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Not Too Big to Jail - Protest in Chicago
Last week, we got a slew of submissions to our "Foundation for Reform" paper! Consensus starts to crack. We just need to keep building the momentum.
So, have you heard about what promises to be the largest protests against the banks yet - Showdown in Chicago on October 25th? All ANWF members who want to go and need more details should contact us. As much as we can, we need to show up! We expect thousands of people to show, we hope you will too. The protest is being organized by dozens of organizations, including ANWF, and will take place outside of the American Bankers Association's annual meeting. You can help at this critical moment, find rides, organize a contingent and go. We'll help you meet up with other ANWF members. We'll have even more info for you next week, but the time to make a decision about going is now.
Our friends at the Center for Media and Democracy recently started working on bank reform too with a new go-to site for updates on the fight: www.BanksterUSA.org. Their "Action Center" is a hotbed of popular campaigning on the crisis, helping us to ramp up the campaign to demand the Federal Reserve fix what's broken (see the ANWF petition):
Fight the Big Boys on Wall Street at www.BanksterUSA.org.
"Fight the Big Boys on Wall Street at www.BanksterUSA.org
The Banksters have pulled off the biggest heist of all time. They have crashed the global economy, throwing 7.5 million Americans out of work, emptying retirement and college funds and forcing many into hardship and homelessness. Yet they continue to be rewarded with trillions of taxpayer dollars that underwrite their Bankster bonuses, they prey upon the vulnerable with ballooning bank fees and macabre investment schemes such as "death bonds" and their taxpayer-subsidized lobbyists swarm Capitol Hill to prevent the passage of any meaningful reform of the financial system.
The Smackdown Starts Now
This fall is a critical time. Congress is now taking up a series of bills to restore confidence in the financial sector. If you want to rein in the Banksters and if you think America deserves better than a "boom and bail" economy, you need to muscle up and weigh in. Only you can tell Congress to prioritize the interests of Main Street over the interests of Wall Street.
Bust the Banksters at BanksterUSA
www.BanksterUSA.org is the go-to site for updates on the financial services re-regulation fights in Congress and for progressive netroots campaigning against the big boys on Wall Street.
Our "Action Center" is a hotbed of popular campaigning on the crisis.
We know that it is wrong that a full year since the Wall Street meltdown no employee of any major American bank or blue chip financial institution is behind bars. Compare this to the Savings and Loan crisis 20 years ago. No less than 1,852 S&L officials were prosecuted and 1,072 were jailed.
Our motto? Too big to fail, but not too big for jail! Click here to email the U.S. Department of Justice and the FBI and tell them to get cracking!
Administration Refutes Geithner and Summers' Approval of BofA-Merrill Merger
Internal Bank Documents Show Obama Aides Were 'On Board'
By Matthew Jaffe | ABC News
"The Bank of America-Merrill Lynch merger was the outcome of a collaborative effort orchestrated by Ken Lewis, Henry Paulson, Ben Bernanke, Timothy Geithner, and Larry Summers," Bardella said in a statement. "As a result of this collaboration, the taxpayers ended up footing the bill so Bank of America didn't have to absorb Merrill's losses." ...
In January, when the Obama administration took over, Summers became National Economic Council director and Geithner replaced Henry Paulson as Treasury secretary.
During last year's transition period between presidential regimes, Obama economic aides Timothy Geithner and Larry Summers signed off on the Bush administration's deal to bail out Bank of America if it finalized its merger with ailing investment bank Merrill Lynch, according to bank documents obtained Tuesday by ABC News.
However, both the White House and Treasury today disputed that Summers and Geithner ever agreed to any financial decisions made during this time period.
"Mr. Summers received occasional briefings by Federal Reserve officials during the transition, but he did not make, review, or approve decisions regarding financial institutions during that time," White House spokesman Matthew Vogel said in a statement. Read more.
$140 billion! Record Payday for Wall Street
Goldman Sachs 2009 Bonuses Could Buy Insurance for 1.7 Million Families
50 Million Americans Live in Poverty
By David DeGraw | Amped Status
The facts are that $30,000 per person is unaccounted for - that’s $30,000 for every man, woman and child in the US - which means if you have a family of five, your family has lost $150,000 to Goldman Sachs.
Paraphrasing a very insightful quote: ‘The amount of poverty and suffering required for the emergence of a Goldman Sachs, and the amount of depravity that the accumulation of a fortune of such a magnitude entails is left out of the mainstream media, and it is not always possible to make the people in general see this.’
The American middle class, once the only effective counter weight to Wall Street greed, has been decimated. Over 25 million people, in what was the US middle class, are now in full-blown crisis mode and urgently need to increase their income. Read more.
On October 17, 2009 on the 8th anniversary of the attack on Afghanistan Bay area trade unionists spoke out against the continuing US war in Afghanistan and wars in Iraq and around the world. Trade unionists included Betty Olson-Jones, president of Oakland Education Association and Jack Heyman, Executive Board ILWU Local 10.
Produced By: Labor Video Project
P.O. Box 720027
San Francisco, CA 94172
How the Servant Became a Predator: Finance's Five Fatal Flaws
By William K. Black | Huffington Post
What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector's current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.
1. The financial sector harms the real economy.
2. The financial sector produces recurrent, intensifying economic crises here and abroad.
3. The financial sector's predation is so extraordinary that it now drives the upper one percent of our nation's income distribution and has driven much of the increase in our grotesque income inequality.
4. The financial sector's predation and its leading role in committing and aiding and abetting accounting control fraud combine to:...
5. The CEOs of the largest financial firms are so powerful that they pose a critical risk to the financial sector, the real economy, and our democracy. Read more.
Reviewing Danny Schechter's The Crime of Our Time
By Stephen Lendman
Danny Schechter is a media activist, critic, independent filmmaker, and TV producer as well as an author of 10 books and lecturer on media issues. Some call him "The News Dissector," and that's the name of his popular blog on media issues. He's also the co-founder of Media Channel.org that covers the "political, cultural and social impacts of the media," and provides information unavailable in the mainstream.
Schechter's books include The More You Watch The Less You Know, Plunder: Investigating Our Economic Calamity and the Subprime Scandal, and his newest and subject of this review, The Crime of Our Time: Was the Economic Collapse "Indeed, Criminal?"
As a form of economic terrorism, indeed so says Schechter and many others. Ellen Brown, author of Web of Debt, writes: Schechter "establishes the crime's elements, identifies the players, and exposes the weapons that have turned free markets into vehicles for mass manipulation and control."
More still, according to former high-level government and Wall Street insider Catherine Austin Fitts in describing a "financial coup d'etat" that includes inflating multiple market bubbles, pump and dump schemes, naked short selling, precious metals price suppression, and active market intervention by Washington and the Fed that lets powerful insiders game the system, commit massive fraud, and be able to transfer trillions of public wealth to themselves, then get open-ended bailouts when the inevitable crisis surfaces.
In his last book, Plunder, Schechter deconstructed one element of the economy's financialization - the outlandish amounts subprime lending, instrumental in inflating the housing bubble and the economic crisis that followed.
The Crime of Our Time is his latest attempt to explain "the financial collapse as a crime story (and) the high status white-collar crooks" who wreak havoc on "the lives of hundreds of millions worldwide." He quotes from author and labor activist Jonathan Tasini in his new book, The Audacity of Greed, saying:
"Over the past quarter century, we have lived through the greatest looting of wealth in human history." While an elite few profited hugely, "the vast majority of citizens have lived through a period of falling wages, disappearing pensions, and dwindling bank accounts, all of which led to the personal debt crisis that lies at the root of the current financial meltdown."
The fallout cost millions of Americans their jobs, homes, savings, and futures, the result of a Washington - Wall Street criminal cabal and their scandalous conspiracy against the US public. In the Crime of Our Time, Schechter, once again, does a superb job explaining it astutely, thoroughly, and clearly.
Capitalism: An Apathy Story
By Cindy Sheehan
This Thursday, in a move that would make Baron von Louis Rothschild blush with shame (or burst with pride), Goldman Sachs will announce that it is more than doubling its bonus pool: from 11 billion in 2007 to 23 billion in 2008.
I always thought the concept of the “Welfare Queen” was eliminated during the Clinton Regime (where his SecTreas was a former chair of G S) however, Goldman Sachs has received billions of dollars in taxpayer welfare and supposedly paid that back, except for the 13 billion that was funneled through AIG to Goldman through loan guarantees.
Well, wouldn’t it be hunky dory if every loan we consumers took out from these banksters came with a guarantee that if we failed, our government would pay our loans off?
“Compensation continues to generate controversy and anger,” Lloyd Blankfein, the chief executive of Goldman Sachs, said last month. “And, in many respects, much of it is understandable and appropriate.”
On Thursday, Mr. Blankfein and his colleagues will likely be subject to some of that anger when Goldman reports its third-quarter results — and discloses the latest tally of just how much its employees will probably take home for their work this year. By most analyst estimates, the annual bonus pool will swell to more than $23 billion. In its second quarter, Goldman disclosed it had put aside $11.4 billion for the first half of the year.
“The absolute size of compensation payouts will rise significantly,” Keith Horowitz, an analyst at Citigroup, wrote in a note to clients two weeks ago.
To put that $23 billion bonus pool number in perspective, it is the most Goldman Sachs has accumulated for bonuses in its history — twice as much as in 2008. And it is doing so while memories are still fresh that just a year ago taxpayers had to step in when Wall Street, and even Goldman, were facing a run on the bank.
So should we be upset about the bonuses? Is this a problem? Viscerally, it can be infuriating to watch Goldman executives gobble up piles of money, especially when the government — an overused euphemism for taxpayers — had helped support the firm. It hasn’t been forgotten that the government gave Goldman $10 billion in bailout cash — which it has since returned and said it never needed. And don’t forget the cheap financing it now gets as a bank holding company. Read more.
The health care debate and general political climate compound absurdity upon absurdity.
First we're told that our health care is only worth the time and effort if the remedy has no negative impact on the budget. No deficits allowed. The deficit risk defines your chances for health and longevity.
At the same time, we see that Wall Street failures and the overseas war effort are not held to the same standard on deficits spending.
The federal government has committed $23 trillion dollars to prop up Wall Street's failed financial institutions. That's a fantasy figure and clearly deficit-friendly since it's twice the 2008 Gross Domestic Product of the United States.
On Tuesday of this week a smaller amount was offered up for the 2010 expenditures on the Iraq war and the expanded efforts in Afghanistan. The $128 billion was approved without a Congressional Budget Office analysis (note the absence of a link for "CBO Cost Estimates"). Since we're already over budget for 2010, this is also in the deficit column.
It's all right to run huge deficits to bailout Wall Street crooks and to wage deadly wars but it's not all right to even think about a deficit when it comes to preserving the health and lives of citizens.
The second absurdity concerns priorities. A rational approach to national policy would place citizen health care well above both Wall Street welfare and endless wars on any list of priorities. But that wouldn't do much good with the current legislative approach.
A political victory amounts to a loss for the public. Why?
The current legislation delays help for the uninsured for years. It limits the "public option" to those without health insurance. It does little or nothing to contain rising health care costs for in the near term. And it ignores prescription medication -- a major factor in out-of-control costs. Read more.
“All they need to do is enforce the regulations already on the books,” one top banker told me recently. (Like all top bankers these days, he would speak only anonymously, fearing the wrath of the Treasury.)
What’s more — and this is the part that is really unbelievable — they insist that bankers weren’t the cause of the financial crisis. The entities that were peddling all those awful subprime mortgages were the nonbanks — the mortgage originators and mortgage brokers — who were almost entirely unregulated. “We have no objection to them regulating the nonregulated firms,” said Camden R. Fine, the president of the Independent Community Bankers of America.
Well, of course, he doesn’t. If the bankers can persuade Congress to change this agency’s mission so that it only regulates the nonbanks — something they are trying to do, and which Mr. Frank insists will not be successful — they will have succeeded in putting sand in the engine of their nonbank competitors.
A few months ago, I asked Simon Johnson, the former International Monetary Fund economist, now a prominent critic of the banking industry, what he thought the banks owed the country after all the government bailouts.
“They can’t pay what they owe!” he began angrily. Then he paused, collected his thoughts and started over: “Tim Geithner saved them on terms extremely favorable to the banks. They should support all of his proposed reforms.”
Mr. Johnson continued, “What gets me is that the banks have continued to oppose consumer protection. How can they be opposed to consumer protection as defined by a man who is the most favorable Treasury secretary they have had in a generation? If he has decided that this is what they need, what moral right do they have to oppose it? It is unconscionable.”
I couldn’t have said it better myself. Read more.
by Linda Milazzo
Our great buddy Mike is angry. For the past twenty years, Michael Moore, our everyday hero, has worked hard for us. He's documented sadistic acts against us by industry and government. He's exposed case after case of devious schemes that robbed us of our homes and our jobs, sent our children to war, and sacrificed our health. He's given us irrefutable proof that our leaders lied us to war, our insurers denied us care, and our lenders deceived us into hopelessness and destitution.
Mike's been our teacher, our ally and our devoted friend. Few people in recent memory have worked harder to inform us - ALL OF US - of the inhumanity and greed that are decaying our nation, which we perpetuate through apathy and inertia.
"If you are the average Joe, you should definitely be worried because if the U.S. dollar loses its status it is going to mean higher borrowing costs for the U.S. government, which will mean the average Joe will have to pay higher taxes, the U.S. government will spend less on services, and there will be higher interest rates -- or some combination of the above."
Is the dollar's status as the world's reserve currency in jeopardy? How are U.S. officials responding? And should the average American be worried?
A report in The Independent newspaper today, citing Gulf Arab and Chinese banking sources in Hong Kong, said that Gulf Arab countries -- joined by China, Russia, Japan and France -- are planning to move away from pricing oil in dollars to using an array of currencies including the Japanese yen, the Chinese yuan, the euro, gold, and a new unified currency in the Gulf Co-operation Council including Saudi Arabia, Abu Dhabi, Kuwait, and Qatar. Read more.
The Senate last night passed an amendment by Sen. Bernie Sanders (I-Vt.) that would require the Department of Defense to calculate how much the Pentagon pays companies that committed fraud.
The measure, added to a defense appropriations bill, also would make the Pentagon recommend how to penalize contractors that repeatedly cheated the government out of hundreds of millions of dollars....According to the nonpartisan Project on Government Oversight, the three largest government contractors – Lockheed Martin, Boeing, and Northrop Grumman – all have a history riddled with fraud and other illegal behavior. Altogether, the three companies engaged in 109 instances of misconduct since 1995, and were fined $2.9 billion. How were they punished? In one year alone, the big-three pocketed $77 billion in government contracts in 2007. Read more.
They Lied: Watchdog Says Treasury and Fed Knew Bailed-Out Banks Were Not 'Healthy'
Before the $700B Bailout, Senior Government Officials Had Financial Concerns About Nine Bank Institutions Receiving TARP Funds
By Matthew Jaffe | ABC News
The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, a government watchdog states in a new report released today.
Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise.
"Contemporaneous reports and officials' statements to SIGTARP during this audit indicate that there were concerns about the health of several of the nine institutions at that time and, as detailed in this report, that their overall selection was far more a result of the officials' belief in their importance to a system that was viewed as being vulnerable to collapse than concerns about their individual health and viability," Barofsky says. Read more.
Kucinich Urges Treasury to Strengthen Re-remic Oversight | Press Release
Washington. D.C. (October 1, 2009) – Congressman Dennis Kucinich (D-OH) today asked Treasury Secretary Timothy Geithner to address the potential threat to the financial system posed by resecuritization of existing residential mortgage backed securities, informally referred to as ‘re-remic.’ Congressman Kucinich recently brought the matter to the attention of the Securities and Exchange Commission and uncovered that only $50 million of a $664 billion market is overseen by the SEC.
The Re-remic process takes previously issued residential mortgage backed securities and collateralized debt obligations whose value has deteriorated considerably, and repackages them into larger, more complex financial instruments in an attempt to create investment-grade products once again. Investors and analysts alike have stated concerns that re-remics could be used to hide toxic assets and manipulate capital requirements. In the letter, Kucinich called on Secretary Geithner to create a stronger regulatory framework to ensure that financial institutions are not continuing practices that led the financial system to the brink of collapse in 2008.
The full text of the letter follows:
Michael Moore: Free Screenings Tonight of "Capitalism" for the Jobless and Homeless in America's Hardest Hit Cities
Free Screenings Tonight of "Capitalism" for the Jobless and Homeless in America's Hardest Hit Cities
Plus Local Benefit Premieres All Across the Country
Michael Moore wrote:
We're just one day away from the widest opening I've ever had for any of my movies. Tomorrow, Friday, October 2nd, "Capitalism: A Love Story" opens on over a thousand screens across the United States, a record for an independent documentary.
This follows last weekend's limited opening in New York and L.A. where "Capitalism" set the box office record for the highest per screen average of ANY movie released so far this year. Not just any documentary -- any MOVIE! It was, as the studio said, a good indicator of just how well the movie may do when it goes wide this weekend. I sincerely hope they're right because I believe deeply in this film.
To kick off the national release of "Capitalism: A Love Story," I've asked the studio to offer a number of screenings in the nation's hardest hit cities -- the ones with the highest unemployment rates and highest foreclosure rates -- where those who've lost their jobs or who are in foreclosure (or have already been evicted) may attend my film free of charge. They've agreed, and so tonight (Thursday), the night before our opening day, ten cities will grant you free admission if you have fallen on hard times. The list of theaters and cities is below. You don't need to bring any "proof" of your situation -- just show up -- it's the honor system, no questions asked.
|Las Vegas, Nevada||Phoenix, Arizona|
|Fresno, California||Saginaw, Michigan|
|Raleigh/Durham, North Carolina||Tampa / St. Petersburg, Florida|
|Elkhart, Indiana||Baltimore, Maryland|
|Cleveland, Ohio||Peoria, Illinois|
"CAPITALISM: A LOVE STORY" BENEFIT SCREENINGS:
- Miami, Florida, Benefiting: Take Back the Land
- Madison, Wisconsin, Benefiting: Union Cab / Isthmus Engineering
- San Francisco, California, Benefiting: US Federation of Worker Cooperatives
- Chicago, Illinois, Benefiting: United Electrical, Radio and Machine Workers of America
- Grass Valley, California, Benefiting: KVMR
Kucinich: ‘Is Wall Street Headed for Collapse?’
Questions Repackaging of Complex Financial Instruments, Calls for Additional Hearings
Washington D.C. (September 30, 2009) –Congressman Dennis Kucinich (D-OH) today questioned whether the U.S. would be headed for another financial crisis if Wall Street continues to sell the same old products, with new names, that got us into trouble in the first place. The former Managing Director of Moody’s Investor Service, Mr. Ilya Eric Kolchinsky, agreed there is a danger. The admission came during an Oversight and Government Reform Committee hearing examining the role of credit rating agencies in the financial crisis. Following the admission, Kucinich called for further Committee hearings to examine the renamed investment instruments.
Exclusive: Check Fees, ATM Charges, Monthly Service Fees Hit Record Highs
Public Outrage as Banks Squeeze More and More From Consumers
By Elisabeth Leamy, Vanessa Weber and Suzan Clarke | ABC News
Bounced-check fees, ATM surcharges and monthly checking account service charges have soared to record highs, according to a Bankrate.com study released today in an exclusive story on "Good Morning America."
In a growing trend, bounced-check fees increased 2.1 percent to an average of $29.58 -- and that's just the cost of the first bounced check.
"Banks have become reliant on fee income as a way to diversify their revenue over the last decade or so," said Greg McBride, a senior financial analyst at Bankrate.com. "That strategy is paying dividends, but it's coming at the cost to consumers who don't have good financial habits."
In the August survey of large, small and online banking institutions across the nation, Bankrate.com found that 26 percent of banks used a tiered structure to impose progressively higher fees for multiple overdrafts during a 12-month period. The average climbs to nearly $34 for the second, third and fourth bounced checks. Read more.
By Dave Lindorff
Some years ago, my wife and I, together with our young daughter, took a circuitous summer train trip through France, Italy, Austria and Germany. The last leg was an overnight express from Berlin that deposited us at the Gare du Nord in Paris just at sunrise. Feeling washed out from the ride, we made our separate ways to the facilities. I was standing at the urinal with a bunch of other men, relieving myself, when I heard this awful groaning coming from a stall. The groaning grew louder and more painful sounding. Some guy was obviously having a terrible time with his bowels. The agony continued, to the point that we who were by now washing our hands at the sinks were looking at each other in puzzlement, wondering what was going on. I even wondered if someone should ask if the poor wretch if he needed help.
Following up on the quick mention now that I have a story to cite from Amherst:
Cure rates for these distressed loans remain low. Amherst noted a near 0% cure rate of all loans in foreclosure, 0.8% for 90 plus days delinquent, 4.4% for 60 days delinquent and 26.5% for 30-day delinquencies. All told, Amherst expects 12.42% of units (from the 13.54% of properties delinquent and in foreclosure) to eventually liquidate.
Let's put some numbers on this.
There are roughly 125 million single-family homes in the US.
Of those, roughly 30% have no mortgage on them at all. This leaves 87.5 million single-family homes with mortgages.
Let us assume the average outstanding balance is $200,000 across the entire set and will take a 40% loss severity. This is less than S&P has estimated for subprime loans and only assumes a roughly 20% market deficiency in the home price (the rest is from legal, rehabilitation and marketing expenses.)
These numbers are, with a high degree of confidence (90%+) low - that is, losses will exceed these estimates, perhaps dramatically so. It is, for example, quite reasonable to believe that due to the concentration of defaults in higher-priced areas (e.g. California and Florida) that the average outstanding balance could be close to double that $200,000 value and the loss due to negative equity higher.
From this we can develop a "cocktail napkin" view of the losses to be taken in home mortgages for single-family homes (remember, this does not include condos, apartment buildings and similar "commercial" paper.) Read more.
The banking bust is getting mighty costly.
Bank regulators on Tuesday sharply raised their estimate of the cost of cleaning up after bank failures -- and proposed sending the industry a $45 billion tab to shore up the dwindling deposit insurance fund.
The staff of the Federal Deposit Insurance Corp. said it expects expenses tied to failed banks to surge to $100 billion over five years -- up 43% from the agency's last estimate in May.
As a result of the rising costs and the pressures on the agency's cash position, the FDIC proposed that banks prepay their deposit insurance premiums for the next three years at the end of December.
The move would head off a cash crunch at the fund that stands behind consumers' bank deposits.
The FDIC said the fund, under strain from 95 bank failures this year, will have a negative balance when the third quarter ends Wednesday and will run out of cash by the end of the first quarter next year. Over the past year, the deposit insurance fund balance has dropped to $10 billion from $45 billion. Read more.
Alan Grayson, Bernie Sanders, Ron Paul and others keep hammering away at this whole Fed-secrecy issue, and every now and then we get some pretty interesting exchanges. Zero Hedge relates this one between Grayson and Fed counsel Scott Alvarez. It’s becoming abundantly clear that at some point we’re going to start to hear details about monstrous front-running operations involving the major banks on Wall Street. Read more.
"I would say, however, that that's different from saying that after a suitable time period, so that there won't be this market effect, you don't have a right to go to a federal agency, borrow money and keep it secret forever," added Frank, a Massachusetts Democrat.
The Federal Reserve is willing to work with U.S. lawmakers on ways to release names of companies that borrow from the central bank after a time lag so the disclosures do not disrupt markets, a Fed official said.
Scott Alvarez, the Fed's general counsel, told the House of Representatives Financial Services Committee on Friday that the idea was "something that we're giving serious consideration with and we'd be happy to work with you on."
Alvarez, testifying on proposed legislation that would subject the Fed to audits by the Government Accountability Office, said that allowing reviews of the Fed's monetary policy deliberations would undermine the U.S. central bank's independence and credibility.
The GAO is the investigative arm of Congress.
But he was asked by the committee's chairman, Rep. Barney Frank, if the Fed would cooperate on changes to the legislation that would provide more disclosures on firms that borrow from the Fed's discount window and on its open market operations.
"I do believe it's important that there be a time lag before information is released about who bought what, and who went where, so that you -- this does not become information on which people act in the market," Frank said. Read more.
Read more about the Austin Decision: The Citizens United Case: Will the Supreme Court Return America to the 19th Century?
How Did Economists Get It So Wrong? Lead letter to the New York Times Magazine: September 16, 2009 | Submitted by Michael Munk | www.MichaelMunk.com
Paul Krugman's How Did Economists Get It So Wrong?" (September 6, 2009) offers a refreshing, critical assessment of the academic profession of economics and how it missed the recent economic collapse. While addressing the standard textbook issues in mainstream economics, Krugman seems oblivious to one area of the field that has warned of deep, cyclical crises in capitalism since its inception: Marxist economics. You do not have to believe in revolution or the proletarian struggle to appreciate the centrality of secular crises for this economic tradition. Marx was wrong about a lot of things, but he seems to have been on target when pointing out at least two problems: the severity and depth of periodic crises and the rise of financial speculation.
DIEGO VON VACANO
Center for Advanced Study in the Behavioral Sciences
Stanford University, Palo Alto, Calif.
Here's the article Diego commented on:
I. MISTAKING BEAUTY FOR TRUTH
It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.
Last year, everything came apart. Read more.