[It is an honor to welcome Nobel Prize winning economist and NYTimes columnist Paul Krugman to FDL. Stay on topic, please, and remember your manners. Thanks! -- CHS]
The Return Of Depression Economics And The Crisis Of 2008 broadened my understanding not just of past errors in the US and a number of parallel crises, but of smarter potential tweaks and substantive change possibilities down the road.
For that, I must say an enormous thank you to Paul Krugman. His snarky illustrative stories and pithy analysis kept me slogging through the dismal economic information with relish. How often can you say that?
This is a highly recommended read for anyone who wants to understand how all the assorted myopic, inept, and greedy schemes and failures dragged down the economy for all of us. As Krugman says:
[T]he good opinion of markets can be fickle…today’s good press does not insulate you from tomorrow’s crisis of confidence.
The prior warnings: Mexico in the 1980s and 90s, the Asian meltdown of the 90s, Japan’s bout with liquidity traps, vast hedge fund tinkering? All lost in a sea of hubris and Friedman-esque justifications for avarice disguised as free market laissez-faire-thee-wells.
Of late we’ve seen a return of some conservatives to the Andrew Mellon words of yore:
"liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…purge the rottenness out of the system."
It’s just disguised in PR friendly euphemisms fresh from focus-grouping, but still pure Ebenezer Scrooge at heart. And something that Krugman dispatches handily:
The specific set of foolish ideas that has laid claim to the name "supply-side economics" is a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men….
Meanwhile, the rest of us pay the penalties for policy-making based on ideological rifts and Rand-y adherence to "free market" purity, whatever its long-term failures might be.
Krugman does not stop merely with criticisms, but proposes potential ways forward. He is at his best discussing the Keynesian potential of public works and individual stimulus efforts, to put money in the demand side of the marketplace.
He also details historical precedents for influx of capital into credit markets, as FDR did in the 1930s. He identifies parallels to lending institutions sitting on these infusions, rather than freeing up capital — and proposes incentives to shake the public’s money loose for its own benefit. However, this should be no open-ended giveaway – Krugman advocates relearning the lessons taught so painfully by the Great Depression:
…the basic principle should be clear: anything that has to be rescued during a financial crisis, because it plays an essential role in the financial mechanism, should be regulated when there isn’t a crisis so that it doesn’t take excessive risks.
An analyst at the Heritage Foundation just started reaching for his pitchfork. But Krugman is right — if you expect American taxpayers to bail you out, then a price ought to be attached. Transparency, accountability, oversight and some common sense ought not be too much to ask, given the stakes for all of us if they continue to fail.
There is so much more in this richly detailed book, but that wouldn’t leave room for needed questions: about panic journalism mode once the housing bubble collapsed, while feigning ignorance or indifference only days beforehand. Or questions about whether Congress, the Bushies or the incoming Obama administration will have the wherewithal to do the hard work. How can average Americans make better decisions as we go forward to protect assets — large or small? Or how we’ve all taken on the risk of retirement that used to be carried by employers along with the insane costs of health care.
What about our increasing debt load? How do we better manage global interdependencies? Or the Greenspan mystique, even after all of this.
With all that hanging in the air, I welcome Paul Krugman, and open the floor for your questions and discussion.
Related posts:
- FDL Book Salon Welcomes Paul Starobin, After America: Narratives for the Next Global Age
- FDL Book Salon Welcomes, Paul Davidson: The Keynes Solution: The Path to Global Economic Prosperity
- Paul Krugman on “This Week”: “The Argument Against the Public Option is Sheer Nonsense”
- FDL Book Salon Welcomes George Soros, The Crash of 2008 and What It Means
- FDL Book Salon Welcomes Wade Rathke, Citizen Wealth: Winning the Campaign to Save Working Families
Spotlight
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About Firedoglake
Advanced search
Professor Krugman, Welcome to the Lake.
Christy, Thank you for Hosting today’s Book Salon.
Welcome Professor Krugman, what an honor!
Welcome to FDL, Prof. Krugman. Congratulations on the recent Nobel selection — we are thrilled to have you here to chat today.
As of today, how dismal — or not — are things looking, in your estimation? (And yes, this is an open-ended question to start you off…)
Thank you so much for visiting with us today, Professor Krugman!
Honored to do it, Bev. Truly.
Welcome Prof. Krugman. So many Qs, so little time.
1. Is the U.S. (world?) in a liquidity trap, and if so, what to do about it?
Hi all. I’m eager to join in — and trying not to check the other open windows on my computer, with dire economic and financial data arriving every few minutes, too often …
How would you assess the performances of Paulson and Bernanke? Didn’t you say that you thought they were doing well? How do you think Geithner and Summers will be the same or be different from them?
My own take is that Paulson and Bernanke have been stunningly incompetent. The housing bubble was already showing strains when they took up their offices in 2006. They did nothing. Even after the bubble burst on August 9, 2007 with the panic following the freezing of the BNP Paribas funds, their efforts were sporadic and uncoordinated. As for Paulson’s decision to let Lehman fail without giving a first thought let alone a second to who held Lehman’s debt has got to be one of the most blindingly stupid moves in financial history. The result was that credit which becoming more sluggish froze precipitating the meltdown and the near collapse of the system. Since then Paulson and Bernanke have expended fantastic sums of money and have very little to show for it, other than apparently to prop up the house of cards of the financial system until the inauguration.
Hello, Prof. Krugman, welcome and congratulations.
There’s a post up here earlier today where Jane quotes David Sirota and Chris Hayes suggesting that Team Obama has put movement progressives in communications posts, but has left policy crafting duties to traditional centrist types. With regards to the economic team, do you think that critique rings true?
Well, I hear thre’s a living to be made in ignoring all that stuff for some people.
/snark.
So glad to have you here, Professor. Looking forward to the conversation and hoping our own Stirling Newberry and Ian Welsh will be here to participate.
2. Your point about anything to big to fail needs to be regulated on the other side. How can anyone reasonably expect that to happen with the Obama economics team chockablock with the ones who deregulated it under Clinton, leading to the mess under W (which he did nothing to prevent and made it worse after it happened-not blaming it all on Clinton)?
OK. So, we’re in a liquidity trap; so are the Japanese; the Europeans will probably be there soon.
For the puzzled: a liqudity trap is a situation in which the central bank — the Fed or its equivalent — can’t turn the economy around even if it cuts interest rates all the way to zero. That’s where we were in the Depression, where Japan was in the 90s (and is again), and it’s where we are now. Interest rate cuts are like over-the-counter cold medicine; they’re safe and easy to use. Once you’re in the trap, though, you have to start taking medicine of uncertain effectiveness and with dangerous side effects — sort of like chemo for cancer.
So this is a very worrying prospect.
I know that Bev warned you about this before the chat, but we have a lot of econ wonks and interested folks in the readership who will be peppering you with questions. Get to them as you can — we’re a chatty bunch and appreciate what you can answer for everyone.
Welcome, Professor Krugman.
We are honored to have you here. Thank you for coming.
I also am delighted to see TV news programs inviting you in to their studios more often. Everyone needs to concentrate more on what you have been saying. I look forward to buying and reading your book.
Professor Krugman, I’m a longtime fan of yours, as a Times reader and grateful citizen. Congratulations on your well deserved Nobel Prize.
While an Obama supporter I always agreed with you that there were better ways to get to health care – and I hope he’ll revise his views.
Do you see any possibility that all our various already existing government health care systems (VA, Military medical system, Worker’s Comp, Medicare, Medicaid, NIH, Public health, etc) could be folded into one integrated system?
This may not be the purpose of your visit here, but it’s something dear to my heart and my profession as a clinical psychologist.
3. Infrastructure programs will create jobs as long as they last, but economic growth more fundamentally comes from consumer spending, over 70% of GDP. Consumers have no visible means of support. Real wages haven’t risen since the 1960s (except for a brief bout in the 90s when the unemployment rate approached 4%), job growth was strong during Clinton, but not since, and the use of houses as ATMs is over. How does the economy prosper when consumers can’t?
Paul, one thing that I’ve seen personally is that larger businesses — even ones with very good credit ratings and assets/debt ratios have difficulty getting run-of-the-mill commercial loans these days, setting up all sorts of hiccups for businesses that ought to be going well, even now. (Energy sector and some manufacturing folks, for example.) With the Fed rate already at 1%, there isn’t a lot of wiggle room to work with in lowering rates — what can be done? Beyond waiting this out and praying loudly, I mean…
That was very kind. In the day, I got A’s in economics, and never understood why. You, sir, have made it accessible and understandable, even for me. Thanks so much. I’ll be lurking.
Thank you Professor Krugman for being here today. I’m a great fan and appreciated your comments to George Will on This Week. How are Bush’s policies and that of Paulson and Bernanke different from what President Hoover tried to do?
Excited to be lurking on this sure-to-be-epic Book Salon!
A follow up question on personnel:
As head of the New York Fed since 2003, Geithner was in excellent position to see the both the housing crisis and the financial meltdown coming but he did not. We have been talking about the coming splat here since late 2005-early 2006 and I do not think we came especially early to the party. But what does this say about Geithner? What do the behind closed doors, non-transparent deals he helped structure with the Bear Stearns and AIG bailouts say about him? Or his being a protégé of Rubin and Summers?
As for Summers, he was heavily into the deregulation craze during the late Clinton years and here I am thinking principally of Gramm-Leach-Bliley (repeal of Glass-Steagall) and the CFMA (deregulation of derivatives). How can anyone who was so desperately wrong about these major components of the meltdown retain credibility on anything? It seems a little like hiring Boss Tweed to clean up corruption in New York.
And then finally there is Rubin. Vikram Pandit must have been thanking his lucky stars that Rubin was on the board of Citi because Paulson and Bernanke gave him one big wet kiss when they agreed to guarantee $306 billion of the bank’s crap assets at around 90% of their face value. Rubin is godfather to Obama’s economic policy. He has been a godfather in the careers of both Geithner and Summers. And as Pandit found out, he is a godfather of Citi.
But the question remains for all three of these men is this the best Obama could do for an economic team? Other than keeping on Paulson or the ludicrous Kashkari it is hard to imagine a more tainted and wrongheaded bunch of officials even in good times and these are likely to be the hardest times any of us have ever seen, the worst since the Great Depression.
Welcome Dr. Krugman.
You have rebutted the argument put forth by Shlaes, Will and others that the New Deal showed that fiscal stimulus does not work. I have also heard it argued that fiscal stimulus did not work in Japan in the 90s. Could you address this?
Welcome from an unemployed Hoosier.
Welcome, “the Nobel Shrill One.”
In your recent NYRB piece, you talk about leaving behind obsolete doctrines.
You say similar things in your book, though not as explicitly.
Given the many discussions about “ideology” in regards to the Obama transition, can you be even more explicit about obsolete doctrines as clutter?
Welcome Paul, great to have you back again.
So we’re hearing some rumblings about extending the Bush tax cuts, and how it’s both foolish and unprecedented to raise taxes during a recession.
How do you feel about that?
There’s something to this, but I’d make a few comments.
One is that this is who Obama is. It was clear all through the primary campaign that he wasn’t all that progressive on economic issues — remember how he more or less said that Reagan was a necessary corrective to the excesses of the left? So you shouldn’t be surprised that he’s chosen a centrist economic team.
On the other hand, even if he had been really determined to appoint progressives, there would have been some limits. I saw a Sirota post suggesting some people who could have become Treasury secretary; they were all very good people, but I don’t think any of them had a background in finance or monetary policy. So the pool of plausible appointments wasn’t as big as you might imagine.
Finally, some hope: these are smart people, and they’re not dogmatic. So they’ve learned a lot since the 90s. Oh, and let me say a word on behalf of Tim Geithner, if only because he’s stayed in the public sector rather than cashing in by going into investment banking — he could have made enormous amounts, but chose not to. That’s something special in these days of greed is good.
Desires, Greed rather than Prejudice Supply Side tells people what the want to hear not need to hear its like a Cancer it starts out as useful tissue then it gets evil and grows uncontrollably to a size that it kills the organism that gave it life.
Oh and Welcome to the Lake I used to read your paper every day while I was bagging newspapers for delivery:). The Times use to pay us more than all the other papers for delivery:)
Great have you here Prof Krugman!
Question: Aren’t “mandates” in any so called “universal” health care system simply a boon for the insurance companies? As a family that practices mostly natural and preventative health care options, why should my family be forced to partake in a deeply flawed system? Is the idea that a “universal” system is a stepping stone to a true single-payer system? I’m trying to figure out why you supported a proposal that included mandates. Thanks for your time.
Re the liquidity trap, this is tied in with insolvency of banks and the opacity about how many bad assets they hold. Why is nationalization of the banks not getting more play? It would allow the government to kick start regular lending, determine the insolvency of the banks re their bad assets, provide a means for restructuring many home mortgages, and allow for rationale recapitalization. Anything short of this it seems to me is either not going to work or be unbelievably expensive.
Congratulations on your Nobel!. Thanks for talking to us basement bloggers.
The newer estimates are that Hank and Benny are giving their rich friends $8,500 Billion Dollars. Can they steal more from us?
When Citigroup uses our money to buy toll roads in Spain and Chile, and airports, is that evidence of a New World Order privatizing all public resources?
Professor Krugman, thank you so much for this book and for your immeasurable contribution to the national dialogue. Last nite on Rachel Maddow, the head of the steelworkers’ union talked about the double standard for bailouts of industry based on whether the workers showered before work or after. Can you talk about the huge inequity between the bailout discussions of Wall Street and The Big Three? For instance, I don’t recall much discussion about how the Masters of the Universe traveled to DC to plead their case, yet we know have the spectacle of auto execs road-tripping in hybrid vehicles after their supposed “PR disaster” of using the corporate jets last time.
Is Congress really prepared to punish workers who shower after work because of how their big bosses travelled to ask for a rescue?
Thanks for chatting with us today.
Good question. Read Adam Posen:
http://krugman.blogs.nytimes.c…..dam-posen/
The Japanese story is kind of like FDR: there was a lot less fiscal stimulus than met the eye. When they did it, it worked — but they kept pulling back before it got enough traction.
What kind of regulations do we need now and in the future.
Will Hedgefunds ever be forced to open their books? What about all the Homeloan debt the hedge funds bought are the banks who loaned them the money to buy that debt ever going to start asking for more collateral?
What happens then?
Dear Empty (can I call you that):
I say exactly the same things in the book — the NYRB piece was an extract from the book.
Hi Paul. Wondering what your thoughts are about Richardson at Commerce.
Thank you for your considered response. I didn’t expect that progressive an agenda out of President Obama–I was just hoping that the times would drag him in that direction, not unlike what happened to FDR in 33.
I have heard you stick up for Geitner several times in recent weeks–you would know better than I–so I am hoping you are right.
Prof. Krugman:
Now that the government has acknowledged that we have in fact been in a recession for a year, isn’t this an admission that they have been withholding the ACTUAL data from those of us who rely on it to plan our business and investment decisions? Whose numbers should we believe, the FED/Treasury, or shadowstats.com ? If we are measuring employment, inflation and other key metrics by a different yard stick than was used during the Great Depression, wouldn’t that serve to explain why comparisons to the original Great Depression are difficult to make?
Out here in the hinterland of Arizona we are seeing big effects of the recession on natural resource industries. Just spoke to the Peabody Coal rep here this morning and they are pulling all hiring signs down. A friend’s son had just got laid off at a copper mine at Bagdad, Arizona, and had hoped to get on with Peabody. Bush’s administration seem blind to what is happening or frozen like deer-in-the-headlights. Paulson is so against helping anyone outside the boys of the banks. Do you think this his own narrowness or is he just following Bush-Cheney orders?
This seems a standard dodge. Obama’s team is experienced even though much of that experience involved them being epically wrong about deregulating markets. The second part of this is that they have learned a lot since. I have seen no evidence of this. I have heard no repudiation of their former views (Yes, I know that they now think there may be a place for some regulation. Well, gee.) nor how their current views differ specifically from those they formerly held.
Will Chrysler get bailout money without Cerberus the Hedge fund that owns them having to open up their books?
After all how do we know if they really need the money? If Cerberus can’t help Chrysler then its customers will leave because who wants a hedge fund thats broke?
On the other hand if Cerberus has the cash to help Chrysler why should we give them money?
Did we give Ford and GM money when Chrysler was bailed out?
In the end, a single integrated system is what I want, and America needs. But since the votes aren’t there yet, we go for a patchwork with as few holes as possible.
It’ll be a long time, in particular, before the VA model gets accepted — even though the integrated care the VA provides is vastly cheaper than anything else out there, yet provides higher quality care. But one step at a time: universal coverage now, even if the scheme is messy, single-payer a little down the road, integrated health care maybe a generation from now.
Gosh, I’d be honored if you called me “empty”!
But in the context of the Obama transition, what does getting beyond “obsolete clutter” look like? Given the angst over the hiring of Rubin acolytes, what does it look like. Upthread, you suggested you thought the team members were not dogmatists. What is the process going forward to find new solutions, and how is it different from what Bernanke and Geithner have been doing (leaving aside Paulson, who has been stuck in the WH ideologies)?
Glad to see you here, Prof. Krugman. My question is, I saw you the other day, I think it was on 1600 with David Gregory. I didn’t catch the name of the other guest, but he suggested that we should not waste money trying to set an artificial bottom to the Real Estate industry. I was wondering what you think should be done with all those wasting assets and all of those foreclosure to come.
Prof Krugman, today Yves Smith has a post arguing that the consensus about a Keynesian stimulus comes from learning the wrong lesson about the depression… and that in our current situation, we are postwar Europe and the Chinese are us. As a supporter of the idea of fiscal stimulus now how do you respond to that?
Yves’ post is here.
I fail to see how Geither choosing position over money (could have been only a near term choice; he can always go to Wall St.) is a qualification for his ability the head treasury. He gave some speeches that looked like he understood the developing financial crisis but then as NYF prez did nothing to stop it. Doesn’t the NYF have oversight for some financial institutions? Was it doing its job on his watch?
Paul, this is some honor having you with us today!
I’ve bee posting the following for quite some time and I wonder your opinion;
real wages have been depressing for years
real assets have been depressing for years
retirement savings have been depressing for years
real American based investments have been depressing for years
how has this not been a depression?
Will we ever see the kind of accountability for toxic assets that our departed blogger friend Tanta called for?
Could this be part of the reason why Pirate Paulson is making capital investments rather than acquiring assets this week?
Spencer
Great to have you in this! So, you want to know what I think about Richardson; actually, it’s a bit troubling, on economic grounds (or at least economic doctrine grounds.) During the primary Richardson declared himself a “pro-growth Democrat”, seemingly implying that other Democrats were anti-growth, and at least sometimes seemed to be defending the Bush tax cuts, opposing deficit spending in recessions, and all around giving aid and comfort to the right. When pressed on specifics, he came across more progressive than that — Ezra Klein had a good interview:
http://www.prospect.org/cs/art…..richardson
But still, giving him what is basically an economics post troubles me more than Tim Geithner at Treasury.
This is a little off topic, but Tucker Carlson said this about pardons and
Scooter Libby:
“It’s immoral to let people who work for you suffer for your sins. Whatever Libby did, he did on behalf of his superiors. A pardon is the least they owe him. Also, it would drive Paul Krugman crazy. Really crazy. Even crazier than he is now.”
I think he should apologize to you, do you agree?
Welcome Dr. Krugman, I used to attend your lectures when I should have been spending time on the particle bestiary. I’m hoping you will take a moment to elaborate on the need for fiscal stimulus, and on the size and design of the package.
You say that we need to discard outworn ideologies. I generally agree with the sentiment, but would like more particulars. Could you be more specific about which those are? Also can you suggest what we should replace them with?
Obama also said that he would listen to all kinds of views. I didn’t expect an economic team of progressives, but I did expect some representation at the top levels. Furthermore, Obama has made a big deal out of “pragmatism” an “getting things done” – so I was expecting some people who were right about financial regulation issues in the Clinton administration in addition to those who got it wrong.
I’d also like to congratulate you on winning a Nobel prize and to thank you for your shrillness. Wish there was more of it.
What are your thoughts on the derivative overhang? Are clearinghouses on regulated exchanges really going to be sufficient to deal with CDSs, especially naked ones?
On a related note, there seems to have been a repeated use of shorting to push a whole series of companies into or near failure. Do you favor a return to the uptick rule? Do you have other ideas to prevent predatory shorting?
Another question;
What do you think about adding commensurate tariff to products produced int counttries that allow industry to defer their costs and do not pay their own bills, IE;
when the laborer does not earn a living wage, when the country allows industry to polite environment, these companies are not paying their own costs, this is not “fair trade” and in my opinion those products should not be allowed into this economy without facing said commensurate tariff or fee
I would not call this fee a “tariff”, I would prefer calling this fee “proper usage fee” or something more indicative to the reason the tariff is in place
Weren’t people saying something similar to this in the early 1990s? A generation ago.
Just how much time would it take to change over auto production 10%, 50% 100% to hybrid cars, electric cars, hybrid diesels assuming we do the auto bailout right?
Just how long would it take to generate 10%, 20%, etc of our power from green power.
OK, I didn’t really finish the answer. So, the clutter that’s a problem right now has at least three components:
1. Deficit phobia — right now, red ink is OK, but it’s hard to break with the idea that it would be prudent to limit the stimulus (It would actually be dangerous folly, because of the risk of a deflationary spiral)
2. The preference for tax cuts over government spending. Right now, spending is a much more effective stimulus than tax cuts that would probably be saved — and infrastructure also works to make us richer in the long run
3. Fear of government ownership/control. The financial rescue efforts are being hamstrung in part because the Paulson Treasury is terrified of doing anything that looks like nationalization; they won’t buy voting shares and then demand that banks lend, they won’t even guarantee the debt of Fannie and Freddie, which are already in government receivership. You don’t have to be Lenin, eager to seize the economy’s commanding heights, to see that for the time being a lot of banking will have to be directed from DC.
Speaking for the Sadly, No! crew, I should have to say that we’re deeply suspicious that this economic instability is all part of Donald Luskin’s plan — a ‘long game’ of his, as it were.
Does it bother you that the President-Elect doesn’t seem to consider the Secretary of Labor part of his economic team, and that he’s leaving that appointment near the last?
I don’t think these were actually “tax cuts” and I think even referring to them as “cuts” defeats the debate
these were actually asset gifts given to the wealthy at the expense of infrastructure and middle class growth
I do not believe “taxing the wealthy” is the proper method for describing the plan to defeat the bush gifts either
I believe this plan should be discussed as “investments that proved flawed in their concept and these investments must now be redirected”
So, how big is the CDS problem? I think Clinton Derangement Syndrome is a *big* problem. Oh, you meant the other kind of CDS.
You know, even now I’m not sure how central credit default swaps are to this mess. They certainly conveyed a false sense of security — I think Nouriel Roubini said that they were like buying insurance on the Titanic from people who were passengers on the Titanic. But the big crippling losses have come from CDOs, not CDSs — it’s those sliced-and-diced claims on mortgage pools that have wreaked havoc.
Which people? Under what economic circumstances? With what Congress?
Welcome Mr. Krugman.
Can you please offer an explaination as to how the Chicago School of Economics and it’s disasterous effects can be “cured” by the likes of Geithner, Rubin, Summers and the like?
I was pleased to learn that while teaching constitutional law, President-elect Obama avoided personal or professional relationships with the Freidmanites, and yet, he is surrounding himself with them now.
Are there no competent Keynesians?
Won’t that be the same under Geithner?
Thanks–that’s very helpful.
Ding ding ding. Thank you for asking.
industry has to pay to maintain their equiptment and I believe they also should be paying to maintain their health force
I believe if industry were mandated into covering health care they could obviously offer less wage, their buying power on health care would result in a net gain, it wouldn’t even cost them much if anything
for those unemployed, there should be a tax to the laborer and income that would pay for unemployed health care, we would call that tax “social security”…oh, wait
I dare say that the only thing Paulson is terrified of is
nationalizing American Industry and banking.
That he is doing so is painfully obvious.
Yes, where is Labor in all this? FDR’s lasting legacy had as much to do with labor protections as it did with Social Security; I’m not happy about this neglect.
What would make more economic sense hybrid cars?
Or high speed trains passenger and freight powered by green power and then we discourage short hop airline flights and use semi trucks for shorter hauls and use high speed freight more.
I see no reason why we can’t make a high speed freight train if the power is free and green power is free.
Plus the train companies already own the land next to their tracks they could build wind farms along the track and sell the power they don’t need at a profit.
Commerce is a second tier position. Yes, it involves trade policy but Richardson will have little control over that. Either it is alreay set or in the face of a worldwide recession pretty much not in the cards. Treasury in the middle of a financial meltdown is very much a premier position on the other hand.
DrDick asks a question @51 I’m also interested in:
Specifically, have your ideas policy wise about our free trade regimes (including the NAFTA chap. 12 like elements, capital liberalization and TRIPS) undergone any revisions? If so, what were they and what are they now?
From Reagan through now labor has been the sacrifical goat on the altar of capitalism. It has been a demoralizing era for labor.
I do not believe giving more of our assets to the very people who mismanaged the assets in the first place is a good idea at it’s very concept.
in addition, it adds overhead to our investment that should not be there, the overhead of profit to those institutions
another addition, we are left with nothing to back the investment, we needed to take those assets and use them to create jobs rebuilding our infrastructure and investing in alternative fuel and cooling the planet, then we would have something to show for the middle class investment
And isn’t it arguable that the US could restructure the way it thinks of it economic team?
The preferential focus we’ve given Wall Street, as opposed to Detroit (I’m in MI, so I’m biased), comes largely from prioritizing finance in our economic team.
You mentioned Richardson above, and the absence of Labor still.
But it seems we’re not having a conversation, as a country, about what it is we plan to make in the future that other countries will want to buy. Well, we HAVE talked about green jobs–but then why isn’t a Green Jobs Secretary being named on the same day as Geithner? How will Manufacturing and Ag play a part in our economic recovery? It seems like we need to be having THAT conversation if we want to avoid a solution that isn’t just the reinflating of a different balloon.
You talk quite a bit about CDOs in the book — could you give readers a synopsis briefly on what those are and why they are so important?
When so much of a response on the economic mess from the right tends to be “Fannie Mae/Freddie Mac,” I think having a good grasp on just what CDOs are — and where the greatest difficulties were with them — would be very useful for folks trying to navigate pundits and prognosticators going forward. Thanks!
It was called the Clinton healthcare plan. Wiki it.
Well, let’s make sure that there is some sort of incentive for the owners of ‘the grid’ to expand the capacity; the ‘hose’ is too small already. There are wind farms in Upstate NY that can’t get on line because of lack of connection and capacity.
Prof. Krugman;
Thank you for spending time and thought with us.
It may be that America’s largest ‘deficit’ lies in the region of courage and imagination.
The timid ‘pragmatists’ (once termed, “neoliberal”) who worship at the alter of the Divine Right of Money have, of late, showered ‘upwards’ many billion$; assuming that the ‘downward’ masses somehow survive this obvious theft, which primarily benefits the haves and have mores …how might this nation, once again, actually produce ‘wealth’ (as opposed to clever schemers for whom Boesky is their Patron Saint)?
Geithner has been a civil servant through all of this, not in a position to express strong personal views. So you shouldn’t assume that he’s with Paulson all the way.
I happen to know Geithner a bit, through meetings of the Group of 30 and suchlike; he comes across as thoughtful and open-minded, and not as a doctrinaire free-market type.
Should you trust me on this? Maybe not — we all excoriate Beltway pundits for being too nice to people they hang out with, and I may have the same problem with the central bank/finance types. I’ve had drinks with a lot of the people we’re talking about, wearing my economist hat rather than my journalist hat. And as I guess everyone knows, Bernanke actually hired me at Princeton, so that may cloud my judgment.
I’ll try to suppress my generous impulses in the months ahead, but it may be hard.
OK, since we’ve finally gotten around to labor, I’ll repost a Q you skipped over above:
3. Infrastructure programs will create jobs as long as they last, but economic growth more fundamentally comes from consumer spending, over 70% of GDP. Consumers have no visible means of support. Real wages haven’t risen since the 1960s (except for a brief bout in the 90s when the unemployment rate approached 4%), job growth was strong during Clinton, but not since, and the use of houses as ATMs is over. How does the economy prosper when consumers can’t?
Thank you for being here today. Congratulations on your Nobel prize.
I greatly appreciated how you walked viewers to the NewsHour through the concerns regarding the auto industry recently. You stated a failure to bailout would essentially be a, “Reverse stimulus package.” Have you had specific contact with members of Congress in the last two weeks in terms of aiding a design of an automotive stimulus package? If not, might you suggest how you would structure such a package?
Your comments on health care above, I assume are a glimpse of your suggestions.
What is the economic toll of giving Ivy league diplomas to legacy admissions like Bush who to be honest even now after graduating and years of real life experience I doubt couldn’t pass the rigorous standards of Community College to graduate?
But because he is an elite and has money influence and the right friends (he met at the Ivy school) he gets to be President?
The right challenges minority admissions with lower test scores but not legacies when its the legacies who having power can do the most damage.
I’m going to float my crazy stimulus idea:
Remove the cap on FICA and put in a floor–the poverty line would be my choice. No one pays FICA on the first $10,400 or so, but after that every dollar is taxable.
As a trade off, with the substantially increased revenue you would get from that, you could cut the Social Security portion of the withholding. Quite a bit, I think.
Cutting the withholding for our poorest would put real dollars in the hands of folks most likely to spend and spend locally, and it would put it there at the very next payday.
That’s a very brief summary of my idea–what do you think?
CDOs are about bank insolvency. That is certainly a fundamental problem, but the overhang from the CDSs could take out the system entirely. It is where something like $200 billion has been going to cover AIG’s exposure.
Thanks for your answer up above on healthcare.
Do you have any ideas about how we’re going to deal with all these elderly folks trapped in houses they can’t sell (for enough) – who therefore can’t get into the next level of care that they need?
This is a problem that’s only like to grow bigger with time. And has many spin-off problems.
Agreed we can’t neglect to fix the power grid when we rebuild the Infrastructure.
I was going to ask the same thing!
To follow-up with another criticism of fiscal stimulus: Even if a large stimulus is passed (say $600 billion), is it realistic that this amount can actually be spent in 2009?
The news out of the Governor’s meeting seemed to be that: 1) the states have already slashed their budgets (big anti-stimulus); and 2) there was only about $1.5 billion ready to roll.
I’ve heard you state that about $3.5 billion is ready. Where is that coming from? State/local? Federal?
Oops, my #77 should have been referring to #62. Sorry for the error.
Your self-deprecating humor does not come out on TV. *g*
I could rant on Bernanke also but won’t since you’ve revealed that he hired you.
Well, maybe one rant. In his speech, Monday I think, at the Austin Chamber of Commerce, he didn’t mention regulation or deregulation once in the whole boring litany of how we got where we are. How can one expect to come out of the mess when an in-charge guy is blind to a large part of the problem?
I’m still trying to make sense of the alphabet soup here, so I may have this quite wrong – but aren’t some CDOs based on CDSs (synthetic vs cash flow)? If that’s correct, do you mean that it’s the cash flow CDOs that have been the main problem so far.
School spending per pupil on minorities is lower than for whites and much lower than private school legacy admissions. Should college admissions at the school you teach at be at least partially weighted according to how much money was spent on your education?
As well as test scores?
Christy
Ah — good point. I may be falling into the YHMAAAIYP trap (you have too many acronyms and abbreviations in your paper)
OK, so here’s how the housing bubble was financed. Lenders would make loans, but they wouldn’t hold on to them. Instead they would sell the loans to various players who grouped the loans into pools containing a lot of loans, and sold shares in those pools. That’s a long-standing practice.
But what happened in the last decade was that wheeler-dealers would create different kinds of shares. Some shares would be “senior” — they’d have first claim on any payments by the mortgagees. Then there would be a succession of less senior claims, each paid only after all the more senior got theirs. These shares were the Collateralized Debt Obligations.
What CDOs did was make massive risky lending possible — because the senior shares, with first claim on the money, were supposedly safe investments even if the underlying mortgages were very skanky. Senior CDOs got rated AAA, and all sort of nice people, like teachers’ unions and small towns in Norway, bought them. And so it became possible to make subprime loans, Ninja loans (no income, no job, no assets) and so on, without a care in the world, because you could always sell the stuff off to someone who had no idea what he was getting into.
And then, one day circa October 2007, it turned out that junk in fancy packaging is still junk. And that’s how we got where we are today.
Prof. Krugman is here for a book salon to discuss his latest book on the economy. Not admissions practices at Princeton. Thanks.
What is the rest of the world doing about the economic crisis? What ideas should we copy what ideas should we avoid? Will their ideas pull them out of the Crisis before us?
Yes, but Geithner did nothing to speak out on or forestall the housing bubble or the financial meltdown. It was essentially his job to do so and he didn’t. He was also involved in the Bear Stearns and AIG deals which have lots of question marks and insider corporate backscratching in them. You haven’t said how he will be different or even specifically what he will do. This seems like a setup for more of the same just “better” managed them we are so often sold but which so seldom pans out.
Here is an economic stimulus for the future, unburying streams in coal mining country. Bush’s EPA is making it available.
It seems we could public works projects for decades based on what Bush has done to our environment.
It seems to me that everything that could be done was done, in terms of the MSM, to obfuscate the true nature of our country’s precarious economic situation over the last few years. I believe this effort went as far as restructuring blogs that were owned by corporations with vested interests in wide-spread economic ignorance.
There was a very nice board on the Slate Magazine site, it was called ‘Moneybox’ and had a very high concentration of sensible posters who quite often, in fact most of the time had more accurate understandings of our economy than Slate’s feature writers.
After a few years of very interesting development, Slate ‘invited’ the longtime resident posters to ‘migrate’ to another board called ‘The Bottom-line’ and I’ve always suspected that it was to avoid the embarrassment that accompanies having the trash they publish called into question by folks that over time had actually gained a measure of credibility in the blogosphere for explaining complex economic questions more truthfully than Slates writers who were regurgitating the ‘party line’.
I wonder about your opinion of the quality of information that is provided by the MSM as concerns our economy?
My own opinion is that the MSM is busy spreading militant ignorance.
Hi Paul,
Great to see you here. We know each other from a long way back.
My question: do you have any idea at all what happened to the first tranche of the bail-out money? Did it just go down the rabbit hole? The liquidity trap seems to be an awfully deep well. Are the Fed and Treasury holding the bag for Chinese and Arab banks as well as our own?
OK, the answer there is that consumption doesn’t have to be 70 percent of GDP; it can be 65 percent of GDP if you can persuade people to invest more for the future. The trouble is getting there from here.
I should say that I don’t buy the idea that inequality and stagnant wages, bad as they are, are responsible for the financial mess. You can have a fully employed economy producing disgusting luxury goods rather than middle-class necessities; it’s not nice, but it can work.
Do you still support the Paulson $700 billion bailout? Has your thinking evolved any concerning it?
Ooooh, thanks for asking that one — I’ve been wondering how intertwined a lot of this is as well.
We are in this Financial Crisis because our economic/political elite are in many schools taught this doctrine that they want to hear. They grow up in a private school bubble a bit more diversity might expose them to different ideas.
If Bush had not gotten a Harvard MBA would he have felt so strongly about his expertise to deregulate business, to cut taxes on the rich when we were fighting a war?
To prevent future financial crisis we need to understand and change the mentality that creates them.
There has been some decent economics reporting, but in a broad sense you’re right. Dean Baker at the American Prospect often rages against the fact that during the housing bubble only flacks for the real estate industry seemed to be quoted — and that even now, stories about the disaster only seem to quote people who failed to see the bubble when it was happening. It’s sort of like Iraq: you’re still not considered a “serious person” unless you were wrong about the way, and you’re not considered a serious person unless you were wrong about the economy …
And Credit Default Swaps were part of the “glue” that held CDOs together, and allowed them to be sold to buyers who, buy law or contract, had to be in investment grade paper, and allowed tranches to be rated as lower risk because the higher risk of being a subordinate tranche had been “offloaded.”
My model of investment is derived demand. So if consumer spending (& exports) are anemic, what’s the point in investing?
And as someone put it here the other day, people aren’t staying home & not spending because they’re afraid of falling into a pothole. So infrastructure spending is only productive if there is an economy to use it.
I wasn’t saying that stagnant wages were a cause of the financial crisis. My point was that once that crisis is solved, once the big infrastructure spending has maxed out in its stimulative effect (which is only during the period when it is increasing), what keeps the economy growing after that?
I can answer that one, these people don’t really believe in supply side economics but they know they can get wealthy on it at everyone elses expense so they promote the scheme as if it has value
thanks stirling, that’s very helpful.
A large number of blind eyes, and a lot of greed played into this. Those can come from any and all schools.
The money isn’t gone — we, the American taxpayers, now own large stakes in quite a few financial institutions. Unfortunately they’re almost all non-voting shares. But it’s not money lost, at least not yet.
I actually don’t think we’ve done much for Chinese or Arab banks (Arab banks? They exist, but Islamic banking is a troubled area … I had a student do a thesis on that last year.) Now, European banks is another issue. It’s very hard to bail out our banks without doing Europe a big favor, and vice versa, which is why these efforts really need to involve international cooperation.
If you look at anecdotal evidence, like recent articles about the rating agencies’ acquiescence to this Ponzi scheme, consciousness of the worthlessness of these instruments was broadly understood by people in the finance sector. I’m curious about who the genuine suckers were — the Harvard endowment? The taxpayer? And how much is criminal fraud?
Well then, a Nobel Prize should just about sink any possibility that you’ll ever be mistaken for a serious person.
What be done to change a system where all the ‘right’ people are wrong, and anyone who understands and shares the truth becomes a ‘crazy’?
A bunch of people say that Bush is smart and his actions make the rich richer.
But the stockmarket is going down allot when you factor in inflation are the richest 10% 1% really richer now than at the start of Bush’s term?
I agree that Perris is right on the motavation for Bush’s actions but I wonder about the actual execution? Can you settle that question for us Paul?
Why does that smack of ENRON-style creative accounting on so many levels to me?
Dropping in late, so forgive me if this has already been covered, but, Ex-Mr. Prop is an economist by training and manages money for rich old ladies.
He was until very recently a worshiper at the alter of Bush/Cheney.
He says–every time anyone will listen–that allowing “mark to market” was one of THE BIGGEST MISTAKES ever and created a situation where no one, not the people who buy them, not the people who sell them, can really measure the value of anything next to any sort of benchmark standard.
That it taints the whole valuation system.
He has other theories about other contributing factors, but would disallowing mark to market going forward make a big difference?
Keith Olbermann, in his usual sarcastic and bombastic way that I love, calls the financial bailout “the thing some families will someday call ‘why Daddy went to jail.’” Given what we know already (that there’s no real plan; that the Inspector General appointee has been blocked by a single Senator; that the Senate appointee {Judd Gregg} has dropped off the oversight panel) do you think the Wall Street bailout will ever have any accountability?
Also, please ration your engagement with the suddenly popular New Deal anti-historian Amity Shlaes. She’s ‘punching up’ to you, and I believe you enhance her by responding. Left alone, she’ll soon be muttering about FDR as “that man” like her intellectual forebears.
Good point but it does not cover the naked swaps.
With the decrease in real wages and the absolutely ridiculous minimum wage it is damn near impossible for vast numbers of people to live. Some method of getting us to a “living wage” standard would allow for increased spending, higher savings and less borrowing.
Obama has proposed giving tax breaks to companies that hire. Is this a good idea and should there be a “living wage” requirement for the hiree?
I love your writing and would like to congratulate you on your well deserved Nobel.
Probably because it is Enron accounting. The Enron loophole in the Commodities Futures Modernization Act (CFMA) allowed for over the counter trading of derivatives.
At the risk of getting too far into the weeds:
We do need eventually to have growing consumer demand, but once the savings rate has risen to something more historically normal, consumption can start growing again.
On investment: Most European countries and Japan consistently invest a higher share of GDP than we do, even though they normally have slower-growing economies. So we should be able to do the same, although I’m working right now on trying to figure out how we make that happen.
I suspect that you’re at least leaning to a “secular stagnation” view — the idea of a sustained shortfall in demand, going forward from here. I guess I’d say that history is not on your side — a lot of people expected persistent demand problems after WWII, and it didn’t happen. That doesn’t mean it can’t happen, but it’s not a good bet.
I guess the point is that during a severe slump it’s hard to envision the future state in which people will feel like spending again, and very hard to be concrete about what form that spending will take. But the odds are that we’ll find something to buy.
This is FDL – we LOVE weeds.
Hello Paul Krugman. It’s exciting to have a “Paul Krugman” thread on FDL. I almost failed economics in high school BTW.
I would think higher taxes (for the rich) *plus * government spending would be better for the country. I live in CT and schools been closed down and after school programs have been cut in places like New Haven, Bridgeport etc. (And in New Haven after school programs seemed a good part of the solution to serious gang problems) A friend of mine who is a NYC public school teacher says the grinding poverty students face is completely demoralizing and it’s gotten worse since the 90s. Not only have we not payed attention to our infrastructure for a long time, but we are not investing anything in the younger generations.
It irritates me that that a “moderate” Obama administration might decide to “play safe” with the conservative lot.
No, the miracle of Bush is that he’s even managed to impoverish his base, the haves and the have-mores. Impressive, really.
Seriously, Bush has been a class warrior — but the economy has gone so badly that even so the upper tail of the income distribution has done badly.
I guess I’d add that I don’t buy the theory that Bush et all knew exactly what they were doing. I think that what you see is what you got — they weren’t faking their economic cluelessness.
Why do republicans hate FDR? It’s totally perverse.
Yes, those ‘botanical’ adventures, off the ‘beaten’ path, are always innerestin’ and, oft times, a great learning ‘opportunity’, selise.
;~D
Mark to market is another way of saying that banks were holding bad assets that effectively made them insolvent. It was fear that couterparties were insolvent that continues to keep lending largely frozen. But here is the thing “mark to market” is essentially meaningless if there is no market and if markets are frozen well then there is effectively no market. One of the ways to get around this and as part of a nationalization and recapitalization plan would have the government go in and assess a bank’s assets at pre-bubble levels. Any such valuation is going to be arbitrary but this one is at least rational.
Thanks for the weeds.
What I’m getting at is we need to do something to help labor. Consumers are also workers. I don’t see any policies on the drawing board to do that, nor do I see any sign that Obama will reverse any of the anti-labor measures of the post-WWII period.
I was a U.S. economy forecaster on Wall St. I found one did best by looking at the structure of the economy. You’re right that consumers are fundamentally insatiable & will find a way to spend. Just can’t figure out what that will be the way things stand. And won’t forecast something unless I have a reason.
Don’t know the higher percentages of investment in Europe & Japan, but at a guess, is it because labor is expensive and capital is cheap, so they substitute capital for labor?
Must of have been strange being in George’s presence the other day at the White House. Were you tempted to ask him any questions?
Their hatred of him makes perfect sense, they being “economic royalists”. It’s their public genuflection to him and his place in history — by Republicans like Reagan, McCain, probably Bush at some point, too — that is perverse.
I think it’s kind of funny when deep believers in the free market suddenly decide that paying attention to actual market values is the root of all evil.
I just don’t see any sign that mark-to-market is the problem here. People have lost faith in financial institutions because they don’t know what toxic waste may lurk in their balance sheets. How would making those balance sheets even *less* transparent restore trust?
Yes, I wanted to ask him what nickname he gave me. But I decided it wasn’t a good idea.
Maybe not in mixed company, anyway. *g*
The fact that all these former deficit hawks are backing massive deficit spending and bailouts is a big hint that they’re not the ideological locksteppers they’ve been painted.
Please mention that meme the next time you are on tv. Even here on the Lefty Blogs people wondered heck I wondered if Bush really was smart by making himself rich at our expense.
The fact he is not does make me feel better about Obama taking us in a new direction.
It’s been my schadenfreude fantasy that the haves and have mores invested in the hedge funds. I visualized them losing millions and billions that way. Sounds like you’re suggesting that between the lines of your comment.
That’s a good point. Taxing the rich and redirecting spending to the middle and working classes would soak up some of this excess capital that they have been using to create these horrendously destructive bubbles and put it to better uses.
OK, on that we’re very much in agreement. My other recent book, The Conscience of a Liberal, says a lot about labor bargaining power, which matters much more than economists tend to think.
Prospects for the Employee Free Choice Act don’t look too good after Georgia, but there’s still a lot Obama could do — and that is indeed one reason the apparent lack of interest in the Labor Department is a shame.
Prof. Krugman, before your other work takes you away, I just wanted to take a moment to thank you for being here at FDL today. This has been an excellent discussion, and we truly appreciate you taking the time for it.
Please, drop by any time…we’d love it.
Isn’t that just what Bernanke is doing by refusing to reveal who the Fed is bailing out in case it might scare us?
As we come to the end of this great Book Salon, Professor Krugman – If you would like to stay longer, we would like to have you answer more questions.
Professor Krugman, Thank you for stopping by the Lake today and spending your afternoon with is discussing your new book and economics.
Christy, Thank you very much for Hosting this great Book Salon.
Everyone, this is a great book, if you haven’t bought it yet, there is a link above.
Thanks all.
OMG-Hugh, that is exactly what he said!
OK, then on to Ex-mr. Prop’s other theory which I did a post on a few weeks ago, he suggested taking all the people who are upside down in their mortgages because of falling home prices (not people who mortgaged 100% or more of their home’s value, people who had equity that has been wiped out) and who are struggling with readjusted payments and recasting the mortgage so the payment is 30-35% of their current income.
This gets the banks a lot more than they would get if they foreclosed, resets both the value of the house and amount of the loan, and allows a method for placing a hard value (though admittedly a somewhat arbitrary value) on the mortgaged based securities.
This restored some liquidity to the market for those securities until they die of old age.
Does this make any sense?
True. People want to think that they had some grand super-brilliant scheme when all they had was a near-complete lack of scruple and enough dough to insulate themselves from the ill effects of their own decisions.
I asked my uncle that same question. (My parents family used to have a photo of FDR over the coal furnace in the basement so that when they fed coal to the furnace the flames and soot would fly up into FDR’s face).
He said, “Actually it was Eleanor that they hated the most.” Remind anyone of Bill and Hillary?
Could you elaborate a bit on this point?
Is the downturn for the upper tail a recent development, or has the whole eight years of BushCo been an illusion?
It would seem from my limited perspective that the haves and have-mores were doing ok until relatively recently?
Economic Nobel Guy
Thanks all. I wish I could stay, but as usual, there’s too much stuff going on.
Bye thanks for answering my question:)
Professor – we have opened up the next half hour if you would like to stay here and answer questions.
I think he wanted to go way back to mvaluing an security based on some ratio of net assets, goodwill, ongoing operations, etc. The way you do when selling closely held businesses.
It has been my perception (perhaps looney) but that to get out of this mess we are going to have to decrease the work week and increase the minimum wage to a survivability + level based on the reduced hours. Provide assistance to employers so that they can weather the sea changes.
Thank you so much for the time. Great to have you here, Professor.
I want to second Christy’s recommendation – - this is a great book, accessible and enjoyable. I didn’t make it past statistics as a poli-sci major and got a D in freshman economics many years ago; this book really makes the current crisis understandable, and places it in recent history, for someone like me who has no business understanding any of this. Please buy this book and read it: the topic will be with us for a while, and everyone will be better off having digested Prof. Krugman’s wonderful explanation of it.
Although I must say, like all pared-down economic models, the Capitol Hill babysitting co-op example made things more opaque for me and not less. I guess it was the very scary prospect of the “central bank” printing more coupons that made me tremble.
Ding ding ding.
Right when I got booted from Wall St. (lost an internal political battle) I had arranged to do an experimental economics project with some economists are U. AZ. The point was to set up power structures where the corps had most of the power & the workers very little & see what happened to wages. But it never happened, more’s the pity.
Ding ding ding!
Thank you so much for coming Prof Krugman. I am such a fan!
Don’t be shy!
The ‘grand super-brilliant scheme’ was simple and massively successful:
Transfer as much public wealth as possible into private hands.
In the economy at large, as with Iraq, there is zero concern about ‘collateral damage’.
Thanks Prof. Krugman for a very illuminating discussion.
Cluelessness, the new evil…
thank you for your time here today.
please don’t fall into the Very Serious Person trap – love it when you’re shrill.
It is extremely accessible, which made for an excellent read for me as well. For those of us who have been digging in to understand the nuts and bolts, it’s a great walk through both history and potential theory going forward as well.
Like I said, you hear anti-auto worker union sentiments coming from persons with working poor wages. And the working poor might want to consider whether or not they are getting the short end of the stick from their employers.
He’s vetting labor organizer Mary Beth Maxwell for Labor Sec even as we type:
The North American deficit hawk went extinct in 2001. Its population had fallen sharply in the 1980s due to an epidemic of what was known as the Reagan virus, causing the conservative hawks to have thin shells and making them unable to trickle down. After a brief resurgence in the 1990s, they disappeared as their native habitat now become bush did not favor their survival.
Or request that your local public library buy it. And if they don’t have try interlibrary loan.
But was it all that complicated? Not really. Bush and Company had and still have the billionaire owners of our TradMed covering for them, so they got away with it.
Whoa — the cognitive dissonance on the differences between someone as well-suited as Mary Beth Maxwell versus what Elaine Chao has been at Labor? Mind blowing there for a moment…
I missed most of this “Live” but have just caught up.
What a great book salon!
I like this guy Krugman!
I know he already left but I would like to thank him for his time and insight.
Cluelessness, the new evil…
God is all knowing willful ignorance to the facts has always been evil:)
Eleanor? Who sat in Congress for gosh knows how many days to try and get a antilynching bill passed. And travelled the country documenting conditions brought on by the depression?
Mary Beth Maxwell’s being vetted for Labor Secretary, and she’s approved by David Bonior himself:
The problem with servicing the mortgages in any non-standard way is that the originating brokers don’t own them, nor do the bankers who only passed-through the loans. They’ve been sliced-and-diced, and are now managed by loan servicers who lack the systems and personnel (as well as any incentive) to re-cast the loans to make them affordable and reflective of lower home values.
We’ve created a system where the homeowner is so far from her own mortgage that the many intermediaries are unable to help. They are also unwilling, since their individual company’s bottom line is not linked to the homeowner’s successful mortgage performance.
Exactly. :-)
And yes, she’s a big fan of the Employee Free Choice Act.
Thank you for helping me with my holiday shopping, Prof Krugman. I can think of at least three relatives who will be delighted to find your new book under the tree.
Just wish they were autographed copies!
Dang I forgot to ask about Elaine Chao’s labor Dept stats even Barron’s questions the changes to the birth death model of figuring unemployment.
yes serious and wonkiness are no good.
All fingers & toes crossed.
How is it that you have so quickly forgotten the Clinton healthcare plan?
Don’t forget to Digg pups
As an aside, I enjoyed your questions.
No wasn’t complicated at all.
In fact it was their lack of understanding of—and concern for— the complexities and unintended consequences that has been so gobsmacking to the rest of us.
My point is simply that to understand a coherent base for EVERY Bush admin policy, just follow the reverse wealth transfer. It’s not that they weren’t incompetent at governing: they were. But that’s not what they cared about. What they did care about, they were incredibly successful at orchestrating: looting the treasury; outsourcing the military; grabbing control of natural resources in other nations; allowing the plundering of domestic natural resources, etc., etc.
All the while enriching their supporters and cronies and completely ignoring the damage they casually strewed in their wake.
Correction: comments.
You and Selise!
Are you comparing the 90’s economic circumstances, Congressional climate, and the players involved, to today?
I see no evidence that there is any basis for this comparison.
I wonder if the Georgia runoff needed to happen before this nomination was leaked?
lol. shrillness and weeds rule!
Channeling Palin, are we??? (((shudder))) ;-)
Especially if your a Kewl Kid.
The mortgages are not the CDOs. The CDOs were financial instruments based upon and securitized by them. The CDOs represented a cash flow (mortgage payments minus fees) to their holders. But holders of CDOs do not hold the mortgages and it is precisely because of all the slicing and dicing that any claim to them would be hard to make. The originating institutions or mortgage buyers like Fannie and Freddie often still have the mortgages and it is with these that a renegotiation can occur. Such a renegotiation would affect the downstream securities holders and their cash flows but again I don’t know what kind of a claim they can make, especially if the renegotiation is being sponsored by the US government.
for starters: a Democratic congress, a new Democratic president who’d campaigned on the economy and health care?
Did you enjoy this book salon?
Not certain where this is coming from, but as I specifically asked at the top of the thread that folks stay on the topic of the book in the book salon — because Prof. Krugman had very limited time to interact with folks — why is asking someone to stay on topic (which we do quite frequently) cause for alarm, pray tell?
The people at Enron were mere amateurs compared to what has gone on the last decade.
You seem concerned with deflation. I worry about serious inflation. Where does the government get the money to fund all these bailouts when it has operated at a deficit during the Bush years?
An utterly calamitous economy with an enormous stimulus package likely, a Democratic Congress that is unlikely to be upended in the next 4 years, a real mandate for doing something about health care and not just a wife as point-person.
Thanks, Stirling — it’s good to know that my non-expert gut feeling isn’t off the mark, then.
Read Krugman’s definition of liquidity trap toward the beginning of the thread.
My point is that every generation or so there is a push for healthcare in this country. It is always portrayed as too difficult to go to single payer universal healthcare coverage. So something less, something more unwieldy and vastly more expensive is proposed and then cut back further or ditched entirely. So what I am saying is that incremental approaches don’t work. It’s never a little bit today and a little bit more tomorrow. In these things tomorrow never comes and a generation later we are still talking about how to get affordable healthcare done.
i thought it was very interesting. as always for both the questions answered and those that were not.
They were more like a trial balloon of what was possible. We got Sarbanes Oxley which the business community hated but further attempts at reform were pretty effectively snuffed out, mostly by Bush and Congressional Republicans, althought I don’t remember Democrats raising much of a ruckus about it.
It is, after all, a book salon. Yes?
I got your point.
When our guest speaks of political-fiscal realities, a subject I am singularly unqualified to answer, he is actually giving his take in that political-fiscal reality. To suggest that his take is unreflective of an administrations capabilities or willingness to get it done is another question. Professor Krugman has yet to be appointed to serve in an Obama administration.
Are you drawing inferences from the ones he didn’t answer?
which makes the “go slow” and “one step at a time” all that much more galling. to me anyway, obviously ymmv.
also, i’m not as confident as you are about the elections in 4 years. hope you are on the mark there.
yes.
sorry if that came off as curt. maybe best left for another thread.. that is all.
Tha’s true! I’ve noticed that about the questions that weren’t answered. I think most guests ty to scan a few questions and answer one in a way that mauy touch upon a couipe of others. Some are better than others. Some questions, while they don’t get answered by the guest, still get me thinking and maybe something tne guest says later on helps me with the answer. or part of an answer.
oh. i don’t draw inferences. amybe i should. i jst think some of the unanswered questions are thought provoking.
You do realize that I’m reading the thread the same time everyone else is and not simply omniscient, right? It’s because I happened to spot it and thought I’d better comment on it before ten more off-topic questions came pouring in…because, frankly, human nature in the threads generally is that if one person gets away with something off-topic a bunch of other people want to follow suit. So, when I spot an off-topic comment, I try and do a gentle reminder to stay on topic.
It has nothing to do with from whom it came — I didn’t even notice whose comment it was, frankly, beyond hitting the reply button and having it do so automatically.
When Professor Krugman and other guests appear on TV shows, we get them for 5 to ten minutes and there are far too few useful questions asked, for more than one reason. But this was what – 90 minutes – and a lot of weedy questions. I’m not surprised that they can’t all be tackled.
i agree with you i like the questions too! very interesting group of people here.
gotta go for a bit catch you-all later…
I kept my mouth shut, I kept my mouth shut!! (((Little happy dance)))
That was my take. I think he answered the Qs he saw, and went on from there after he posted the A. So if your Q got posted while he was typing, there’s a good chance he didn’t anser it. I reposted one of mine from the beginning that he had skipped over and we had quite a productive back & forth (at least from my POV).
Why are you happy you kept your mouth shut?
I’m not suggesting that Krugman has or should have some connection to the incoming Administration. What I am saying is that I have seen incremental approaches to healthcare go nowhere before.
That was my take, too. Once in a while (okay, maybe once), he looped back to an earlier question, but by and large, he kept going with the flow.
Ummm, okay.
I do realize a lot of things, naturally.
Because once in a while, I have learned that I can learn more by lurking than by being caffeinatedly all over the map. It was a positive thing!!
I get it. I do that myself sometimes. But not often. *g*
Sing it, sister. I know that one, too!
*g* back atcha!
You do a great job Christy… one that I definitely do not envy.
Of all the FDL front-pagers, you are by far the most balanced, rational and consistently respectful in your approach. Frankly I doubt if I would have stayed if it weren’t for your positive and calming influence on the place (don’t mean this book salon, but in general).
Any suggestion that you exert your on-site power with a heavy hand, or in a biased way, is so far off-base as to not deserve a response.
Thanks for making it all work, and thanks for hosting Prof. Krugman today.
Anyway, great damned Salon!
see you guys later
Krugman seems fairly supportive of Obama’s economic team. I could of course be wrong but my takeaway was that
he favors a large stimulus package although unclear how big geared toward infrastructure projects
he favors keeping the Bush tax cuts even for the wealthy until they expire on their own
he favors a continuation of the Paulson-Bernanke approach with modifications instead of a break with it
how this gets us out of the current liquidity trap remains unclear
He also did not think that swaps were that big a deal whereas I find CDSs a kind of financial doomsday device.
Outside of the credit crunch and derivatives, other fundamental problems underlying the current crisis were left unaddressed, i.e.
distressed homeowners and the housing market
bank insolvency and toxic assets
re-regulation of financial markets as in specifics.
Great salon, thanks to all.
Oh, sheesh.
I waited until after the thread was over. My comment was to Things.
So. There.
I’ve always been a big fan of Christy’s and have lifted her even handedness many times.
But, really glad to know she has another fan.
Prof. Krugman,
I wanted you for Secretary of Treasury. Were you ever contacted by the Obama team for consideration? Why did they opt for old failures when they could have asked the world’s best?
I am a child of the Big Depression. I fear that it will soon become painfully evident to all that there is a wide gulf between theory and reality.
I think the Dept. of Agriculture should be in action right now to relieve the hunger already spreading in America. Without the “commodities” of my childhood I would not have lived to adulthood. (flour, corn meal, canned milk, lard, beans, rice, raisins, canned vegetables, etc). Unemployment is growing at a staggering rate.
During the Depression many families lived in the caves west of Austin, TX. No jobs, no money to pay rent, water and electricity bills. They lived on commodities, hunting game and fishing in the nearby rivers and creeks.
We should get out of NAFTA, re-tool our textile mills, shoe factories, garment factories, in short all the products we used to produce. Spend the billions on that, not rewarding the crooks of Wall Street for their gambling degts.
New post
So did I. (wait that is)
My comment was to Christy, who obviously felt she had to defend her approach in keeping people on topic. (There was an implication in your post—maybe unintended—that I might have bristled at as well).
I was simply trying to show my appreciation for the amazing job she does. No interest in a pie fight on my side. Peace.
Why is my comment in moderation?
That is one of the funnest pieces of irony I’ve read. Thanks.
Holy crap! Paul Krugman was here today! And I missed it…all because I was working with the rest of the schmucks of America. LOL Oh well.
Great conversation everyone.
Which comment? I’ll check later Christy thought I was off topic thats her call I just voiced my disagreement and dropped the subjest.
Paul didn’t and couldn’t answer everyone’s questions I knew that and wasn’t disappointed. Paul did answer one of my questions for which I’m grateful.
Christy was doing her job I am sorry Christy that my disagreement had a tone though. I should have phrased it nicer.
Thanks Demi:)
Going for a walk
Christy. Jane. FDLakers. Great thread.