear away some of the mound of suffocating rubbish which cloys political discussions (and especially CiF at the moment), and makes it easier for folks like you to add your voice to the discussion I will be well satisfied.
Sib/Dan