Wake Up, Paul Krugman!

In "Boiling the Frog," New York Times Nobel prize winning economist Paul Krugman today compares America to the proverbial frog that lacks the ability to hop out of a slowly heating pot. So what's making life hot for the American frog? Krugman says it's government gridlock on two critical issues: inaction on a second stimulus plan to prevent potentially crippling unemployment and inaction on climate change. This gridlock scares Mr. Krugman, who concludes:

So if we can’t get action to head off disaster now, what would it take? I don’t know the answer. And that’s why I keep thinking about boiling frogs.

Of course, many Americans vehemently disagree with the liberal Mr. Krugman on these vexed issues. Yet the solution to polarized disagreement and government gridlock obvious: it's a national decision-making process on these issues, available to all Americans. 

You call this civic media? Yeah, I do . . . sort of.

In a one-man-talking-to-himself sort of way. So far at least. Where a true civic media is dialogic, this site, so far, is pretty monologic. Too bad. I talk, but people aren't talking back - not yet. And where civic media sites are non-partisan and non-ideological, this one, maintained by a political independent who is relieved and often glad that Obama is our president, is marked by a deepening concern that his financial team of Bernanke, Summers and Geithner are so beholden to Wall Street that Obama is being shielded from the information he needs in order to help the U.S. and the world emerge from the global financial crisis. In the April 29 Press Conference held to mark his first 100 days in office, the President unblushingly conceded his ignorance of the coming crisis:

You know, when I first started this race [in December, 2007], Iraq was a central issue. But the economy appeared on the surface to still be relatively strong. There were underlying problems that I was seeing with health care for families and our education system and college affordability and so forth, but obviously, I didn't anticipate the worst economic crisis since the Great Depression.

I find this admission galling. It's hard to accept from an editor of the Harvard Law Review and a U.S Senator, surrounded by brilliant people, who reads a lot and can actually think straight. It's as if the Ivy League, Wall Street and the D.C. beltway suddenly sealed themselves off what by December 2007 was obvious to a lot of people. In late 2007 I myself knew fellow Realtors and loan officers here in Glenview, north of Chicago - who knew something terrible was bound to hapen - we just couldn't tell when it would hit. We saw it coming in our business and in alarm signals that were being sounded loud and clear in the financial media: Yves Smith, Felix Salmon, goldbugs like Jim Willie and Martin Wolf and John Authers of the Financial Times, for Pete's sake!How on earth could Obama and advisors like Austin Goolsbie have missed what was staring us in the face?

Yves Smith is one of many finance bloggers who could have saved America and the world endless grief had the Obama team read her posts in 2007. So are Obama's people reading her today? They sure should - her website has 25,000 hits a day. Here she dissects the flaws of Obama's finance team in a painstaking analysis of the New York Times' surprisingly harsh April 26 story about Tim Geithner. Her analysis prompted one commenter to say

I cried when Obama made these appointments. Summers, Geithner and keeping Bernanke. I knew all was lost. And now I watch as the whole thing falls apart.

Larry Summers, the ringleader of the Obama economic team, strikes me as a brilliant careerist in the mold of Henry Kissinger: a first rate self-promoter and a second-rate "realpolitik" thinker. To me, he's in denial about what first-rate thinkers like Steve Waldman are saying about the need for economic models grounded in a new understanding of sustainable wealth and wealth creation - a topic I discuss here. Summers and Co. are all the kings men trying to put Humpty Dumpty (American hegemony) back together again. It just won't work. (The Times article suggests that Summers, a big man at the White House, may be lobbying to replace the unpopular Geithner with a loyal fresh face. In other words, nothing will change.)

In his recent "100 days" press conference, President Obama named the economists he follows (scroll to "Where the economists are coming from"). The central debate in his mind, he said, is between Wall Streeter Robert Rubin and realative main streeter Robert Reich, with attention to corporate globalism critic Joseph Stiglitz and inflation-breaking Paul Volcker. And he sums up his philosophy nicely: "The truth is," Obama says, "that what I’ve been constantly searching for is a ruthless pragmatism when it comes to economic policy." And: "The touchstone for economic policy is, does it allow the average American to find good employment and see their incomes rise." Sounds OK, but can Obama's "ruthless pragmatism" put America's financial system on a sound and durable footing? Pragmatists lack vision. Their ideas work short term, not long. The President needs pragmatisim and vision. Is he listening to people like these:

• Charles R. Morris, author of The Trillion Dollar Meltdown, argues in a brief but prescient column that "Merrill Makes the Case for Nationalization" (1/29).
  
• Henry Kaufman, for decades a leading Wall Street insider, argues here that "We should, therefore, fundamentally re-examine the role of the Fed and the supervision of our financial institutions." He discusses the rise of a "social milieu [of policy makers that] encouraged financial decision makers to cherry-pick the theories that supported excessive risk taking. It discouraged whistle-blowing, not just by risk-management officers in large financial institutions, but also by the economists whose scholarship provided intellectual justification for the financial institutions’ decisions. The consequence was that scholarship that warned of potential disaster was ignored. And the result was global economic calamity on a scale not seen for four generations. (Financial Times 4/28)
• Steve Waldman: "If you believe, as I do, that we need a root-and-branch reorganization of the financial system, which must necessarily involve the dismemberment and intrusive restraint of deeply entrenched institutions . . ." (4/27)
• Barry Eichengren of the U.C. Berkeley Dept. of Economics argues that "The Great Credit Crisis has cast into doubt much of what we thought we knew about economics". (National Interest 4/30)
• Charlie Munger of Berkshire Hathaway says banks will use their “enormous political power” to prevent changes to the industry that would benefit society. (Bloomberg, 5/2)Univ. of Chicago Economist Anna Schwartz, a Friedman/Volcker pure monetarist, says the Bernanke Fed has misjudged the financial crisis (City Journal, Spring '09)
• Martin Wolf of the Financial Times says "The world economy cannot go back to where it was before the crisis, because that was demonstrably unsustainable. It is at the early stages of a long and painful deleveraging and restructuring. Fortunately, policymakers have eliminated the worst possible outcomes. But there is much more yet to be done before fragile shoots become healthy plants (4/21)
• Martin Wolf says that "Those who hope for a swift return to what they thought normal two years ago are deluded" (FT 4/28).
• Joseph Stiglitz (whom Obama follows) here calls for something Wall Street does NOT want: a new global reserve currency (3/26). The findings of the UN panel that Stiglitz chaired are described here (3/26). In this article in the South China Morning Post James Dorn (Cato Institute) challenges Stiglitz. Here the Wall Street Journal is defensively on China's call for a new global reserve currency. (American financial media largely overlooked or suppressed the Stiglitz story and are covering this issue poorly if at all. Shame on us.)
• Matthew Richardson and Nouriel Roubini punch holes in the Obama administration's case for progress towards restoring banks to solvency (WSJ 5/5).
• In her post on "The Banks and Orwell," finance blogger Yves Smith isolates some of the doublespeak that Wall Street chieftains are using to resist real regulation. She says that "M. Rodgin Cohen [managing partner of Sullivan & Cromwell] is already leading the fightback [against hostile public opinion]. Yesterday, he even had the gall to say that the system as currently constituted was fundamentally sound. Yes, for him and a handful of Goldman partners, I'm sure that's true, but on planet earth, it's a bit of a different picture." (5/9)
  

Wells Fargo Quarterly Results Boost the Dow 247 points to 8038!

The Obama Spring rally found a second wind today thanks to a Wells Fargo earnings report that benefited the big financial stocks. With the spring rally is now in its fifth straight week, even the Financial Times front-paged President Obama talking about "glimmers of hope." Yet I wondered: how could Wells Fargo, in this terrible economy, announce a record high quarterly profit of $3 billion? By borrowing at zero per cent and doling out refi's at five? That's a ton of refi's. I didn't get it. Then I stumbled on this post by a guy I don't know - well, he's a goldbug - who knows more about finance than I do and puts questions I'd like to see put to Fargo's Howard Atkins (minus the vitriol):

DaveInDenver said:
This is beyond belief. Wells Fargo's 1st quarter profit forecast goes way beyond any fairy tale ever written in history. Here's what they say: Chief Financial Officer Howard Atkins says the results "reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results." Mr. Atkins, you are an outright liar and fraud.

Hmmm..."strength in traditional banking?" Who is borrowing that money and making their interest and principal payments on time? Has there been a bunch of businesses started no one is aware of yet? Are existing businesses expanding? You've got to be kidding me.

"strong capital markets activities." Where is this revenue coming from? Any big equity IPO's during Q1 that we missed? Corporate debt issuance was occurring, but at a very low rate and Wells Fargo is not a real player in that business. Mortgage securitizaton? I'm not aware of any. Please explain to me, Mr. Atkins, the source of your "strong capital markets acitivities."

"exceptionally strong mortgage banking results." This one is the most puzzling and troubling to me. We know, with hard data and facts, that home sales and mortgage issuance is plummeting every day. Where are the revenues coming from in this area? Mr. Marks goes on to cite that WFC's acquisition of Wachovia boosted their results. How on Earth can this be? Wachovia's balance sheet is mostly the kinds of subprime mortgage assets that are melting down to zero.

The only possible source of extraordinary revenues I can think of for WFC during Q1 would have been WFC's use of the massive amount of Treasury and Fed money extended to banks at little or no cost and being put to work in Treasury bonds and WFC earning the positive interest carry.

In fact, we know from hard data released every week that the very business activities that Wells says are creating massive profits are, in fact, melting down quickly in every corner of the U.S. and global economy.

For WFC to come out and make those claims is beyond fairy tale - it's outright fraud. And lest we forget, the beloved Warren Buffet owns over 10% of WFC, and thus de facto is standing behind this massive fraud. George Orwell is laughing uncontrollably in his grave now.

Thanks, Dave. Is anyone asking these questions? Is Fargo answering them? Here's one answer:

Wells Fargo’s revenue was boosted by its mortgage banking operations, as the company received about $190 billion in mortgage applications, a 64 percent jump from the fourth quarter. Roughly $83 billion of that volume came in March, when announced governmental programming sent interest rates tumbling. The majority of that was refinance applications with roughly 25 percent coming from home purchases.

And here's another:

Wells Fargo attributed the strong results to healthy lending margins driven by lower interest rates, fewer additional costs related to its purchase of Wachovia and a boom in mortgage activity.

Do these accounts satisfy anyone?

BTW, George Orwell's essay on Politics and the English Language is as timely today as when he wrote it in 1946. Dave may be thinking of Orwell's warning against the "invasion of one's mind by ready-made phrases (lay the foundations, achieve a radical transformation)" that "anaesthetize a portion of one's brain."

DaveInDenver was responding to Henry Blodget's article about why Dylan Ratigan left CNBC. Ratigan, the able host of CNBC's hot "Fast Money" show, says he left because

When you're dealing with systemic policy failures that have rendered a catastrophe the likes of which we've really never seen, the role of journalism is to ask questions of money and power from the broadest possible platform.

Ratigan has anti-fans who doubt his credentials as a journalist - see the other responses to Blodget's article - but for months he has been targeting bailouts that seemingly pick the pockets of taxpayers to benefit big bankers. This alone doesn't make him golden in my book, but I look forward to seeing what he does next.

Larry Summers: Maximizing Wealth with "One of the "Greatest Minds of the Past 500 Years"

Of the past 500 years? Really? Maximizing wealth? Whose? We'll get to all that. But first, will someone kindly send me something about Larry Summers that shows him in a better light than this godawful tedious CNBC clip of him fielding soft grounders about the economy before the Economic Club (of New York, I think) on 4/9. It SO reminds me of my undergrad days at Harvard in the 1960's and the smoke and mirrors political discussions that routinely marginalized outsider views as "generating more heat than light". (Anyone else remember this phrase?) This cozy CNBC clip suggests that the old boys' network is still in fine working order today, its nexus having merely migrated northwards to Cambridge from New Haven, from whence an unbroken string of Yale graduates (Bush/Clinton/Bush) had occupied the White House for an unprecedented 20 years. (My take on the historic "Yale succession" of U.S. Presidents is here, here, here and here.)

Well, I'm getting carried away. But seriously: are video clips like this one the best that CNBC - and Summers himself - can give the American people at this critical juncture in our history?

Well I gotta rant a bit more. Just listen to the long-winded introduction (suckup?) that consumes the first two minutes of this nine-minute clip, including the moderator's paean to Summer's astounding skills as a tennis player - "his greatest talent," says the host, confessing his own need for professional training in order to beat Summers - "barely" - on a doubles court. Please. This idle talk only assures Summers that he is among friends and will not be asked any hard questions (say, about bank solvency or bank spending of government bailout money). And the warm audience response to his not-so-witty dismissal of any claim to certainty in the making of economic forecasts confirms that none are expected. I decided to scout the web a bit on this man, focusing on his ties to Wall Street. It didn't take to find a couple interesting items:

• At Econospeak (via Naked Capitalism) I found this glowing account of Summers' "stadium rock concert" and "performance art" presentation last year to Goldman Sachs. Smoke and Mirrors? For sure, it was patently a magic show. Genius? One of the greatest minds of the past 500 years? That was the take of one Monique, a Goldman employee who says “It was his entertainment that opened me up and made me receptive, but the economic vision was irreplaceable. I thought I was maximizing wealth before I heard Larry, but I didn’t know the half of it.” Maximizing wealth, huh? Whose? (4/4)


• Well, consider this. The New York Times reports that "Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed Friday in releasing financial information about top officials." OK, so Summers, as Treasury Secretary, isn't pulling in the big bucks from Wall Street. But whose wealth he is maximizing? And who is benefitting from his great wisdom? So far, it's still going to Wall Street while the Americian people, on CNBS, get jargon. (4/3)

OK already, enough ranting. Here's a challenge, stemming from the 2nd sentence of the 2nd paragraph of the New York Times' brief bio of Larry Summers, which celebrates his "deep understanding of global economic issues, at a time when the American mortgage crisis has leaped borders to become a worldwide contagion." Whoah, hold it. Can anyone show that Summers had any prior understanding of this crisis before it hit full force in 2008? What was one the greatest minds of the past 500 years saying about it in 2006 and 2007?

Is Massive, truly MASSIVE, Bank Fraud going Unpunished and Unregulated?

Is America ignoring bank fraud on an unprecedented scale in its haste to bail out its apparently insolvent banks? This 20 minute Bill Moyers Journal video makes a strong case for the affirmative. Moyers interviews William K. Black, a senior regulator during the Savings and Loan Crisis of the 1990's. Black's take on the decay of American finance over the past 20 years reminds me of David Cay Johnston's take on the decay of the IRS since 1980. Two straight shooters. Black is hard on Geithner and Summers and on President Obama too. A key passage:

The FBI publicly warned, in September 2004 that there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle. And that they were going to make sure that they didn't let that happen. So what goes wrong? After 9/11, the attacks, the Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents. So even today, again, as you say, this crisis is 1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis. There are one-fifth as many FBI agents as worked the Savings and Loan crisis.

So what needs to be done? Here's Black's 9/08 Nation article co-authored with economist James K. Galbraith. Here are some related links:

• Tim Geithner outlines his regulatory plan before the House Committee on Financial Regulation (3/??)
• President Obama backs up Geithner's plan (3/24)
  
• The Economist says "The rich are an easy target. But when you try to bash them, you usually end up punching yourself in the nose." Seems to me this caution against political retribution skirts the hard issues of legal accountability and regulatory reform. (4/2)
• Meredith Whitney says that the country's biggest banks, still undercapitalized despite government efforts to refloat them, are reducing credit card lines and thereby "sucking liquidity out of consumer wallets." How much? "In the fourth quarter alone," she says, "half a trillion dollars of lines were cut from the consumer--half a trillion." (4/6)
• Mike Mayo's "Seven Deadly Sins of Banking" is out today - David Faber and others at CNBC blame today's down market (Dow -114 several hours before the close) in part on Mayo's report.
• William D Cohan on how Goldman Sachs emerged as the king of financial institutions (NYT op ed. Not fraud, but sleight of hand ( 4/15)
• 
  

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.

HEAD FAKE?

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.

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.)

Storm Hits Agin!

Jan. 23, 2009. 6am. Dow futures are below 8,000 at the moment and even as the CNBC gang all but begs for an Obama honeymoon rally, I myself see the Dow heading south to test its November lows of 7,400.

This week America (and the world) celebrated the inauguration of a promising new president. But the economic news was not good, for the world was sliding into the second (economic) phase of the global economic contraction whose first (credit) phase hit with gale force last summer. This time, the dangers at home included rising unemployment, consumer spending declines and a still-weakening housing market (not to mention Citigroup, Merrill Lynch and Bank of America). And abroad, they included the Chinese contraction and confirmed recessions in many countries.

Two news items for our times: The Bank of England's historic rate cut to 1.5%, lowest since its founding in 1694. And the Moody's cut of its rating of The York Times to junk status.

LESS SHOCKING

It's worth noting that Phase II, while painful, will if nothing else be less shocking than Phase I. Thanks to the miracle of modern communications technologies, our heads are at long last out of the sand. The years of ostrich denial are done. "That we are in the midst of crisis is now well understood." That was President Obama in his inauguration speech.

Well put. And important to be said. Yet not saying much! Where do we go from here? What are we learning that will help us down the road? As time permits, I'll post links to interesting responses and solutions to the crisis. Some (Wolf, Whitney, Roubini [register], Friedman) will be variations of the $800 billion Obama stimulus plan that's now taking shape in Congress. Others (Morris, Whitney) will be strategies for cleaning up the nation's broken banking system (New York Times "Room for Debate" ). And others (Farmer, The Economist) will focus on the global crisis. Still others will argue that the best course of action is no action. There are lots of good ideas out there, often in conflict, as ideas should be.

CONSCIOUSNESS. CONSENSUS. CITIZENSHIP.

Clearly the world is far from reaching anything like consensus on a way out of the crisis. And solutions pile up so fast that even keeping up with them is a full time job for several people. What's more, the solutions being implemented are coming from the small circle of experts and central planners who for the most part failed to see the crisis coming. Ordinary citizens are voiceless when it comes to generating solutions or weighing the pros and cons of solutions advanced by experts and political leaders. Yet President Obama keeps saying that America will not able to renew itself until Americans are fully engaged in the process of renewal. Here's where civic media comes in, and we are far from having an effective one at this point.

Meanwhile, the crisis seems to worsen faster than anyone can keep up with it. It has the feel of a black hole. Or of a maelstrom, the massive deep-sea whirlpool caused by tidal shifts described by Edgar Allen Poe in his Decent to the Maelstrom, a short story about a Nordic sailor who survives one by staying cool and observing, looking for way to escape. When his brother perishes by lashing himself to the mast of the sinking ship, he escapes and survives by grasping a rising empty barrel. The story was an inspiration to Marshall McCluhan - the Canadian media prophet who first spoke of a global village - and to his biographer, W. Terrence Gordon, who chose the perfect title for his book: Escape into Understanding.

Out of the Crisis, by the way, was the magnum opus of W. Edwards Deming, the American systems engineer whose philosophy of continuous improvement based on listening to and learning from employees is widely credited with bringing Japanese industry from the ruins of World War II to global preeminence in the 1990's.

Looking for an escape. Listening to employees. Listening to citizens. Listening to ourselves and others. Deming, like McLuhan, makes great good sense to me. And I'm no engineer. Once a TV interviewer asked him what one thing he would do to improve American education. "Abolish grades!" was his immediate, blunt response. His questioner about fell off her chair. "Why?" she asked, stunned. "Because grades destroy the two qualities most necessary for productive work: co-operation and creativity." He laid down the hammer. As an educator, I couldn't agree more. These qualities, along with competence, are what the world needs now.

OUT OF THE CRISIS: FROM AN ECONOMY OF QUANTITY TO AN ECONOMY OF QUANTITY AND QUALITY?

Some economists are now speaking of reinventing the economy. Will the day come the economy is no longer seen as a matter of rising or falling GDP, of material wealth-generating productivity affecting many citizens but excluding many others? Has this ingrown, ideologically-tainted notion not utterly and recently failed us? New data-gathering technologies and the dawning Obama era make it possible for economists to generate much more comprehensive ways of measuring the current and future health of the vast networks of human survival and enrichment activities that constitute the economy.

It will soon be possible to measure the health of the economy using both traditional metrics of material quantity and new metrics of non-material quality of life. Take the concept of consumer confidence , which measures how all citizens feel about spending money. As such, it is a qualitative measurement of a quantitative aspect of the economy and, as such, as a forerunner of more comprehensive ways of assessing economic health. Behavioral economists are on this track, and for my money it leads to an economics informed by measurements of citizen satisfaction with every aspect of work and life that really matters.

OK, so all this sounds like a pipedream - like John Lennon singing "Imagine". Yet I wonder if the world hasn't reached a point where it simply can't get by - "muddle on through" as folks used to say - with anything less. The storm that's hit us is NOT an act of God or an event of nature: it's entirely man-made. Is it a life-and-death maelstrom of the kind that Poe wrote about? If so, we - the human race - will survive it only by learning from it. Not just some of us, but all of us.

So Why Doesn't the U.S. Have a Civic Media?

Yeah, why not? Well my buddy Rich insists the U.S. already has a civic media. He's a deep Democrat. He says citizens used civic sites like Daily Kos, Huff Post and Moveon.org to elect Barack Obama. And Republicans used similar sites to support John McCain.

But these sites, I say, are partisan. Civic sites are non-partisan. And where Rich's sites are more about individuals then issues, civic sites focus more on the ISSUES. They get Democrats and Republicans talking with each other for the common good, much as Barack Obama says America must do in order to weather the economic storm we're in. And believe me, they can do this in hundreds of entertaining and instructive ways.

Then I bring out my big guns. I remind Rich that his sites advance the interests of a money-driven two-party system that's degraded American politics since the advent of televised political advertising in the 1960's. This system, I say, has made politics the perquisite of the rich. It's forced political incumbents to spend up to a third of their taxpayer-paid work week raising billions of dollars for the mind-numbing attack ads that keep them in office. It's kept all but a tiny number of America's best and brightest from even considering a career in politics. And it's done all this dirty work systematically, in every city and state, from coast to coast.

It's frustrating. Think about it: the great democracy that gave the world the miracle of modern electronic communications AND the Jeffersonian idea that men can be trusted to govern themselves has given itself a political communications system that most of its founding fathers, could they see it today, would condemn as subversive of democracy.

More frustrating still is that no politician, party, pundit, public interest group or university professor has, to my knowledge, ever called for a modern interactive political communications system, even though all of the technologies needed to implement one have been in place for years. Politicians and public interest groups have instead spun their wheels on campaign finance reform - a red herring of an issue if ever there was one. (Wait - Noam Chomsky endorsed civic media in 1994, telling an audience of 500 in Chicago that civic media offers "some hope for the future, in fact the only hope for the future.")

Why such silence on what is after all the most obvious solution to a political media that suppresses or minimizes citizen input? Truth be told, many and possibly most Americans today are by no means confident that men and women can be trusted to govern themselves. Asked about the prospects for a civic media in 1994, Noam Chomsky said there's no way the powers that be would ever let it happen. But Obama's election last year suggests that there's no way the powers that be can STOP a civic media from happening. (Chomsky himself sounds somewhat more optimistic today.) Still, Americans today harbor all kinds of mistrust for each other. For trust to develop, it will take time for an inclusive political media to undo 30 years of damage caused by media polarization of the American people into sometimes paranoid extremes of red and blue, and of rich and poor. (In 2004, I traced the roots of this polarization back to, of all places, Yale University, where I received my teaching degree and where my father, Richard B. Sewall, taught English for 44 years).

Ironically, America's political media have minimized citizen input despite universal user demand for interactive media experiences. Now you'd think the minds of our media moguls would light up at the thought of an untapped "market of the whole" of 300 million Americans. But no. Not yet. Not even when hardpressed network TV execs, losing market share to the Internet and cable TV, are desperate for what CBS's Leslie Moonves calls a "transformative hit".

Sure, Survivor-producer Mark Burnett and Rupert Murdoch’s News Corp were reported in 2007 to be working on Independent, a politically-themed Reality TV show targeting young adults that was to debut in 2008 on YouTube. So the minds of the moguls were slowly switching on, if dimly. But this and this and this is what comes up when I enter "Independent" at YouTube today.

In the 2006 midterm congressional elections, exit polls confirmed voter disgust with political corruption. Soon after, my buddy Rich (my civic media sparring partner since the early 1990's) suggested that the format of voter-driven reality TV might have civic media potential. At first I thought he'd lost it, but this time he was dead right, and I will always be grateful. Within a few months, I had developed America's Choice, a nifty and comprehensive treatment for politically-themed reality TV that enables all Americans to participate INTELLIGENTLY in the great voter-driven game of democracy.

In 2007, I presented America's Choice to half a dozen network TV executives, including a genuine media mogul. No luck. Zero interest.

Why not? One exec said he'd seen similar treatments. Another said that politically-themed reality TV would make the networks look partisan in the public eye. Then there were the unspoken reasons: the fear of rocking the boat of the existing political system and of course the billions of dollars the networks rake in from political ads come election time.

America's TV networks, it seemed, were either blind or indifferent to the mounting instability of the very political system their attack ads were propping up.

Light years ago, in 1988, George Gilder had called network TV a "totalitarian" medium that "squeezes the consciousness of an entire nation through a few score channels." He did so in a wonderful little book entitled Life After Television: the Coming Transformation of Media and American Life. Here Gilder predicted the overthrow of the "alien and corrosive force" of America's top-down, analog TV networks by the grassroots political networks created by the emerging, citizen-empowering medium of the digital "teleputer" (his quaint 1988 term for the PC).

Today, twenty years later, we see not the overthrow of analog TV but the astonishing blink-of-an-eye convergence and integration of all media, print and electronic. The emerging meta-network of interactive networks bids well to dissolve the mindless red/blue polarization of American politics and replacing it with intelligent, problem-solving discourse that puts all Americans, rich and poor, red stat and blue state, on a more even footing with themselves and their elected leaders.

So my buddy Rich is right after all. Well partly . . .

In 2008, America elected a new president whose displeasure with a politics that ignores citizens comes from the same place as the displeasure voiced here. So was the old top-down system actually serving the public interest after all? It must be said that Obama had raised and spent a ton of money on televised ads, with about half of his donations being over $1,000.

Something old, it seemed, was evolving, gradually, into something new.

But this gradual evolution was violently disrupted in 2008 by the volcanic eruption of a financial crisis the likes of which America hadn't seen since the Great Depression. (Yet the crisis, and Obama's statesmanlike response it, likely turned the tide for him.)

As we begin the new year, efforts to recover from the crisis are being managed with little public input or oversight by the same financial community that created it. Americans are angry, and with reason. The old system, embodied in the somewhat credible idea of an Ivy League financial elite, seems to be reasserting itself. Billions of taxpayer dollars seem to be going mainly to failed banks. Americans of sharply differing political views are saying that the only way to prevent this crisis from worsening or recurring is for the American people, as a people, to have a voice in the creation of a new financial system.

That of course is saying an awful lot. But the idea is worth exploring. In coming posts, liberals, conservatives and libertarians are invited to talk about what this system might look like, how it might take shape and what kind of input citizens might have in its creation. (More robust sites than this will be created to advance the discussion as it grows.)

So looking ahead (looking forward if you follow Larry Kudlow), the question isn't WHY America lacks a civic media but WHEN it will get one. Let the press put this question to President Obama in the context of his stirring election-day reaffirmation of the American spirit:

America . . . This is our time - to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American Dream and reaffirm that fundamental truth - that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism, and doubt, and those who tell us that we can't, we will respond with that timeless creed that sums up the spirit of a people: Yes We Can.

And let Americans put this question - this challenge - to their elected leaders and to the nation's public and commercial media as well in order to secure their commitment to giving free and full expression to this American spirit. And to the same end, let yourself, dear reader, feel free (or duty bound) to affirm, correct or refute the ideas advanced here.

Hap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . py New Year!

This blog is the beginning of something. So are the four other civic media sites listed on the sidebar (I maintain the first two). Civic media, as I see it, is a dialogic and problem-solving use of media, not a kind of media. Its ongoing, problem-solving dialogs make citizens and government responsive and accountable to each other in defining and solving the problems (and maximizing the opportunities) confronting a community of any size: local, state, national and international.

Today a single problem confronts us all: the global financial crisis. Over at the sidebar you will find a library of 40 finance writers who throw light on it. Taken together, they show very clearly how the wizards of Wall Street made the world of finance go round and round for twenty years until last summer, when the entire system finally spun out of control, corrupted by Wall Street or overstressed by investor demand for higher yields.

Most of these 40 writers saw the spinout coming AT LEAST TWO YEARS before any of the Wall Street wizards - or most anyone in the central banks that manage (and manufacture) the world's money supply.

Not surprisingly, these writers have useful insights as to how the global financial crisis can best be resolved. Among the problem solvers are Jack Bogle (article and book), Charles R. Morris (articles and book) and the amazing Steve Waldman. (Additions to the library are welcome. Kevin Phillips? Joe Stiglitz? David Korten? Doug Henwood?)

I sell residential real estate for a living. The Realtors at my office are bright and honorable. In May of 2006 I showed them Mike Hudson's "The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse" from Harper's Magazine (at Hudson's site, scroll down to find the title).

My fellow agents. I love 'em. But they just laughed.

How things have changed. Today the National Association of Realtors is talking about the bursting of the housing bubble and how real estate will get back on track. And not doing a very good a job of it, either. But let's not digress.

America's recovery from its deflating housing market and its deepening financial crisis calls for an unprecedented partnership of citizens and government (arms-length will do just fine.) And also (dare I say?) a similar partnership between people with money and people without.

A civic media can mediate these partnerships. Its problem-solving dialogs can convey ideas like those advanced in this library to all Americans, including the least educated. Its ongoing dialogs can give Americans the chance to talk back, for weeks and months on end, until the nation, newly informed, gives Presidential Obama the informed citizen input he needs in order to make decisions that serve the best interests of America and its people.

Does all this - a media that brings out the best in our democracy instead of the worst - sound odd or impossible? It should not. Didn't Barack Obama win the 2008 election by promising BOTH of these partnerships, or something very close to them? Doesn't America already have in place the interactive communications technologies needed to mediate these partnerships? And isn't the need for these partnerships entirely obvious? Had they been in place ten years ago, would an informed America have allowed Wall Street or uncreditworthy borrowers to put the nation and the world at risk as they have?

So these partnerships, then, are possible. Still, questions remain. Will President Obama keep his promise? Will America's print and electronic media do their part to keep citizens and government productively in touch with each other? And finally, will all Americans, rich and poor, do their part to advance these new partnerships as well?

2009 will likely give us the answers. It will be a very interesting year. Even more interesting than 2008. Think about it. For the first time in history, 300 million people are poised to think and act intelligently, as a people and as a nation, about a single problem that threatens its future and that of the rest of the world as well. Wow. The psychologist Jung talked about the collective unconscious. Here we are talking about a collective conscious, an informed and active public mind. Thomas Jefferson, Marshall McLuhan and W. Edwards Deming would be glad to be alive. Not to mention Gandhi and Martin Luther King. And Plato, who wrote dialogs. And Socrates, who never wrote, out of a mistrust of writing's ability to make foolish men appear to be wise. But perhaps not Aristotle, who wrote monologs, as if (like the quants of Wall Street) he possessed or owned the truth, which the Platonic Socrates spoke of entirely differently: as an ongoing search for something that lies ever beyond us all.

How will all this happen? Hey, it's already happening. And let us resolve here to do what we can to advance the civic dialogs that will help us weather the storm. With that,

Hap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . py New Year!

PS - I almost forgot: what should we talk about next here?