Just another Reality-based bubble in the foam of the multiverse.

Friday, November 28, 2008

Unintended Consequences

In a very timely commentary, Glenn Greenwald writes about revisionism:

...Any decent, civilized person watching scenes in Mumbai of extremists shooting indiscriminate machine gun fire and launching grenades into civilians crowds -- deliberately slaughtering innocent people by the dozens -- is going to feel disgust, fury, and a desire for vengeance against the perpetrators, regardless of what precipitated it. The temptation is great even among the most rational to empower authority to do anything and everything -- without limits -- to punish those responsible and prevent repeat occurrences. That's a natural, even understandable, response. And it's the response that the attackers hope to provoke...

Whoever bankrolled them.

...many of these measures, particularly in the wake of new terrorist attacks, are emotionally satisfying, yet they do little other than exacerbate the problem, spawn further extremism and resentment, and massively increase the likelihood of further and more reckless attacks -- thereby fueling this cycle endlessly -- all while degrading the very institutions and values that are ostensibly being defended. The greater one's physical or emotional proximity to the attacks, the greater is the danger that one will seek excessively to empower and submit to government authority and cheer for destructive counter-measures which allow few, if any, limits.

What happened in the U.S. over the last eight years is about much, much more than what "the Bush administration" did. It begins there, but responsibility in the post 9/11-era is much more diffuse and collective than that. Shoveling it all off on the administration that is leaving, while exonerating our culpable media and political institutions that remain, isn't merely historically inaccurate and unfair, though it is that. Allowing that revisionism also ensures that the critical lessons that ought to be learned will instead be easily and quickly forgotten when similar episodes occur here in the future.

In one of those cosmic conjunctions Krugman is writing about the exact same thing... about the economy. Or lack thereof:

A few months ago I found myself at a meeting of economists and finance officials, discussing — what else? — the crisis. There was a lot of soul-searching going on. One senior policy maker asked, “Why didn’t we see this coming?”

There was, of course, only one thing to say in reply, so I said it: “What do you mean ‘we,’ white man?”

Seriously, though, the official had a point. Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication — namely, that financial market reform should be pressed quickly, that it shouldn’t wait until the crisis is resolved.

About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories?

Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?

Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?

One answer to these questions is that nobody likes a party pooper. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly. Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme...?

...Now we’re in the midst of another crisis, the worst since the 1930s. For the moment, all eyes are on the immediate response to that crisis. Will the Fed’s ever more aggressive efforts to unfreeze the credit markets finally start getting somewhere? Will the Obama administration’s fiscal stimulus turn output and employment around? (I’m still not sure, by the way, whether the economic team is thinking big enough.)

And because we’re all so worried about the current crisis, it’s hard to focus on the longer-term issues — on reining in our out-of-control financial system, so as to prevent or at least limit the next crisis. Yet the experience of the last decade suggests that we should be worrying about financial reform, above all regulating the “shadow banking system” at the heart of the current mess, sooner rather than later.

For once the economy is on the road to recovery, the wheeler-dealers will be making easy money again — and will lobby hard against anyone who tries to limit their bottom lines. Moreover, the success of recovery efforts will come to seem preordained, even though it wasn’t, and the urgency of action will be lost.

So here’s my plea: even though the incoming administration’s agenda is already very full, it should not put off financial reform. The time to start preventing the next crisis is now.

The one positive thing about the Bu$hCo years is that the chicanery has been so obvious. So obvious, in fact, that those who can't see it have become the butt of popular humor once again. Really, Sarah Palin?

So obvious, in fact, it led an overwhelming majority of America to elect a black Democrat over another white Republican.

So obvious, in fact, the Invisible Empire has gone into overdrive trying to lower its profile. We're a Republic, right? And this election proved that, right?

Follow the money, campers. This was a $election as much as 2000. The man with the most scratch and the best Company portfolio won the fight.

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