| Monday, May 4, 2009 10:22AM | | | | Solving the Financial Crisis | Posted By: Robert Flynn
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| Tags: Jeff Madrick, Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, Robin Wells | I don’t know much more about economics than John McCain. Or Ronald Reagan who as president said the size of the national debt showed the strength of the American economy. I don’t believe ballooning debt indicates a growing economy or that lowering taxes increases revenues. Neither did I marry a woman rich enough to make earning a living irrelevant. I was lucky enough to marry a woman who believed numbers meant something, that numbers preceded by a dollar sign had consequences, and that those followed by zeroes had more consequences
That’s why I went to hear people who did understand economics discuss “The Economic Crisis and How to Deal With it” sponsored by the New York Review of Books. The members of the panel bristled with degrees. The only thing that seems to be booming in the present economy is degrees in economics. Except for George Soros, a billionaire, none of them seemed to know enough about economics to enrich themselves. Like Kenny boy Lay, for instance. Or Bernie Madoff.
Jeff Madrick had been a columnist for the New York Times and has written some books but didn’t have enough degrees to rise to the level of panelist and was relegated to moderator. Which seems a strange term for someone on a panel discussing an economic crisis. Wouldn’t generator or accelerator be better?
Senator Bill Bradley, who can outshoot Barack Obama, said the panel needed to explain to the average citizen/taxpayer why they could buy Citigroup for half the money they have already spent on it if there were a mechanism for average citizens to own it.
Niall Ferguson is a professor, best-selling author, and writes for television. He spoke telly lingo. The whole world was now Argentina. The crisis began in June 2007 but news of the repression was repressed, the world was in a world of denial, then in a state of shock followed by a stage of therapy. The Chi-Merica marriage was in divorce court and in their corners Freedman and Keynes answered the bell for round two.
Paul Krugman topped his degrees with a Nobel prize making him the envy of everyone in Grace Rainey Rogers Auditorium. Paradoxically, that seemed to make him humble. In the Great Depression everyone learned that the financial markets were not rational, that greed was not good; it wasn’t even self-regulating. The Great Learning was followed by the Great Forgetting the lessons learned. The price of oil exploded, the bubble value of housing popped, banks stopped lending, people stopped spending. And buried their money in the back yard because there was no place to put it where it didn’t lose value. The Federal Bank had to take over the role of private banks and middle and lower class taxpayers assumed the position. Until a new man moved into the White House and said that those being bailed out should pay taxes, too. And that caused the Great Filibuster.
Nouriel Roubini said that when the US sneezes, the world catches cold and the US had swine flu. The question was not whether this was a V shaped or a U shaped recession but whether it was an L shaped recession that needed fiscal stimuli so that it did not become a Double U recession.
George Soros made a billion dollars during a recession and kept his secret of how to himself. He did explain that response lags behind the problem. Obama had stopped the collapse and now had to reconstruct the system. What to do in the short term was the opposite of what to do in the long term. Which is the same as, like, if it’s a hundred meter dash you start faster than if it’s a 26 mile marathon. People around me nodded, full of understanding.
Robin Wells was the only woman on the panel and, like my wife, seemed to be the only person in the house who could reconcile the bank statement. If the decline continued we would be in the Stone Age and she didn’t know where the recovery would come from. Chronic fiscal deficits during the 80s created a symbiotic relationship with China, West Germany and Japan that permitted us to live beyond our means. They loaned us money, we bought their goods. It was not a sustainable relationship but no one wants to stop drinking during Happy Hour. It was time for “last call.” Pay the bill, go home, take an aspirin, look in the mirror, promise to grow up, treat government as sustainable, and invest government money in things the public doesn’t such as education and the environment.
Niall Ferguson screamed, “Cut taxes,” and everyone went home enriched.
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