A Rare Thing

It's rare that a little, teeny, petite blogpost about a blogpost (Klein, "Krugman on Krugman") can be so accurate a summation of (what Doug Henwood calls) what the people at The New Left Review call "the current conjuncture."

We began with an economic crisis that looked a lot like the Great Depression. But due in large part to the massive efforts of the Federal Reserve and the government, we pulled out of it, or seem to have pulled out of it.

Of course, I think people do understate the political work done by this administration simply to keep a Depression-ish financial collapse from sucking our entire society into a squalid crater. But the question for the people who govern us is: now that we have (maybe) "hit bottom," how, then, will we re-emerge? How long will it take to begin gaining ground again? And will we be a fairer society when we emerge, better-hedged against the asset bubbles and demand-side shortfalls that occasion these recurrent crises?

If the answer to that last question is "yes," I want to know how demand can be stimulated without rising wages, increased government investment in human welfare (i.e., government entitlements and government jobs) and, by extension, increased taxation of the wealthy? Will Democrats come to see that it is in their political self-interest to open themselves up further to charges of socialism, big-government, blah-blah-blah, if said charges arise while they are delivering actual benefits to voters?

Chris Matthews and Foucualt are both always right when they say that the burden of governing is heaviest on the 20th/21st century Left. If Ds win on the discourses of "health care" and "jobs," they can afford to lose on "socialism," because at that point, socialism'll be* just another (bleeping) tree falling in the (bleeping) woods.

*Actually, socialism already is a (bleeping) tree falling in the (bleeping) woods: at least in the northwest hemisphere. Go ahead and blame it on the whole previous century, or Stalin, or Mitterand, if that makes you feel better.

Krugman on AIG

full article here:

I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

i hope that BHO is reading Kuttner and Krugman...

both "mere" liberals, i know. but truth told, "managed capitalism" or a "mixed economy" or whatever-the-hell else you wanna call it still seems ambitious enough (to me) for this first 100 days.

here's Krugman's pronouncement from a persuasive piece called "the Keynesian moment:"

To be sure, Keynes failed to foresee the postwar rise of the “marginal efficiency of capital” — the way that economic growth combined with inflation would create an environment in which interest rates were high enough in normal times that monetary policy was effective at fighting slumps. Hence the long era in which Keynes didn’t seem all that relevant. But his analysis remained as valid as ever, under the right conditions. Those conditions reappeared first in Japan during the 90s; now they’re everywhere... And in the long run, it turns out, Keynes is anything but dead.

i'll tell you, it's tough

i'll tell you who's having a rough week:

1) the PSUV, led by Hugo Chavez. Venezuela had their equivalent of what we call "off-year" elections this Sunday, and while it's true that Chavistas retained a 60%/40% majority in government, they lost regional elections in the two most affluent regions and also lost the mayoral race in Caracas.

2) Republicans: tough rocks, ladies and guys! Ben Smith quotes this hilarious missive from Mike Murphy, the 2000-era McCain loyalist (and Cassandra-like purveyor of a certain well-documented msnbc blooper):

I'm sailing by container ship to Shanghai. The Hanjin Miami, see below. Good way to get away from politics under the new overlords and finish a script I owe. And I've always wanted to cross the Pacific ocean by ship.

With luck... maybe a pirate attack. I'm doing a TIME piece on the trip, so please, tell any pirates you might know to attack. I need something to happen.

In case of emergency, or a winning lottery ticket you may want to share, my trusty assistant ... will be holding down the fort. .... Capt. Chang says I can radio in to check with [her] once in a while if I give him half my daily rice allotment.

And then there's Conservative crisis desperation, Krugman's ur-ethnographic glimpse into the absolute alchemy coming out conservative econo-wonks' pieholes these days.

All in all, what can you say? Not everybody gets to be Barack Obama. Or Robert Rubin. Or Citigroup.

Postmodern Bank Runs

from Krugman:

as the unknown unknowns have turned into known unknowns, the system has been experiencing postmodern bank runs. These don’t look like the old-fashioned version: with few exceptions, we’re not talking about mobs of distraught depositors pounding on closed bank doors. Instead, we’re talking about frantic phone calls and mouse clicks, as financial players pull credit lines and try to unwind counterparty risk. But the economic effects — a freezing up of credit, a downward spiral in asset values — are the same as those of the great bank runs of the 1930s.

What is next, investors jumping out of virtual windows, or mmorpgs for soup and bread???

Unfortunately, the pain is very real.