Bailout Vote Breakdown

The NYT has a nice graphic.

Preznit Economypants

Steve Benen:

* As of today, the Dow Jones is lower now than it was the day Bush took office in 2001.

I'm not a fan of using the DJIA as a measurement for success, personally, as it doesn't include quality of life, or, you know, the majority of Americans, but damn. By his own standard (remember the CEO President? How's that working out?), Bush is a miserable failure.

... the DJIA on:

January 3rd, 1992: 3,201.48
October 14th, 1996: 6,010.00
January 14th, 2000: 11,722.98

Today, September 29th, 2008: 10,365.45

The guy that got the economy right

The New York Times profiles Nouriel Roubini:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.

Here's hoping that, unlike all of us who were right about Iraq, Roubini gets listened to in the future.

Shakedown

Billmon:

Even the deepest purse has a bottom, and the point may be approaching where the costs of propping up the world's largest debtor nation (i.e. us) begins to outweigh the benefits.

The national debt is owed, in no small part, to banks in other countries. What would happen if the rest of the world - or even, say, the Chinese - decided they wanted their money back?

I'd make a crack about structural adjustment programs, but the Republicans already pursue those with vigor.

"The Worst Financial Crisis Since the Great Depression"

Nouriel Roubini:

# This is by far the worst financial crisis since the Great Depression, not as severe as the Great Depression but second only to it.
# At the end of the day this financial crisis will imply credit losses of at least $1 trillion and more likely $2 trillion. The financial and banking crisis will be severe and last several years leading to a severe and persistent liquidity and credit crunch.

There are dozens more statements just like that, most with documentation backing them up. Roubini spins a very depressing scenario, but not a surprising one. What do you think happens when greed is held up as a value, regulations are shredded, and a Bush is in the White House?

[Krugman] What's the biggest crisis facing America? If you said Iraq, you're.... wrong?

The first and last paragraphs from Paul Krugman's latest column:

Four years ago, an academic economist named Ben Bernanke co-authored a technical paper that could have been titled “Things the Federal Reserve Might Try if It’s Desperate” — although that may not have been obvious from its actual title, “Monetary Policy Alternatives at the Zero Bound: An Empirical Investigation.”

....

I used to think that the major issues facing the next president would be how to get out of Iraq and what to do about health care. At this point, however, I suspect that the biggest problem for the next administration will be figuring out which parts of the financial system to bail out, how to pay the cleanup bills and how to explain what it’s doing to an angry public.

All that stuff between the two paragraphs is really interesting.

Totally Logical, But Still Incredibly Stupid

This is why people think that modifying one's assumptions about the world in response to evidence is a good thing. Not that I expect it to happen, especially any time soon.

Anyway, can you believe this shit? Someone has been smoking from the free market pipe a bit too much:

Brinkley said early economic planners had made the understandable mistake of assuming that a free market would rapidly emerge to replace what he described as Saddam's "kleptocracy", and create full employment.

Um, right. The most charitable thing I can say about that is this: It's only understandable if all you know about the world is what you learned at the feet of Thomas Friedman, or maybe from FOX news. A broader view - hell, any view - of history would have suggested that no, "free markets" do not just spring forth whole from armed conflict. That is a badly mistaken idea that neoliberals have convinced themselves of the truth of rather effectively in the last 20 years. The sad thing is that they show no signs of recognizing their ideological error, but seem to be desperately clinging to the idea that the implementation of Iraq was a mistaken, not the premise.

The least charitable thing I can says is that holy shit, those people are fucking idiots. No wonder things are such a clusterfuck.

Via Eschaton.

Changing Assumptions

I really hope that this signals a shift in orthodox economic thinking:

Poor enough people will accept risk in the downward direction rather than smoothing consumption, so they buy lots of lottery tickets. They also commit more crime, so they can have at least some joyous times, and they take lots of "stupid" chances. Yet the poor are not irrational or necessarily dysfunctional in terms of procedural rationality, but rather they are optimizing given constraints.

It seems to me that for a long time, there's been a very mainstream assumption that poor people are just rich people without the money.

It's a stupid assumption, as the above quote makes clear. They may all be human, but the decisionmaking process is very different based on one's location in the capitalist hierarchy.

There's been a corollary assumption that people without money who do things like gamble or commit crime are behaving irrationally precisely because it's irrational for someone with lots of money to engage in those behaviors. As Cowen is arguing, it's not necessarily irrational at all.

Any good lefty could have would have told you that a long, long time ago for free. I just hope that this shift in thinking becomes more prevalent. It would help a lot.

Seriously. This is part of a big problem with economists and modern universities curriculum. The better understanding of people you have, the better these spacy economic models are going to be. Take more humanities classes, people. They do have some value.

Found via Ezra Klein.