The Shock Doctrine

I have found a set of YouTube links to a presentation by Naomi Klein to a think tank in Canada.

Naomi Klein is the author of the book The Shock Doctrine. Perhaps I have confused Naomi Wolf with Naomi Klein.

Naomi Wolf was the subject of a previous posting about her book The End of America.

I was in the middle of watching part 3 of the above links when I realized that I wan’t feeling well enough to watch the rest of it.  Between watching this, and after watching a Huffington Post item previously, and participating in some Worcester Telegram & Gazette discussions, I am not sure how much more of this I can take.

Private sector loans, not Fannie or Freddie, triggered crisis

Follow this link to a McClatchy Washington Bureau article that debunks the idea that Fannie Mae or Freddie Mac triggered the financial crisis by lending to minority home owners.

Before I read this article, I had said in an email to reader GinnySL,

I have not investigated the charges they make about Barney Frank interfering with regulating Fannie and Freddie because it would be so out of character for him that it is hard to believe.  I also believe there is an issue with mortgages for underserved minorities that Barney Frank would have been for and the conservatives like to twist into saying he was against regulation.  I just haven’t checked to see if their charges are only related to this issue.

By the way, conservatives like to blame sub-prime mortgages as the cause, but they are off the mark here too.  There is nothing wrong, in principle, with giving sub-prime mortgages as long as you don’t use tricks like ARMs with adjustment clauses that you know the borrower will never be able to handle. Then there are the other tricks like interest only loans and payment option loans.

Follow this link to see the video that highlights the claims that the Republicans are making to Democratic culpability.  It certainly looks pretty damning.  Knowing how Rev. Wright’s words were carefully edited to make him look like he was espousing ideas directly opposite of what he was espousing, I am going to have to do a little research on the original videos to see if the same trick is being pulled here.

Follow this link to the unedited video from C-SPAN of a Senate committee hearing on April 4, 2005. I have just  watched this 2 hour 22 minute video. It has been quite an education.  I am not in a position at the moment to be able to summarize what I have learned.  I can say that I learned something at various points throughout the 2 hours and 22 minutes and that it is worthwhile to listen to the whole thing.

I think the next phase of understanding this whole area is to find out what happened to the proposed legislation that should have resulted from these hearings.  What shape did it take, did it get passed, was it signed into law, and how did we end up in the fix that we are in despite of or because of what happened to that legislation?  This was in 2005, when the Republicans were in control of the legislative and executive branches.  So I am going out on a limb because I do not know the answers to the questions I have posed.

Added on October 13, 2008

If Ben Bernanke is reputed to be such an expert on the Great Depression, it finally occurred to me that I should do a Google search on anything he might have said or written about the topic. I posted one result in my blog entry titled What Does Ben Bernanke Know About The Great Depression?

Recession? Depression? How Deep, How Far and What Can Be Done?

Follow this link to an article on that is the most complete analysis of the current economic situation that I have read so far.

The article does not contradict anything I learned in my college economic classes over 40 years ago.  I’ll leave it up to my readers whose knowledge is more up-to-date than mine to comment on whether the ideas in the article are still appropriate.

I am a little disconcerted about the remarks on the death of free market capitalism.  These things tend to swing to the extremes.  Admittedly what has been allowed to happen in the last 30 years has gone to one extreme.  I hope that is not used to justify going to the opposite extreme.  I guess it is hard to stop a pendulum at exactly the bottom of its swing.

Let me put it into a more common framework than the electrical engineering one that I usually use. There are some car drivers known to be all accelerator or all brakes. The more efficient drivers know to use either pedal in moderation and to sometimes keep the foot off of either pedal. Not only is it more efficient, but it leads to a smoother ride for the passengers. (For my engineering oriented readers, all brakes or all accelerator would be the equivalent of a bang-bang control system.)

Again, thanks to GinnySL for sending me the above link to the article.

My post on Why Buy the Imitation is highly relevant to the contents of this post although you would never know it by the title.

Details of McCain’s Housing Solution

Follow this link to an article by two economic advisers to Barack Obama.They claim that McCain’s plan is similar to what was in the bailout bill that was already passed and signed into law, except for one major difference.  This difference is what makes McCain’s plan a bad idea.

But today we learned of a detail that makes his plan significantly different — and much worse.

They don’t specify in the article where they learned about the detail, so there is no way of knowing if their report is accurate.

Why Buy The Imitation?

Did you notice in the debate the number of times McCain just repeated Obama’s policy position?

You might think that if they are both going to do the same thing, then does it matter which one I vote for?

In managing the economy, the government has a plethora of tools.  The trick is to know which tool to use in any given situation.  You also need to have a good idea of what you are trying to achieve.

I presume that Obama understands that one of the goals of government economic policy is to act as a counterweight to the free market.  Running surpluses and deficits are tools to be used at the appropriate times.  Increasing and decreasing public works investments is another tool.

When the economy is humming along and especially when it is starting to overheat, the government needs to apply the brakes by running a surplus.  This is not the time to stimulate the economy even more by cutting taxes as McCain and Bush favored.

When the economy is starting to slow too much or even go into a recession, then it is time to press on the accelerator by using the accumulated surpluses and running a current year deficit. If the private economy is afraid to spend money, then the government can ramp up public works projects to get money flowing again.

All of this accelerating and braking is an attempt to keep a fairly constant speed through the peaks and valleys of the free market.

John McCain, the imitation Obama, sees Obama proposing the application of the tools, but does not seem to understand the timing of their use.  He wants to cut government spending at the exact time when it should be increasing.

Also taking money out of the economy to send it to Iraq to be blown up is not the way to help the world get out of this financial crisis.  Using that money to invest in roads, water treatment facilities, natural disaster recovery are all investments that will pay returns on the investment.

Investments in better education and health also pay dividends.

Certainly any conservative worth his or her salt must know the difference between spending and investing.

Stopping a Financial Crisis, the Swedish Way 1

Follow this link to the New York Times story on how Sweden solved a crisis in 1992 that is similar to the U.S. financial crisis of today.

The New York Times describes Prime MinisterCarl Bildt as head of a conservative government. Having vsisited Sweden in the late 1980s, I would have to guess that any conservative Swedish government would be far to the left of our Democratic party.

In any case, the article shows that we do not have to reinvent the wheel in our situation.  Many countries have been through this before.  Many different paths out of the mess have been tried. Some paths worked better than others. Which politicians do you suppose are aware of these alternatives and how they worked out?  Who is more likely to read the New York Times, McCain or Obama?

Obama’s Economic Adviser on C-SPAN

Follow this link to see Gene Sperling, Obama’s economic adviser, on C-SPAN discussing Obama’s economic plans.

This being C-SPAN, you get to hear a lot more information without the constant interruption of a news person.  The format is that a caller asks a question and the interviewee gets to give a full answer.  When the interviewee happens to be an economics expert, you don’t get an anchor person pretending to know more about economics than the interviewee.  I am not claiming that you have to believe everything that Sperling says.  What you do get is his full explanation that you can then judge for yourself.

I have also added the C-SPAN Politics web site to the Links section at the right of my blog here.  I am sorry I didn’t discover this site much sooner.

Remembering the Keating 5

Follow this link to hear an interview with William Black about the Keating 5 scandal.

John McCain was one of the 5 caught helping Charles Keating make the Savings and Loan debacle of the 1980s even worse.  Listen to the interview and decide for yourself whether or not it has relevance to the financial meltdown we are experiencing now.

This is another item that RichardH brought to my attention.