The above video is a recording of George Soros’s recent appearance at MIT. It lasts a little over 80 minutes. You will be well paid for your investment in time if you watch the video.

The discussion revolves around his recent book, The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means. The previous link takes you to my all too brief comments about the very valuable experience I had reading the book. Hearing him discuss the ideas and take and answer questions was a tremendous added value to having read the book.

I have referred to the book in several posts on this blog, Why Oil Companies Don’t Drill and Predictably Irrational: The Hidden Forces That Shape Our Decisions.

I was also pleased to hear an audience suggestion of an idea that I had proposed in a previous post, Greenberg et. al. Solution to Real Estate Bubble. It was even more pleasing to hear George Soros say that it was a good idea.

How I wish I could have been present at the meetings Soros had with the MIT economics department following this appearance.  The mathematics for modeling his ideas are all available at MIT, at least in the electrical engineering department, and I am pretty sure in the economics department too. Soros commented that one of the reasons for his great success as an investor is that he corrects his mistakes.  In electrical engineering control theory this is called applying negative feedback.  The cause of bubbles and collapses (oscillations) is what happens when you apply positive feedback according to this control theory. It will be no easy feat, but I have been saying for quite a while that accounting for these feedback mechanisms in economic models is one of the solutions to the failings of the current models.  The interviewer in the video gave some hints during the discussion that MIT has been working on this idea.

The research in behavioral economics at MIT and elsewhere described in the Predictably Irrational: The Hidden Forces That Shape Our Decisions book I mentioned above is also part of improving the economic models.

If you ever wondered where some of your tax money is going, take a look at the above video.

Lest you think the above is a criticism, I am actually saying that this kind of investment in research is one of the things that keeps this country in the forefront of technology. If you think that private industry does it all, then you are not understanding how university research is funded. Well, that is how it was funded until recent administrations.

So begins the educational process that Robert Kuttner called for in his new book.

You must read the book Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency by Robert Kuttner.  This book and author were the subjects of the interview mentioned in my previous post, Obama’s Challenge: A Transformative Opportunity.

Since Lyndon Johnson’s administration got mired in the war in Viet Nam in the late 1960s, a fog has descended over politics in the United States. In this fog we have forgotten what a positive force government can be. Not since Robert Kennedy quoted George Bernard Shaw, “You see things as they are and ask, ‘Why?’ I dream things as they never were and ask, ‘Why not?'” have I been lifted from this fog the way this book lifts me. This book reminds me why I want to be a Progressive Democrat.

This book starts off by putting into words all the reasons why I have been an Obama supporter from nearly the beginning of his presidential candidacy. It explains what qualities I saw in Obama that made me think he could be the transformative president of the book’s title. There was no other candidate who came any where near having these qualities to the degree that Obama did.

The book goes on to explain why even the Clinton administration did a disservice to the ideals of progressive politics. If I were tempted to think that Clinton’s tenure might have represented the best that could be, this book lifts my sights higher. Kuttner further explains how Obama’s differences from Clinton could lead to a much better outcome.

Kuttner devotes a large portion of the book to describing a set of steps that Obama should take to lift the country out of  the predicament in which it finds itself.

Read the interview of Doris Kearns Goodwin by Robert Kuttner that furthered the inspiration to write this book.

A search of this blog will show you a number of posts that refer to the ideas in the book.

See also my review of The Audacity of Hope: Thoughts on Reclaiming the American Dream by Barack Obama

The principle being, “I’ve got mine. You can go pound sand.”

Read the real reason in the article Sen. Shelby: How Sweet Is the Auto Business in Alabama? Not Very

In case you have missed the news, Senator Shelby is one of the most vocal opponents of a federal bailout of the big three American auto companies.

Maybe the other principle is that the (federal) government should not bail out the American auto companies, let Alabama bail out only foreign auto companies.

This must be how the Republican’s put country first.  Maybe this is the second round of the Civil war where the South fights the industrial North again. We forgot to ask, which country are they putting first.

Maybe this just proves the point about Obama’s call to sit down and talk to your adversaries without preconditions.  If you know where your adversary is coming from, maybe you can work out a mutually agreeable solution.  If the Southern congress people felt that the bailout had been going too lopsidedly to northern industrial and financial concerns, it would have been nice if we had had an atmosphere in Washington where they could have just come out and honestly said what their concerns were.  Then all the congress people might have been able to get together to work out a deal that saved the entire country.

We could then leave behind the phony idea that government should not interfere with business and pick winners and losers.  The article shows how much Alabama has been doing just that while they protest other people doing that. Maybe Shelby is just using his seat in the Senate to try to kill the competition to the winner that he has chosen.

How I wish Charlie Rose had been armed with all this iinformation when he did the piece about the auto bailout.

One way to lessen the impact of borrowing from foreign countries is to foster a weak dollar.  In essence we borrow today with a strong dollar and pay back in the future with a weak dollar.

The first queston that comes to mind is why any sane foreign country would put up with a plan like this?

The answer appears in the above named article in the Asia Times.

Ok, the butler did it.

Faced with the unprecedented growth of the US budget deficit and the prospect of an increasingly weaker dollar compared with the yen reducing the value of Treasury debt held by Japan, economists in Tokyo are calling for the administration of president-elect Barack Obama to issue US Treasuries denominated in yen and other currencies. The issuance of foreign currency-denominated US Treasures would reduce the perceived risk of holding the debt.

This is a clip of Krugman’s appearance on the Rachel Maddow Show with guest host. It starts off with a long introduction by the host.

On Thursday, November 20th, at over 1,000 gatherings nationwide, MoveOn members will celebrate Obama’s historic victory and launch a new campaign to help him make real change in Washington.

There is MoveOn.org web page to find a gathering.

The idea seems to be to start a petition drive to support various of Obama’s initiatives.  The petitioner signature collectors will gather pictures of signers to show the world the diversity of the people continuing to support Obama.

I decided that such an effort is not really my cup of tea.  I have been trying to imagine an effort that would help Obama overcome opposition to the initiatives that he is going to take.

The book Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency by Robert Kuttner suggests that one of the things that a leader like Obama must do is to educate the people on the wisdom of taking the steps that he proposes.  I have started to imiagine an effort where, we the citizens, help Obama in this education endeavor.

I can picture local gatherings addressed by people who can explain the thinking behind the initiative of the moment.  Perhaps it can be gatherings in peoples’ homes to watch a webcast on the topic and then have discussions about it.  This might be something that Obama is planning to do using his transition web site after the transition is over.

I even sent the above suggestion to Obama using his suggestion web page.

In the Simon Johnson class webcast mentioned in my previous post, Global Crisis Orientation, there was a discussion of the GM bailout.

I was also reading another blog that was touting the successful Chrysler bailout as a model for a GM bailout.

I don’t understand this talk about how the bail out of Chrysler was a tremendous success.

There is very little of Chrysler left. What little that there is will disappear shortly. If this is the success that we can expect from bailing out GM, then this is not a pretty picture. Maybe the slow death of GM rather than a rapid demise is the best we can hope for.

Maybe the discussion needs to change to one about how we will replace the big three with some other industries and let cars be made by the existing successful car companies like Toyota. What steps can the government take to ease the transition for the employees, retirees, and supply chain?

What will happen to the financial system when GM defaults on the trillion dollars of GM company debt being held by the financial system?  We need to prevent this financial disaster.

If there is to be a bailout, perhaps its only purpose should be to smooth the transition to the phasing out of some of these three auto companies. If others want to start up a new American auto company by purchasing some of the resources of the big three, then so be it.  If nobody wants to do this, then we ought to let them fade away.