Monday, March 23, 2009

Geithner Releases Public/Private Investment Partnership, Dow Soars 497

Feels like springtime in Obamaland today! Markets worldwide responded favorably to the Tim Geithner's Public/Private Investment Partnership to restore solvency in America's too-big-to-fail banks. But will his plan, in its author's words, get "our financial system back to the business of providing credit to working families and viable businesses, and help prevent future crises?" Here's a running list of responses PRO, CON and NEUTRAL
  • John Authers asks an underlieing question about bank solvency (3/23)
  • Bill Gross buys in (3/23 CNBC video)
  • Paul Krugman all but despairs over the Geithner plan (3/23)
  • Clive Crook asks Krugman to think twice (3/23)
  • Tim Geithner argues that his plan is "part of an overall strategy to resolve the crisis as quickly and effectively as possible at least cost to the taxpayer. " (3/23)
  • Yves Smith, riffing off a WSJ editorial, talks about Fed rescue plan exit strategies (3/23)
  • Mike Whitney protests the Geithner plan's 5%/95% public/private investor ratio (3/23)
  • Felix Salmon warns that the plan is yet another "thing-that-has-to-go right in order . . . to work." (3/23)
  • Wall Street Journal says the plan "isn't the worst idea the federal government has ever had" (3/24)
  • "NYT "Opinionator" quotes from five mainstream media takes on the plan (3/24)
  • NYT "Room For Debate" compares responses to the Geithner plan of Krugman, Simon Johnson, Brad DeLong, Mark Thoma (3/24)
  • Mike Hudson takes a broad 3,000 year view to today's financial crisis in this 10 minute video (2/20). Here's his indispensable 2006 Harper's cover story, "The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse"
  • New York Times voices doubts about the Geithner plan (3/24)
  • Joseph Stiglitz says the plan robs the taxpayer (3/24)
  • Martin Wolf says an adequate rescue plan is still far away (3/24)
  • Czech President of the European Union calls the plan "A way to hell". Also, Financial Times (3/25)
  • Rick Santelli of CNBC asks protests "two years" of government neglect of Nouriel Roubini's warnings about dangers of government exacerbation/funding of the credit bubble. (Go to 7:30 of this 10 minute February Durable Goods Report (Alt. link: s ) (3/25)
  • London Economist sits on the fence (3/25)
  • Nouriel Roubini, "Dr. Doom," sees POSITIVES in the plan! (3/25)
  • Lee Brodie, of CNBC's Fast Money crew, says Geithner may have rescued America (3/25)
  • New York Post reporter Mark DeCambre says Geithner plan lets City and B of A "buy back laundered loans at lower rates" (3/25)
  • Yves Smith, finance blogger, approves Willem Buiter of F.T. taking "Fed and Treasury to Task" (3/26)
  • Steve Waldman, finance writer, critique New Yorker finance writer James Surowiecki (scroll down to 3/25)
  • Investor's Business Daily, citing Friedrich Hayek, warns against government (bureaucrat) control of the economy (3/27)
  • Nouriel Roubini in this 20 min. Bloomberg TV interview says the plan "won't stop bank nationalizations" (3/28)
  • Newsweek article says Treasury Secretary Geithner is "hitting his stride" (3/28)
  • Newsweek Cover Story says the White House is ignoring Paul Krugman's criticisms of the Geithner plan (3/28)
  • Jeffrey Sachs, Yale economist, asks "Will Geithner and Summers Succeed in Raiding the FDIC and Fed?"
  • Mike Whitney, finance writer, citing DeCambre, Sachs and Stiglitz says "the country will undergo the greatest period of bank consolidation in its 230 year history."
  • New York Times charges Congress with "bipartisan resistance to a thorough investigation of what caused the collapse" (3/29)
  • Richard Posner, U.C. Law and jurist, says the Geithner plan "will simplify the banks' balance sheets by removing assets of uncertain value and replacing them with cash (3/29)
  • Gary Becker, U.C economist and Nobelist, says "it is a strange program indeed where banks get subsidized in proportion to how many 'bad' assets they hold." (3/31)
  • Joseph Stiglitz, Nobelist, says government overleveraging replicates the bank overleveraging that caused the meltdown.(4/1)
  • Jonathan Weil , Bloomberg, "Obama Stakes His Fortunes on Failed Banksters" (4/9)
  • Mike Whitney examines the recent report on the Geithner bank rescue plan released by the Congressional Oversight Committee chaired by Elizabeth Warren.(4/11)
  • Jeff Cox at says "Flood of US Debt Threatens To 'Crowd Out' Other Borrowers" (4/13)
  • Financial Times Tarp investigator seeks evidence of book fiddling (4/13)
  • Nouriel Roubini coming on strong for the first time in several weeks, says "Testing the Stress Test Scenarios: Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded" (4/13)
  • Elizabeth Warren, Harvard Professor and Chair of the Congressional Oversight Committee, is interviewed by John Daley at Comedy Central (4/15)
  • Simon Johnson, MIT economist and former chief economist for the International Monetary Fund, argues in the Atlantic Monthly that "the financial industry has effectively captured our government" and that "recovery will fail unless we break the financial oligarchy that is blocking essential reform" (5/09)
  • Geithner Testimony arguing for bank stability sparks Wall Street rally (4/21).
  • Wow. China, Backing Russia in Advance of G20 Summit, Calls for Replacement of Dollar as Global Reserve Currency

    Doubtless in anticipation of the April 2 G20 meeting in London, China today joined Russia in calling for the dollar to be replaced as the world's global reserve currency by a basket of currencies managed by the I.M.F. Here's the story in the Financial Times, the International Herald Tribune, Agence France Presse and the Prudent Investor. (Question: did Nouriel Roubini see this coming? He's been saying that even though "the American Empire" is on the decline, the dollar, despite rough spots, looks secure as the global reserve currency over the next twenty years.)

    The news from China strikes me as a game-changer. (My buddy Big Bill says it's just sabre-rattling.) But I don't see it mentioned on the New York Times or Wall Street Journal. Or CNBC. U.S. markets seem unperturbed. In fact, the Dow is up 300 points at the moment on the strength of a surprisingly strong housing report and positive response (including from global markets) to the Obama administration's release this morning of its $1 trillion private-public plan to save America's financial system without nationalizing the big banks. On CNBC, guest host lefty Democrat Howard Dean supported the Treasury plan in several clips and righty Republican Dick Armey opposed it one clip. While Dean is an able advocate, and although I've felt the Armey is a blowhard, I find myself feeling sympathy towards Armey's assertion that he has never thought any bank as "too big to fail". Interesting to compare his take on the Fed with those of lefty Fed critics like Matt Taibbi and Mike Whitney. Interesting similarities. Also worth reading is Mike Hudson's critique of the "house burning down" metaphor used by Ben Bernanke in his "60 Minutes" interview March 15 (at Mike's site, scroll down to "Articles").
    • Jim Willie, an avowed friend of gold and foe of the dollar, reading Asia News, says the Chinese are planning to replace the dollar with the yuan as global reserve currency (3/27)
    • Asia Times - good source for news and commentary on the yuan/dollar story
    • Celestine Bohlen at Bloomberg says the time has not yet come for the dollar's replacement as global currency (3/31)
    • This three part video interview of economist Anantha Nageswaran in the Financial Times argues that the dollar's days are numbered (3/31) Here's Nageswaran's Blog
    • "New York Stock Exchange Runs out of Gold Bars: What Happens Next? (Market Sceptic, 3/31/09)
    • Paul Krugman says that China’s call for a new “super-sovereign reserve currency” is a sign of troubles ahead for a global economic recovery (4/3)
    • John Tamny of RealClearMarkets argues for the universal benefit (including to the U.S.) of a new global reserve currency that he says will brings a stability the dollar can no longer provide (4/7)
    • "China Slows Purchases of U.S. and Other Bonds" (NYT 4/12)
    • Economist Andy Xie argues "If China loses faith the dollar will collapse" (FT 5/5)
    • Gwen Robinson of FT gives the views of investor Jim Rogers, Black Swan auther Nassim Taleb, and three other analysts on the possibility of a dollar collapse ( 5/12)
    • America’s triple A rating is at risk U.S. financial media ignored story that was front-aged in FT. The gist: "Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit." (FT 5/13)
    • Nouriel Roubini discusses the possibility of an "Almighty Reminbi" and says the US must invest "in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation [in order to] "slow down the decline of the dollar, and sustain our influence in global affairs (NYT 5/14)
    • The Economist concedes that the world's new economic order "is more likely to be made in Beijing" than in the West, given the sway of creditor nations (5/14)
    • Investor Sahm Adrangi, in a thoughtful review of Richard Duncan's "The Dollar Crisis," predicts "that the dollar will collapse, and its ramifications could be as violent as when the credit markets cracked in July 2007." (Clusterstock via John Carney and Hunter at Distressed Debt Investing" 5/18)
    If this happens, how about the chinese word for harmony - tao or tiao - as the name for the world's new global currency?

    Friday, March 20, 2009

    President Obama and the "Obama spring rally:" Standing here. wondering, which way to go . . .

    Well that's how markets seem to feel in flat early morning trading today. That's also the first line of a gospel song by Thomas A. Dorsey, who wrote Precious Lord, beloved by Rev. King. Here it's sung by Mahalia. And really sung by Marion Williams.

    I myself am standing here wondering, scratching my head at the morning's headlines and op ed pieces. The President may well feel the same way ("Stunned," he told Jay Leno, is how he feels about the
    AIG Bailouts that have sparked national outrage.) The headlines are conflicted even polarized. Something is happening, a groundswell of hostility towards the likes of AIG and it's hardly conducive to generating anything like an informed consensus on the future of the American economy.

    The polarizing headlines include the dollar plummeting in the face of global doubts about Treasury Secretary's Geithner's shock stimulus plan announced Monday. Yet what's obsessing most Americans? Geithner's supposed foreknowledge of the AIG bailouts. Yet Alan Greenspan is now coming close to seconding Nouriel Roubini's call to nationalize (put in receivership) the supposedly too-big to fail "zombie banks" - the very banks that the Obama administration has committed itself, irrevocably it seems, to bailing out at a cost of trillions.

    On the op ed front, William Greider says that "Obama Told Us to Speak Out" but asks "Is He Listening"? Good question, but shouldn't Greider be asking if the nation's media are making it possible for the president to hear anything but outrage, whether populist or elitist? A friend just sent me Michael Wolff's Huff Post thrashing of Obama's Jay Leno appearance last night. Wolff says Obama is like Jimmy Carter: ineffective. I have my doubts about our President, but aren't there better ways for smart people to use their ink than this?

    For substantive critiques of the Obama administration, read Mike Whitney's "Bernanke's Witness Protection Program." For more than a year, Whitney has been writing presciently about the magnitude of present crisis. Here's the kind of discourse that Obama and the American people need to hear and process:
    Last week, investors backed away from Bernanke's TALF, even though the Fed promised to provide up to 95 percent of the funding (through low interest loans) to investors willing to buy distressed assets backed by student loans, car loans and credit card debt. The potential investors "objected to the level of scrutiny that dealers would have over their books, arguing that the dealers' rules attached too many strings. Dealers were saying they take plenty of risk to facilitate the program and need to be protected in situations where the collateral or the client made mistakes or wound up ineligible." (Wall Street Journal)
    7 PM CST. Is talk like this too risky for prime time TV? Hell no. The Fast Money crew on CNBC made these very points today. If clarity and transparency are important to economic recovery, surely the American people are entitled to hear too.

    Standing here wondering, which way to go / So much confusion down here below . . .

    Today, launching its "Future of Capitalism" Series, The Financial Times says that "The credit crunch has destroyed faith in the free market ideology that has dominated Western economic thinking for a generation. But what can – and should – replace it?"

    9PM CST. The Dow closed down 122 today at 7,278, a bit shy of 300 points below its March 18 Obama/Spring market rally high of 7554. On the positive side, the lead story at the CNBC website says that "Home Sellers May Flood the Market Soon" now that the rate for a 30 year fixed loan, thanks to Geithner's shock stimulus, has fallen to 4.25% (I'm hearing 4.75% here in Glenview). BTW Martin Wolf of the Financial Times here discusses the stronger/weaker stimulus debate going on between, respectively, the US (Geithner) and Germany. And he sides with Geithner's strong stimulus position. Geithner will need all the help he can get if Mike Whitney reads the tea leaves right:
    The TALF and the "Public-Private Partnership" are another slap in the face of the international community. They violate the spirit and the letter of the G-20 communique. It will be interesting to see if foreign holders of US Treasurys endure this latest insult in silence or if there's a sudden stampede for the exits. There's a sense that the world is getting fed up with the Fed's financial chicanery and would like to chart a different course. Enough is enough.
    Definitely not want the world wants to hear before the big April 2 G-20 summit in London. What's more, most Americans are oblivious to this meeting's importance. Background is here, here, here, and here. As a nation, we have our heads in the sand, do we not? A correctable problem, to be sure, but only, as I keep saying, with the aid of a compelling, prime-time civic media.

    Standing here wondering, which way to go / So much confusion down here below . . .

    What's confusing me now is NOT these problems, but how hard it is to find a way to win support for a media that will enable America to solve them, as a people. A unifying media that will help 300 million people think (more or less) with one mind. Isn't it time we got to work on this? Maybe, I hear a voice saying, after the NCAA. Myself, I hear the President, while defending his embattled Treasury Secretary, saying "I don't want to quell anger, what I want to do is channel anger in a constructive way." This is not a task for the pundits on Meet the Press or Face the nation on Sunday mornings. It's not a task for the nation's (mostly failing newspapers.) It is, rather, a task for all print and electronic media. It's time for the media to channel this anger constructively on intelligent prime time reality TV. That, in a word, is the business model that the nation's media and the nation itself are looking for. In an age of convergence like the present, these two are inseparable. So far, if I had to pick a success story, I'd say CNBC, for all its faults, is coming closest to doing the job of being a mediating media right.

    Monday, March 16, 2009

    The Obama spring rally pauses as Bernanke and 60 Minutes skirt the bank solvency issue

    Nouriel Roubini doesn't mince words. His March 14 post speaks of a "dead cat bounce" and a "bear market suckers rally". And of "a Ground Hog Day movie that we've seen at least six times . . . in the past year or so." Gotta say I love Nouriel even though one of my less enlightened friends jokes that I've become part of his terrorist network. But to show I haven't lost control of my affections, here's a comparison of Nouriel and Warren Buffet on the topic of bank insolvency that gives the laurel to Buffet. Then again, Kansas City Fed president Tom Hoenig here condemns Fed bailouts and calls for big banks to be "resolved [shut down] the old fashioned way."

    The Dow closed down a bit today at 7,216. Yet it was fast off the blocks in early trading, up 150 points on news that Fed Chairman Ben Bernanke's comments on CBS' "60 Minutes" last night were driving gains in early trading on the Dow. So this rally isn't just a "spring rally", it's an Obama rally fueled in part by the President's concerted efforts to boost investor confidence by putting an end to fear itself. Wow. Stakes are high. There will will be much egg on many faces - and a hard fall, I should think - if this rally fails.

    CBS boasted last night that no Fed Chairman had ever granted an interview like its "60 Minutes" interview with Bernanke. For the first time ever, Bernanke gave the viewing public inside glimpses into the heretofore sacrosanct Federal Reserve system: we saw the Fed Governors' 30 foot-ceiling, marble walled meeting room and a football-field sized underground vault where robot forklifts shuffled around shrink-wrapped pallets of paper money valued at $64 million each - too much for human hands to touch.

    Well la di da. A key question, only glancingly addressed in the interview, was on bank solvency. CBS' Scott Pelle puts it to Bernanke at 11:35 into the interview:
    Pelle: Are all the banks that you regulate solvent?

    Bernanke: I believe they are, yes, but we are doing a, um, a stress test right now, where we're looking at . . .
    Question: why Bernanke change the topic from solvency at present to solvency under the harsh hypothetical conditions of the stress tests? Why didn't Pelle press Bernanke on the solvency issue, which is critical not only for Nouriel and his "zombie banks" but for mainstream Republicans like Senator Richard Shelby and John McCain. What exactly is the basis for Bernanke's belief that the banks are solvent NOW? If they're solvent, wouldn't everyone benefit from knowing so now? To me, either Pelle dropped the ball or real doubts about bank solvency are keeping Bernanke (and CBS) from discussing this topic publicly.

    The flipside of this question is to ask Nouriel, Shelby & McCain how they know the banks are insolvent. I'd also ask Nouriel to what extent his case for a bear market hinges on the matter of bank insolvency? If restored to solvency, could the banks lessen or possibly even resolve the problems he predicts in his March 2 post:
    Of course you cannot rule out another bear market sucker’s rally in 2009, most likely in Q2 or Q3: the drivers of this rally will be the improvement in second derivatives of economic growth and activity in US and China that the policy stimulus will provide on a temporary basis: but after the effects of tax cut will fizzle out in late summer and after the shovel-ready infrastructure projects are done the policy stimulus will slack by Q4 as most infrastructure projects take year to be started let alone finished; similarly in China the fiscal stimulus will provide a fake boost to non-tradeable productive activities while the traded sector and manufacturing continues to contract. But given the severity of macro, household, financial firms and corporate imbalances in the US and around the world this Q2 or Q3 sucker’s market rally will fizzle out later in the year like the previous 5 ones in the last 12 months.
    Nouriel speaks of imbalances. Does this mean solvency? Ouch! Questions, questions, questions, they keep popping up, gotta get outside for some exercise or I'll go nuts, thank goodness spring has finally hit the Midwest (where it's best).

    Saturday, March 14, 2009


    The Dow rallies. The Obama administration juices the rally. Jon Stewart thrashes Jim Cramer, as discussed below. Is anyone orchestrating these events? Blog comments I've seen charge that Stewart, a big time Obama supporter, went after Cramer on March 12 only because Cramer had assailed the Obama recovery program on March 9 and March 11.

    Hmmm. Let's see. First, some background. The Dow has rallied sharply from its March 9 multi-year low of 6,547 to its March 13 close of 7,223. On March 2, with a sinking Dow closing at 6,726, President Obama made some cautiously bullish comments about investing. These struck one veteran observer as a risky case of presidential market timing. Indeed, they were widely seen as a buy sign. Still, the market continued to fall for a few days until hitting its multiyear low on March 9 and then beginning its "Spring rally", as CNBC fondly calls it.

    Yesterday, on March 13, the Dow closed at 7,223 thanks in part to a rosy assessment of the economy from Obama adviser Lawrence H. Summers. It seems clear that the Obama administration, after months of saying "things will get worse before they get better," felt the need to change its tune and put a cap on fear itself. It's now playing a risky game of emotions focused on the stock market. (Summers, in his so-called "excess of fear" speech at the Brookings Institute, called for strong federal action in the Keynesian mold to break "the excess of fear" which he said follows market bubbles fueled by an "excess of greed [and] an absence of fear".)

    So how might the Stewart/Cramer tussle fit in with all of this? Could it be that the seemingly defenseless Cramer simply threw the fight, a media-hyped event witnessed by 2.3 million viewers? Did Stewart notice that on the very next day, March 13, Cramer was back in the saddle doing precisely what Stewart charged him with doing: pumping up individuals to "Buy buy buy!" On Friday Cramer predicted that the Dow may hit Dow 8,000 - much as the Obama administration would love for him to do - but we're already half way there at 7,200 so even by Cramer's account this rally doesn't have that far to go. On Friday, Cramer also pretended, almost poetically - by alluding to his favorite fairy tales and TV sitcoms - that the dreaded evil short-selling hedge funds are motivated not by insights into financial realities but by sheer ill will alone. He even charged the shorts with being "anti-Ecclesiastes" (at 7:44 ) in wanting only a "time to kill" and never "a time to heal".

    To bullish investors, Cramer's ebullience and the Dow's rally may feel good. But how will America feel if the Dow hits Cramer's target of 8,000? If the Dow can hold at this level, we'll all be happy. But if it collapses, as happens so often in bear markets, then Jim Cramer, wittingly or otherwise, and the Obama administration as well, will have used emotions to deliver hopeful investors and the market itself into the hands of Cramer's declared mortal enemies: the hedge fund shorts.

    Stewart's mistake, in taking down Jim Cramer, was to zero in only on the man's past excesses. He never once sought Cramer's view on markets today - or his present bullishness.

    Head fake? For my money, that's not the issue. Bottom line, it's a red herring, the wrong question to ask. So what's the right question? If the above thoughts make sense, they suggest that CNBC - America - could use better prime-time finance TV shows. Why don't we have them when we need them most? How ironic, some are complaining, that we have to look to Comedy Central for hard-hitting economic commentary. These folks are right. It's time for America to have financial programming that puts taxpayers, investors, financiers and politicians on the same page in resolving the financial crisis.

    I'm working on that. In the next post, I'll identify issues that all Americans should be talking about. Can't wait? Browse the links on the left and you'll find plenty of them.

    Friday, March 13, 2009

    Cramer versus Stewart: CNBC on trial

    I was surprised. Down, down, down he went, almost without a fight, CNBC's voluble Jim Cramer, with his credibility at stake and maybe CNBC's as well. There the man sat, hands folded, taking the scolding, often repentent, promising to do better next time, as Jon Stewart of The Daily Show kept piling it on. Quite a sight. Some financial media are seizing on this interview as an indicator of the state of financial reporting today. Check out coverage at Calculated Risk, Felix Salmon, Huff Post, The Wall Street Journal, The New York Times, Fortune, Business Week, the Financial Times and Yves Smith at Naked Capitalism. Even John Authers writing from London mentioned it.
    • And near the end of an interview in April Yale Alumni Magazine, Yale endowment manager David Swenson makes some pointed comments on Cramer.

    • Roubini goes after Cramer too (4/8)

    Saturday, March 7, 2009

    Civic Media or Civil Disorder?

    It's a long shot, to say the least, to speak of the inevitability of civic media in resolving the global economic crisis. Long, perhaps, to the point of whistling in the wind or tilting at windmills. Yet there are reasons, strong ones, to do so. Here are some.

    First let's consider two factors, one positive, the other negative. On the positive side is President Obama's campaign promise of an era of responsible citizens: his promise to listen to and work with liberals and conservatives in order to shape a viable future for the nation. (Senator McCain made similar promises.) On the negative side are two facts, as the public sees them now: the uncertain status of Obama's promise today and also his halting early steps in managing the worsening global crisis as described here and here.

    Now consider a third factor: the Federal government, under the Bush and presumably Obama administrations, is taking definite steps - military ones - to keep public impatience from mushrooming to civil disorder. "Impatience" is too soft a word to describe the public mood today. "Economic deprivation and pent-up outrage," as expressed here, here and here, more accurately describes it. As the Dow sinks to new lows, as unemployment soars past 8% and as 20% of all U.S. homes fall underwater, Americans are witnessing the draining of nation's treasury in order to prop up the insolvent "zombie" banks that caused the crisis in the first place.

    If the Obama administration's bank-bailout strategy fails to turn economy around, citizen outrage could harden into civil disorder. In that case, America might well find itself asking what's best for the nation: civic media or civil disorder? Democracy or autocracy? And it might be too late to ask that question: the situation by then would be out of hand.

    The obvious counter to this alarmist view is that the situation is less dire than I maintain. I'll post some credible proponents of this view, which, as I see them now, hinge on the claim that massive T.A.R.P and T.A.R.F infusions into the banking system will produce positive results in coming months. (Rumor has it that a third infusion, the Borrowed Assets Relief Program - B.A.R.F - is also in the works.)

    Thursday, March 5, 2009

    Thought for the Day

    Perhaps the most important ideas of all are . . . ideas about how to support the production and transmission of other ideas
    What a beautiful thought. It perfectly articulates the central challenge to modern communications technologies. But that's not its original context. The thought is from Paul Romer's entry on Economic Growth in the 2007 edition of The Concise Encyclopedia of Economics. Romer goes on to talk about the modern research university as a generator of important ideas, predicting that
    the country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the public sector.
    Correction: Romer doesn't say public. He says private. I made the change. I want suggest that what our country needs now - Romer's most important idea - is an idea-generating and processing mass media. Dear reader, be not baffled, annoyed or angry. Is it not time to look past the mindset that for that past two generations has equated the value of the research university with its value to business and the economy, as Romer appears to do here? In the future, in an age of information and given the financial storm we are weathering, must not the value of the research university be equally a function of its value to the public and the public interest?

    Why, you ask, would the twenty-first century belong to nations that embrace this civic valuation? Because the alternative - the neglect of the public interest in favor of research programs that advance the business economy (not to mention the interests of our cash-rich universities themselves) - has failed to develop America's most powerful creative and co-operative energies: those of its people, considered as a people. America today is a nation polarized into extremes of (educated) rich and (undereducated) poor unknown in America since the Gilded Age of the 1870's to 1900. This division contributed to the financial crisis. And this crisis, even if resolved, will soon repeat itself if America fails to close this division.

    Think of it this way. No nation can forever hope to use the disruptive, profoundly democratizing Internet in order to maintain the top-down, hierarchical social order that preceded it. The Internet by its nature forces nations to choose between democracy and autocracy as their preferred form of government. America's heavily commercial use of the Internet, to the near exclusion of civic uses, has greatly weakened it. This dollar-driven use has also contributed to the global economic crisis. To strengthen the nation and to resolve the global crisis democratically, the Internet and other media must give Americans (and people worldwide) an informed voice in the political and economic decisions that affect their lives.

    That's enough thought for one day.

    Wednesday, March 4, 2009

    "Bailing the Ailing" - Nasdaq's Bailout Index

    Found this revealing chart (and article) not in any American financial medium but in the London Economist. I wonder why. Is it too scary for CNBC, where a search for "Nasdaq bailout index" yields nothing? It sure isn't pretty, and won't help narrow the gap between supporters and opponents of the U.S. government's stimulus/bailout programs.

    Sadly, America at the moment is so caught up in this debate that it can't hear the world's urgent calls for American leadership to resolve the global crisis. Any doubts on this? Read Martin Wolf. In a March 5, the New York Times editorializes that
    The economic news is so frighteningly bad here, it has all but squeezed out reports of the turmoil wrecking the developing world. The news there, if possible, is even more frightening.
    Not auspicious. The other day a CNBC guest said it would be calamitous for the US to lose both its triple A credit rating and the U.S. dollar's status as the global reserve currency. I thought he had his head in the sand. And again, I wondered. Would it be impossible for the US to retain its AAA credit rating while working with other nations to develop a new global reserve currency? The idea would be for the U.S. a) to pay a fair penalty for U.S. government miscalculations and Wall Street misdeeds in causing the crisis and b) to help itself and the world weather the storm of hyperinflation that seems likely to result from the trillions of dollars spent on government bailouts and stimuli.

    Just a thought. But if a contestant on my (imagined) financial crisis reality TV show were to advance such a position, I would likely vote for him, at least until someone pulled the wool off my eyes. Nouriel Rubini might do so - he said several months ago that the dollar is likely to remain the world's global reserve currency "for the forseeable future." (Am looking for the link).

    Monday, March 2, 2009

    Steve Randy Waldman on the Link between the Financial Crisis and Open Democracy

    Over the weekend I came up an idea as to how civic media can help resolve the worsening global financial crisis. A format idea. I mulled it over and now it's a bud about to bloom. And today along comes Steve Randy Waldman with a post that fertilizes it:

    I've just listened to NPR's recent interview of Timothy Geithner. Adam Davidson did a great job of trying to get answers from Mr. Geithner. I felt sorry, at a personal level, for our Treasury Secretary, a very smart man imprisoned in a series of talking points, desperately afraid of the consequences of holding an honest conversation.

    As an aside, we've come to take it for granted that policymakers ought to be circumspect for fear of provoking traumatic moves in the markets. But isn't that dumb? Markets are supposed to be about aggregating and revealing information. In what sense is it "more responsible" to hide information or ideas so that markets do not move on them? And if markets do misbehave so wildly that public officials can no longer afford to be candid because of market consequences, does that suggest an incompatibility between the kind of financial markets we have and open democracy? [my italics]

    Waldman has the respect of other finance bloggers. And my format idea addresses the incompatibility he speaks of. Here it is. It's a windfall for CNBC, if they have the wits to run with it. Just remember where you saw it first. Alternatively, it can be done on the Internet. Anyone want to make it happen?

    Imagine an American Idol-type reality TV contest of from eight to as many as sixteen rival solutions, presented by small groups of from one to four individuals competing for the prize of Best Solution to the Global Financial Crisis. Imagine this contest aired over a period of weeks or months primetime evenings on CNBC. Half the contestants might come from CNBC's existing on-air team and half from elsewhere and indeed anywhere: they could be finance writers and bloggers, Bloomberg reporters, financial institutions, universities here and abroad, and Vii's (Very intelligent individuals) with few credentials but great ideas.

    Now imagine an on-air selection process, open to anyone, that winnows down hundreds of aspiring contestants to a field of eight or sixteen finalists, as happens in the first phase of American Idol. Finally, imagine the finalists advancing their solutions by interviewing anyone and everyone connected with the financial crisis, including even, conceivably, Timothy Geithner. Who could judge the contest? Who would govern it? How would contestants be selected? How would the government be involved at local, state and national levels? How would winners be rewarded? I have answers for questions these and other questions.

    Read the rest of Steve Waldman's post - he would be one terrific contestant for this show.