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Friday, March 20, 2009

On the Dangers Inherent in Populism

It's been a long time since my AP US History. So I apologize to the historians in advance. As a Raving Leftatic, it's a truism that I adhere to the essential tenets of populism. However, in a conservative Republican administration that meant something entirely different, than it does today. I feel something of a retraction is in order. What has always been so appealing to me about Populism is that I have a basic problem with the extremely wealthy. That problem has always existed for me, in good times and in bad. It stems from a mutual rejection of a list of priorities, predjudices, and overall disposition. I should be fair--the other half of the rejection is a deep rooted pyschological resentment of having grown up in an affluent suburb. Regardless, I find populism attractive because it serves as a crowbar with which to pry open doors long closed to the vast majority of people. Namely, access to government, access to wealth, and more importantly access to information. So when I see the House pass a bill to tax the AIG execs bonuses 90% pass in a literally a day--I get worried.

However, as the crisis continues, and the pogroms against the financial world grow ever more frenzied I have to say the idea of wealth distribution is becoming a little bit frightening. Not because I disagree with it as much as I fear the lynch mob mentality that we're seeing. The MSM is always the last to glom onto a popular movement, and they've gotten on board of the "Lynch the Bankers" cash cow with great abandon, but I wonder if they really know the size of the beast they stir. It's one thing for people like me to agitate and press for reform. I'm just left enough to be deemed radical by the right. But I still work within the system. A lynch mob just burns everything in its way. The vitriol I'm seeing on Digby's Hullabaloo and other left blogs is alarming.

We can't rewrite the past. We shouldn't retroactively prosecute, that's one of the great tenets of the law, and so it should apply here. Make rules for the future. Limit executive pay? I think that's a silly rule. The difference between an angry mob, and an angry mob of populists is that the populists are really just asking for their rightful share. The new rules should ensure that pay is more equitable, should ensure medical care, and pension plans. Should help mitigate the vast amounts of debt that each one of us, including our government, has accrued.

And so, I reach a new point in my intellectual career. I've never seen such anger expressed in my lifetime over a leftist idea. Oh I know my American history, so I know that it's always been there. It's just so odd. The last thirty years of public rhetoric has been one nasty diatribe after another, declaiming against the poor, the disenfranchised, whilst the rich were elevated to pedestals reaching to the heavens. To be clear: I'm not disavowing my principles, but we're here for justice, not blood. And an angry mob that turns left can be just as bad as an angry mob that turns right.

Friday, March 13, 2009

Madoff's Confession

I think everyone in New York has waited for the trial/sentencing of Madoff for the last three months with abated breath. I've read a lot of angry posts, a lot of vitriol, and frankly I agree with them. But what I haven't seen is anything about the man. I haven't seen anyone delve into the man's life to see what created this "special" character. I've read about "family friends" who were "shocked." But no one has stated why.

So when the first line of the Guardian article this morning states that "legal experts were flummoxed by the fraudster's willingness" to confess, something finally clicked into place. I've been wondering about this guy for a while, and all the guys like him: the people who lie and cheat as a lifestyle, like a Anne Hathaway's ex-boyfriend who was just sentenced. Or Marc Drier of Drier LLP whose entire firm's wealth was based on selling fake promissory notes. There's something almost serial killeresque about people like this. And, I confess, a keen interest in the subject. And at least in the case of serial fraudsters, it makes me feel sorry for them. The confidence that they express in life, is a complete and utter lie, (like everything) a false front verging on ludicrous bravado and broggadicio. How can someone live like that?

To a certain extent, we all lie to ourselves. I'm good looking, I'm smart, I'm talented. I did this and no one else. I know I did this, but I didn't really do it. I believe I was wronged, and that this person wronged me even though I know it was my fault. We're peculiar and fantastic creatures that way. Our lives are governed by perceptions of ourselves and perceptions of the world that are based on such spurious notions, seemingly sacrosanct, and totally ephemeral, if as Sartre would say, we were confronted with a mirror. But some people go to far. Whether it's fear, or perceived necessity, the little lies are never discovered and progress, and grow. For most people, the little lies don't grow. They're small enough, inconsequential enough, or they're faced immediately. But for men like Madoff and Raffaelo Follieri (Hathaway's ex) the lies only grow ever larger. What fear they must live in, what constant gnawing fear of being found out. And what relief when the lie is finally over.

This I believe is why Madoff was so relieved. He's not a Ken Lay, or a Hank Greenberg, people who acted fraudently, but believe that they were right or justified, he knew that what he did was terribly wrong. And he couldn't help himself. We didn't help him either. Men like Madoff and Follieri didn't become this way overnight. I could almost believe that both could take an insanity plea. But at least in the case of Madoff, he was done with it. Madoff may have stolen the most money in history--that's an accomplishment, and he'll live on in infamy for the rest of his days. Maybe in fifteen or twenty years he'll have some admirers. But Madoff's sin was cardinal. It's one thing to steal from the poor, but Madoff stole from the rich. That would only be forgiveable if he were Robinhood, and giving the money to the poor. No, the man is doomed to ignominy. And he can't wait. All the terrible thoughts he's had about himself, the sleepless nights, the hellish day dreams, they can all rest easy now. Because the truth is known, and he can hate himself without all the needless subterfuge, self or otherwise. Just like we do.

I pity the man. I do. I hope his last few years in prison are relatively easy ones.

Friday, March 6, 2009

Econtalk and Stimulus

This post will be a hodgepodge. As usual, being so far behind the times, I recently discovered the wonder of podcasts. When looking for a podcast on accounting, I discovered the George Mason University's podcast "Econtalk." The first cast was pretty interesting, with some neat concepts. But the second podcast really stuck in my craw. First off, the guy who hosts the show, was educated at University of Chicago. For those of you not in the know--this is a very conservative economic philosophy. Their bias--which the host admits most frankly--is against government intervention in the free market. Fairly standard stuff. From his point of view, I would be dubbed an interventionist. I don't care for the term, I think the implied meaning doesn't really capture what I believe at all. Liberal economists (or faux economist students--like myself) don't really think of their vision as an intervention into a formal entity "The Market Mechanism" but as part of an entirely different mechanism, that requires public action in the form of rules, regulation, including private and public auditing and ratings entities.

What's worth writing about this you lunatic? You say free market principles have been prevalent for the last century? Well, sure. But for the first time in sixty years the prevailing winds are blowing my way. People actually want more regulation. And the good folk of Econtalk (they really do seem like nice guys too) are horrified by this. According to them, the essential cause of the current downfall was that the market wasn't really free. That regulation was in fact the cause of the crisis. To most of us, this seems ludicrous. But I can sort of understand their point, if only from the level that most socialists have long defended their beliefs, namely "No government or society larger than a village has ever practiced true socialism, so therfore you can't disprove it's legitimacy." Insert free-market capitalism and you've essentially made the same argument. There are always rules and regulation on the exchange of goods. I mean, there wouldn't be a market if someone didn't guarantee a free market space to begin with. Maybe I don't understand the theory. And I'll admit, I certainly haven't read any of their works.

They did raise an interesting point. They are, of course, opposed to the stimulus. On a couple of levels. For one thing, the market mechanism for dealing with failure is harsh. Nul-survival, if you can't make the grade, you go bankrupt, and the market dealt you the hand you deserve. On another level, they don't like the bank bailout for similar reasons, but also for the idea of moral hazard. On a more complex level though, they dislike the intervention in the market mechanism because from their standpoint it reduces market efficiency. Prolongs the pain. They say things like, bank failure isn't that bad. I find this reprehensible. In a healthy system that would be true. But Hank Paulsen's stand against Lehman nearly unhinged the system. If they'd let AIG go under, the banking system would have been effectively demolished. The auto industry would have tanked the next day. There literally would have been riots. Complete panic. I believe that they think that very unlikely. But for what reason? They also oppose the stimulus because they find the public works proposals, what they label as Keynsian economics, to be demonstrably proven false. They say that the last sixty years of economics have roundly disproved the idea that public works programs stimulate the economy. That's wrong for two reasons. 1) The Chicago school of economics has been THE school of economic thought for the last sixty years. No wonder there aren't too many studies that prove they are wrong. 2) There hasn't been a significant public works project other than The Big Dig (a total disaster), in the last sixty years. How could they have even done a study? And the last big public works programs were wildly successful, namely the New Deal, (and no I'm not disregarding The War.)

Here's what got me. They qualified their disdain for the public works programs by saying that they were not opposed to the idea of the programs and development. They were opposed to them being labeled as a stimulus. !!! !!! Only academics could give a damn. They were upset by the fact that the bill was perhaps a misnomer! Positivists are people who adhere to logic and law regardless of the emprical outcomes of their choices. People like this stun me. I like a good logical argument, and you'll see me make a lot of them. But sometimes, and this is what seperates the positivists from their counterparts, sometimes the rule doesn't fit. And where it doesn't fit, adjustments must be made.

However, I find myself agreeing with them. For different reasons. Calling it a Stimulus bill was a hat tip to George Bush. Fuck him. And his party. Enough nicey nice. And that was a mistake. Calling it a stimulus, and keeping Geithner and Bernanke (I like Bernanke, but he's part of the old system, with which I believe we need a clean break,) only served to prolong Bush era policies. The market is demanding something else. Which is why it hasn't calmed the markets at all, but instead only exacerbated the situation. You want to bail out the banks? Fine, call it what it is. The works projects should have been a different bill anyway. My other half thinks that they packaged them together as a way to get them through Congress. Maybe she's right. I don't know. As a matter of policy, I really think the Dems could have pulled it off. But not without a rhetorical flair and daring that they have not been able to carry off for sometime. Harry Reid must go.