Just Thinking Out Loud About The Economy

There is so much talk about the Obama stimulus plan, the remaining half of the TARP bailout money, and the necessity of “saving” the financial system. Couple that with the ongoing partisan bickering over spending cuts versus tax cuts and we have a real muddle. Most of the ordinary people I talk to admit they really don’t understand how the economy works well enough to know what should or should not be done.

It sounds reasonable to say we have to “save” the financial system.
It sounds as if some items in the plan don’t meet the criteria for “stimulating the economy.”
It sounds sensible, based on history, that doing nothing or even doing too little will only make matters worse.
It sounds prudent to worry about the already huge and still growing deficit

Acknowledging that I am no economist, and do not understand the finer points of how Wall Street works, there are some things that seem more a matter of common sense than expertise. Starting with the premise that just because something sounds good, doesn’t mean it is good; one of the things I question is the advisability of “saving” the financial system.

Do we really want to save the financial system that brought about the economic collapse we are in? Isn’t this the same financial system (with enhancements) that collapsed in 1929? We fixed it then and got about 80 years out of it before it broke down again. Perhaps a better solution would be to aim for building a new financial system based on sounder principles. And perhaps the people who make the decisions about what kind of economy we need to build should not be the same people who were running the financial system that gutted the economy.

For instance, why isn’t Joseph Stiglitz one of the President’s top economic advisors? He sounded warnings about the coming collapse several years before it happened. He pointed out that globalization might be a good thing but the way it was being handled was not good. What about Nouriel Roubini who predicted in 2005 that “home prices were riding a speculative wave that would soon sink the economy.” These men do not go along with the recovery plans currently being offered. Why are we not listening to these people who seemed to have a better handle on what was happening and now have different ideas about what should be done?

Instead we have Larry Summers as a top economic advisor. A man who is an “ultimate neoliberal, free market ideologue” known for promoting unregulated markets. Summers was actively involved in the dismantling of the bank reforms that were designed to control speculation and prohibit consolidation of depository and investment banks with brokerages. This deregulation allowed the spiral that brought us to where we are today.

And in lead position of Secretary of the Treasury we have Timothy Geithner. A man who was mentored by Larry Summers and Robert Rubin (of Goldman Sachs and Citigroup) and who served as President of the Federal Reserve Bank of New York during the buildup to the meltdown. He supported the financial system as it reached the breaking point and now seems determined to “fix” it.

Why are we willing to spend billions, even trillions, of dollars to fix a system that is obviously flawed instead of spending the money to build a new system? Why are we willing to let the same people who ballyhooed the flawed system even as it began to collapse, now tell us how to fix our economy?

There is a book, Agenda for a New Economy: From Phantom Wealth to Real Wealth by David Korten that is a good starting point for understanding the economic system we have that serves primarily the wealthy and ideas for a new economic system that would serve the interests of the people.

Come on America! Make the effort to understand and then unleash your voices, demand a real recovery, not just a patch job that will last for a few decades and then bring our grandchildren right back here again. Do we really want to keep, not only shooting ourselves in the foot, but shooting ourselves in the same foot in the same spot?