Christianity, Culture, Vocation
The Dow Jones Industrial Average reached 14,253.77, a record high, going past the 14,198.1 it reached back in 2007, before the financial collapse. Does this mean the stock market, at least is fully recovered, and that the financial collapse can be declared officially over? Well, not necessarily. [Read more...]
Economics columnist Robert J. Samuelson says that the reason economic recovery is so slow in coming and the unemployment rate so high is a shift in the national psychology:
We have gone from being an expansive, risk-taking society to a skittish, risk-averse one. [Read more...]
Some business teachers and managing consultants still use their yellowed notes about Japan’s economic success, but that is way out of date. For decades, Japan’s economy has been in the doldrums. Why? And why hasn’t their economy ever bounced back? Economics columnist Robert J. Samuelson says the problem is that Japan has relied on government stimulus. Which is basically the strategy our government wants to follow. [Read more...]
According to the left, the financial crisis was caused in large measure by the repeal of the Glass-Steagall Act, making it possible for local commercial banks to make risky investments. Business & economics columnist Steven Pearlstein–who is himself a liberal–busts that myth:
I was watching “The Newsroom” last week, the latest hit show by the producer and screenwriter, when the brainy-but-beautiful economics correspondent for the fictional cable news network was explaining to her gutsy-but-impulsive executive producer how the world’s financial system recently came to the brink of collapse.
“So after the Great Depression, Congress wanted to put a firewall between the [banks and the] investment banks. They wanted to make sure that Wall Street could melt to the ground and the commercial banks wouldn’t be touched. They passed a law, the Glass-Steagall Act. Now you could be Gordon Gekko [tycoon in the movie “Wall Street] or George Bailey [small-town banker in the movie classic, “It’s a Wonderful Life”], but you couldn’t be both.”
Then, explains the brainy-but-beautiful correspondent, Ronald Reagan launched a two-decade push toward deregulation, which culminates in the repeal of Glass-Steagall in 1999. Suddenly, Gordon Gekko could make risky bets with George Bailey’s deposits, and the rest, as they say, is history.
It was vintage Sorkin: eloquent, fast-paced dialogue that perfectly channels the liberal political/cultural zeitgeist, transforming what appears to be a complex story into a simple morality play.
The only thing is, it’s not true — not even close. Yet it has been repeated so many times — on PBS and NPR, in the liberal blogosphere, on very-serious Op-Ed pages, in an Oscar-winning documentary — that whenever I give a talk to a group of college students about the financial crisis, the first question predictably is, “Yeah, isn’t it all really about the repeal of Glass-Steagall.”
But why let facts get in the way of a good screenplay?
Facts such as that Bear Stearns, Lehman Brothers and Merrill Lynch — three institutions at the heart of the crisis — were pure investment banks that had never crossed the old line into commercial banking. The same goes for Goldman Sachs, another favorite villain of the left.
The infamous AIG? An insurance firm. New Century Financial? A real estate investment trust. No Glass-Steagall there.
Two of the biggest banks that went under, Wachovia and Washington Mutual, got into trouble the old-fashioned way – largely by making risky loans to homeowners. Bank of America nearly met the same fate, not because it had bought an investment bank but because it had bought Countrywide Financial, a vanilla-variety mortgage lender.
Meanwhile, J.P. Morgan and Wells Fargo — two large banks with big investment banking arms — resisted taking government capital and arguably could have weathered the crisis without it.
Did U.S. investment banks create a shadow banking system and derivatives market outside the normal regulatory framework that encouraged sloppy lending and created what turned out to be toxic securities? You betcha.
And did regular banks make some of those bad loans and buy up some of those toxic securities? Yes, they did.
But that was as much a problem at the banks and investment banks that combined as those that remained independent. More significantly, the bulk of the money that flowed through the shadow banking system didn’t come from government-insured bank deposits. It came from money market funds, hedge funds, pension funds, insurance companies, foreign banks and foreign central banks.
via Steven Pearlstein: Shattering the Glass-Steagall myth – The Washington Post.
Europeans are torn about the best approach to fix their messed-up economies: austerity (cutting government budgets and deficits) or stimulus (the government spending even more money and running up even bigger deficits in an effort to jump-start economic growth). Austerity, as recommended by Germany, had been the plan, but recent elections in France and Greece have favored the pro-stimulus side. Who is the role model for this position? President Barack Obama and his stewardship of the American economy. See Germany, U.S. head to G-8 summit with starkly different economic policies – The Washington Post.
Historian Richard Striner proposes a solution for our economic woes:
Using the monetary methods of Lincoln, updated to employ the inflation-fighting tools of the Federal Reserve, we could pay for a faster recovery and a great many worthy projects without higher taxes, without more national debt, and believe it or not, without inflation. How? By letting Congress exercise a little-known power that is used (very quietly indeed) by the Federal Reserve: the power to create new money.
If you’re skeptical about this assertion, ask Federal Reserve Chairman Ben S. Bernanke. In an interview with 60 Minutes on March 15, 2009, Scott Pelley asked Bernanke to state the cost to American taxpayers of the Fed’s attempts to prop up banks.
Bernanke: “It’s not tax money. The banks have accounts with the Fed … so, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money.”
Pelley: “You’ve been printing money?”
Bernanke: “Well, effectively.”
If the Federal Reserve can create new money, couldn’t Congress do the very same thing? The answer is yes, and here’s the precedent: the Legal Tender Act of 1862, in which the Republican-controlled Congress authorized creation of “United States Notes,” known as greenbacks, that were printed up and spent into use.
via The American Scholar: How to Pay for What We Need – Richard Striner.
He is serious. His reasoning about how this could work defies excerpt, so read it yourself.
New technology is unlocking vast amounts of natural gas in the United States, enough to have a huge economic impact. Yes, it involves “fracking,” the controversial practice of pumping chemical-laced water into shale deposits, but improvements in that technique are starting to satisfy all but the most zealous environmentalists. I’m glad to see companies from my native Oklahoma are leading the way. Businessweek has a big story on the topic with the deck below the headline, “Unlocking vast reserves of shale gas could solve the energy crisis, the jobs crisis, and the deficit.”
“The United States,” [energy company CEO Aubrey] McClendon boasts, “has the capacity to become the Saudi Arabia of natural gas.”
A tall man who wears his wavy silver hair long by CEO standards, McClendon, 52, exudes the confidence of someone who’s certain he’s seen the future. Exploitation of newly accessible supplies of gas embedded in layers of what’s known as shale rock, he predicts, will help revive domestic manufacturing and change the terms of debate about global warming. “It’s a new industrial renaissance,” he says. . . .
Encouraged by the availability of inexpensive and cleaner domestic gas, some electric utilities are replacing their coal-burning capacity with gas-fired units. Energy-intensive manufacturers of chemicals, plastics, and steel are beginning to bring home operations that they exported years ago. “We believe natural gas must be part of any discussion on strengthening our country’s long-term economic health,” Mulva said in Detroit. “It should also be part of any discussion on improving energy security, protecting the environment, and, yes, creating jobs.”
On the economic potential of the nascent shale revolution, even some career environmentalists sound impressed, if cautious. “This thing is a potential game-changer,” says Fred Krupp, president of the New York-based Environmental Defense Fund (EDF). Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30 percent of the country’s natural gas supply. That proportion is heading toward 50 percent in coming years. The U.S. passed Russia in 2009 to become the world’s largest producer of natural gas. An Energy Dept. advisory panel on which Krupp sits estimated in August that more than 200,000 jobs, both direct and indirect, “have been created over the last several years by the development of domestic production of shale gas.” At a moment of 9.1 percent unemployment nationally, additional decently paid work is just one potential benefit. “Natural gas burns cleaner than coal, emits less in the way of greenhouse gases, and avoids mercury and other pollutants from coal,” Krupp points out. “So this could be win-win, if—and this is a big ‘if’—we do it the right way.”
via Could Shale Gas Reignite the U.S. Economy? – Businessweek.
The Greeks founded Europe, and now they may end it. And the vehicle for both is the same: Democracy.
The European powers carefully crafted a deal to bail out Greece, forgiving half of their debt at the cost of significant reforms and austerity measures. With this agreement, the world’s stock markets soared. But then the Greek government, despite its earlier agreement, suddenly decided to put the accord to the vote of the people. Since the population seems opposed to austerity, the prospect of a referendum has cast the agreement into doubt, sending the world’s stock markets into another dive and shaking the economic foundations of the Eurozone.
World leaders convening at this resort [Cannes] for a long-planned summit find themselves confronting a suddenly acute crisis over Greece and signs of an economic slowdown throughout Europe that may narrow their room for action.
Greek Prime Minister George Papandreou left a cabinet meeting in Athens early Wednesday with his government intact — for now — and backing his plan to hold a national referendum on the country’s latest international rescue program.
World leaders will gather in Cannes, France, on Nov. 3 and Nov. 4 to discuss Europe’s debt crisis and other economic issues. Thousands of protesters are gathering in France to urge the G-20 leaders to focus on the poor.
But his call for a popular vote on Tuesday has jeopardized the rescue plan and upended the agenda for Group of 20 leaders. Papandreou has been called to a meeting here Wednesday night to explain himself.
This was to have been a summit where the G-20 — the forum where industrialized nations and the leading developing economies compare notes on the world economy — puts its stamp on a plan that convincingly appeared to settle Europe’s lingering financial crisis.
Instead, with Cannes under a security lockdown that has made its streets into a virtual ghost town, the group will be looking for ways to avoid even greater problems. The 17-nation euro region is trying desperately to navigate between the budget-cutting and reform needed to bring down high levels of government debt, and the tepid economic growth that is sapping incomes, causing chronically high unemployment and straining political systems.
via World leaders to confer with Greece over referendum call – The Washington Post.
Do you think the Greek government was right to put the question of accepting the economic package to a popular referendum? Does the world’s economic problems bring us to the limits of Democracy, the possibility that people will not vote to suffer, even when the alternative may be suffering on a far greater scale? Can you see something like that happening here, with voters rejecting efforts to cut back federal spending AND repudiating new taxes AND demanding ever more entitlements, to the point of national bankruptcy?
UPDATE: The Greek government has now scrapped the referendum.
Democrats are attacking Republicans as lackeys for Wall Street. President Obama has thrown his support behind the Occupy Wall Street protesters. He wants to pour on more regulations and restrictions to big investors and banks and to take advantage of the public backlash against big corporations. And yet the denizens of Wall Street are giving Barack Obama much more money than they are giving Republicans. In fact, Mitt Romney’s old company is contributing more money to Obama than to their former CEO!
Despite frosty relations with the titans of Wall Street, President Obama has still managed to raise far more money this year from the financial and banking sector than Mitt Romney or any other Republican presidential candidate, according to new fundraising data.
Obama’s key advantage over the GOP field is the ability to collect bigger checks because he raises money for both his own campaign committee and for the Democratic National Committee, which will aid in his reelection effort.
As a result, Obama has brought in more money from employees of banks, hedge funds and other financial service companies than all of the GOP candidates combined, according to a Washington Post analysis of contribution data. The numbers show that Obama retains a persistent reservoir of support among Democratic financiers who have backed him since he was an underdog presidential candidate four years ago.
Obama’s fundraising advantage is clear in the case of Bain Capital, the Boston-based private-equity firm that was co-founded by Romney, and where the Republican made his fortune. Not surprisingly, Romney has strong support at the firm, raking in $34,000 from 18 Bain employees, according to the analysis of data from the Center for Responsive Politics.
But Obama has outdone Romney on his own turf, collecting $76,600 from Bain Capital employees through September — and he needed only three donors to do it.
The battle for Wall Street cash has become a crucial subtext in the 2012 campaign, which is shaping up to focus heavily on federal banking and markets policies and the struggling economy.
Top Republicans have courted major U.S. bank executives and financiers, arguing that Obama’s policies have hurt them, while Democrats are seeking to turn the erosion of support on Wall Street to their populist advantage.
Obama’s ties to Wall Street donors could complicate Democratic plans to paint Republicans as puppets of the financial industry, particularly in light of the Occupy Wall Street protests that have gone global over the past week.
via Obama still flush with cash from financial sector despite frosty relations – The Washington Post.
Can anyone explain why donors would contribute to candidates against their interests? Or do these donors think that Democrats would be far more likely to bail they out again than Republicans? What all is going on here?
One side effect of the foreclosure crisis: Many banks do not want to hold and pay taxes on run-down properties that no one will ever want to buy. So they are razing the decrepit buildings that plague so many of our big cities and are donating the lots to new land banks. These, in turn, are making the land available for next to nothing for new development and neighborhood improvement projects. (These include churches, which in some cases are getting land for expansion for pennies.) Thus we have an example of capitalism’s “creative destruction.”
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