Paul Krugman: Disaster and Denial

[cal04]

http://www.nytimes.com/2009/12/14/opinion/14krugman.html

When I first began writing for The Times, I was naïve about many things. But my biggest misconception was this: I actually believed that influential people could be moved by evidence, that they would change their views if events completely refuted their beliefs.

And to be fair, it does happen now and then. I’ve been highly critical of Alan Greenspan over the years (since long before it was fashionable), but give the former Fed chairman credit: he has admitted that he was wrong about the ability of financial markets to police themselves.

But he’s a rare case. Just how rare was demonstrated by what happened last Friday in the House of Representatives, when — with the meltdown caused by a runaway financial system still fresh in our minds, and the mass unemployment that meltdown caused still very much in evidence — every single Republican and 27 Democrats voted against a quite modest effort to rein in Wall Street excesses.

Let’s recall how we got into our current mess.

(snip)
Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

(snip)
In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won’t let it face up to the reality of what happened to the U.S. economy.

So it’s up to the Democrats — and more specifically, since the House has passed its bill, it’s up to “centrist” Democrats in the Senate. Are they willing to learn something from the disaster that has overtaken the U.S. economy, and get behind financial reform?

[Writer]

1. Krugman is a brilliant economist who knows almost nothing about real politics. n/t

[democracy1st]

2. can you explain?

[Writer]

5. He's very naive!

His politics are in the right place, but he fails to understand the nexus between economics and the real process of politics. It seems that he believes that if you insert ideology A into political box B, you'll produce result C. He doesn't understand that there's a level of give and take in politics that makes pushing for some economic initiatives very difficult, and sometimes impossible.

[mmonk]

6. He isn't speaking an ideology, he is speaking about ideology.

Especially when that ideology rewards the greedy at the expense of real macro economic theory. It allows them not to admit the cause.

[bertman]

8. Krugman's failure to understand . . . "a level of give and take in politics". Actually,

judging from that commentary he understands it very well. The Banksters/Wall Streeters GIVE money to our elected officials. Our elected officials TAKE their orders from the Banksters/Wall Streeters.

Econ 101 for the year 2009.

What YOU don't seem to understand, Writer, is that it's up to our elected officials to operate for the BEST INTERESTS OF THE NATION--not the financial industry. Politics or not.

[Aragorn]

18. i agree

politicians seem more than willing to do whatever serves them even though they have enough information to know it's wrong. just watch c-span. that information should be enough for anyone who thinks otherwise.

[Time for change]

34. Yep. He's not naive, he's just soft-spoken and words his ideas cautiously and thoughtfully.

But he knows what's going on, as demonstrated by his quote of Upton Sinclair:

"It is difficult to get a man to understand something when his salary depends on his not understanding it.”

[phasma ex machina]

44. +1 "The Banksters/Wall Streeters GIVE money to our elected officials."

"Our elected officials TAKE their orders from the Banksters/Wall Streeters."

[Twitch14]

10. No, you are beyond naive...

...go back and reread the article. After the Great Depression, very clear-eyed people who had seen first-hand what unregulated capitalism looks like put stringent and unyielding restrictions on the underpinnings of finance; the banks. That foundation held until forgetfulness caused a steady erosion, and now the foundation has crumbled.

So, according to you, if the foundation of your house has cracked and crumbled, you're going to hire the company who says they can slap some patch on the cracks. Remind me to never buy a townhouse next to you.

[Jackpine Radical]

23. It wasn't "erosion" and it wasn't forgetfulness.

It was a deliberate and sustained attack on the henhouse by the financial wolves. They got their way by buying the government.

[lxlxlxl]

30. agree...just look at the threat of flight of bankers from the UK

threaten taxation then they pack up and leave. how do you really combat a parallel government of financial fiefdoms, whose obscene profits rely on gross extraction of wealth from everyone in the country? our old frames of politics barely scratch the surface of what is going on now.

[truedelphi]

46. But it wasn't just that the people in Congress after the Earlier Depression were more patriotic and

In wanting to be doing the right thing.

There were fewer lobbyists. (I don't know the number back in the thirties - but during LBJ's administration there were about 700. Now there are 7,000)

FDR understood that you don't give it all away to the banks and then URGE them to be nice to the American people. FDR grew up among the bankster class, and he understood them very well.

People spent a great deal of time out in the streets. From the 1890's on. And they died in the streets to make their point and force change to occur.

A strategy that may well be needed if we are going to achieve improvements here and now.

[Name removed]

47. Deleted message

Message removed by moderator. Click here to review the message board rules.

[JDPriestly]

16. Actually, the political "reality" is that if Obama and Congress don't

listen to Krugman and strongly curb Wall Street greed, the just say no Republicans will prevail. What is politically realistic is to clean up the excesses on Wall Street. It's those who want to "give and take" as you suggest will end up giving up too much and, instead of taking, being taken. Ultimately, when our economy falls further apart than it is, they will end up flat on their you-know-whats.

You just can't play politics with the laws of nature. And the basic economic principle that greed has to be curbed is like a law of nature.

What do you think would happen if you placed a five-year-old in a shop full of candy without any supervision? That's what happens when we don't have stringent and well-enforced restrictions on Wall Street and the bankers. They just gorge themselves with no thought for the consequences.

The politicians are our only protection against the gluttony and greed of Wall Street and the banks. If they do what is expedient in this respect, we will all suffer. They won't be spared any more than we will. And of course, as we have seen in the S&L and AIG crises, the bankers and Wall Street will have the worst tummy aches of all. They won't get bailed out next time. We won't have the means to do it.

[JackRiddler]

35. Ah, what you mean is he doesn't understand the inevitability of gangsters in power?

Because all the "give and take" is between their factions, and obviously doesn't involve, for example the majority of those who voted for "change."

"Give and take" as you use it is merely a legitimation for stratification, unequal power relations and the rule of the vanishingly few who belong to the rich and the permanent bureaucracies.

[pleah]

38. Did you read the first sentence?

"When I first began writing for The Times, I was naïve about many things."

[bertman]

42. Thank you, pleah.

[girl gone mad]

4. That's a baseless accusation, and not even relevant to this article.

Krugman critics just can't help themselves.

[Raster]

25. This isn't about politics, or at least, shouldn't be. This is about the financial underpinnings of

our entire system, which, contrary to what Wall Street would have us believe, are still as unstable as they were a year ago. NOTHING has changed except we, the citizens, have floated the gamblers yet another "loan" with the admonishment to "not do that again."

The only place politics comes into play is that those lawmakers that have the capability to repair some of the damage and take action to make sure the same types of financial catastrophe do not happen again have refused to so. Politics my ass. Wall Street runs Obama's financial policy. Wall Street has most of Congress on its payroll.

[Kurt_and_Hunter]

27. Dumb remark

[chimpymustgo]

36. You sound as though you know nothing about EITHER. Stop making excuses for

Obama and his team of banksters - who just stole billions of dollars from us and are drinking champagne at the White House today.

[leftstreet]

3. I can't remember. Are we hating on Krugman this week...or liking him?

K&R

[Goldstein1984]

7. I don't know. This is my first week here. But I get the impression

that instead of listening to an economist who knows nothing about real politics we're supposed to put our faith in politicians who know nothing about real economics.

That is, we're going along like we have for decades.

[bertman]

9. Recommend. And to answer leftstreet's question: this week we're liking him. I am anyway.

[clear eye]

11. Some of the nay votes & abstentions were b/c the bill claimed much more than it did.

Some House Reps. felt they couldn't in good conscience vote for something that was supposed to be the last word on gov't reforms of the financial sector while leaving the major problems in place.

Sounds to me like Krugman's need to be the voice of "reasonable" mainstream Liberalism is preventing him from understanding how faux reform stymies real reform.

[mmonk]

12. True.

[JVS]

13. Interesting. Thanks.

[amborin]

14. +10 though maybe he felt compelled to praise, to try to be positive; he's been dismayed by much

[snagglepuss]

15. K & R nt

[Loge23]

17. "you don't need a weatherman..."

Regardless of whether you agree with Krugman or not, I find it difficult to accept the "politics as usual" reasoning for inaction on financial reform.
This whole "give and take" crap largely explains why this country is in the mess it's in. Obama was elected by the strength of millions of voters who demand reform - and not only in the financial sector.
And yes, maybe the bill was too weak to begin with (like the stimulus) - that's no reason to table the issue.
The winds of change will continue to blow. To continue that analogy, when moving fronts meet stationary air masses there's usually a violent reaction - like financial calamity, in this case.
My only caveat with Krugman is that he somehow still cares enough - and apparently believes enough - in the ability for people to act rationally. I'm afraid that that horse has left the barn.

[Raster]

28. I think you hit the nail right on the head! Krugman, like most of us, see the damage done, and can

envision what it will take to make needed repairs to the system and what actions must be taken to prevent more damage. That is, if the goal is to fix the system, which, unfortunately, it is not. This is entirely analogous to the health care quandary. We could be well on our way to fixing US health care tomorrow if only we took the extreme courageous action to get rid of the for profit health insurance vampires. Instead, we find Congress bending over backward to "reform" health care in such a fashion that still leaves the perpetrators in charge--or at least profiting heavily--of the system.

[RobinA]

43. I'm Having Difficulty

detecting any "winds of change" at the moment. I hear "hot air of change," but I'm not seeing it turn into anything like actual change or even winds of change. More and more I'm feeling the draft of "winds of status quo." What I'm thinking is that, as bad as the recent crash was, it wasn't bad enough to bring about actual change. Sure, people elected Obama on a change platform, but since then there seems to be little demanding of change. Health care is a perfect example. Apparently, the politicians aren't sensing enough desire for change in their constituents to be willing to vote for any true change. Their survival, at least in their estimation, doesn't seem to rest on making real change, or Democrats wouldn't be having such a problem getting the modest change proposed through Congress. And don't tell me filibuster. I can't believe that if there were any real winds of change that at least SOME Repubs wouldn't find it in their best interest, electorally speaking, to vote for change.

[RainDog]

19. fundamentalists, market or religious, do not like facts

they refuse to be educated, to look at reality, to question the fearful things they believe because they think it will benefit them and hurt others.

that's what it boils down to.

Krugman is TOTALLY correct. Facts do not matter to some people. You see this all the time with creationists. What group is the voting base for so many of these legislators who refuse to deal with reality? Fundamentalists.

so you have legislators elected to do the bidding of people who refuse to acknowledge reality, who don't let facts get in the way of their beliefs. maybe those legislators are also fundie kool aid drinkers.. or maybe they just want to get re-elected.

the answer, it seems, is for DEMOCRATS to strong-arm their blue dog members so that reality overcomes the voters who deal in fantasy as a way of life.

Even tho Rahm supported many of these fundie idiots as candidates, there comes a point when even he needs to recognize the harm they are doing to an entire nation and do the right thing.

[TwilightGardener]

20. So for all those Obama bashers on DU bitching that this bill "does nothing"--Krugman disagrees.

He calls it "modest reform"--that's not nothing. And clearly, anything more strict would not have passed.

[bvar22]

29. Krugman was just being nice.

The bill STILL has to go through The Senate where the conservative "New Democrats" get to work their magic.

"I am a New Democrat"--Barack Obama
http://www.dlc.org/ndol_ci.cfm?contentid=254931&kaid=85&subid=900184

[Odin2005]

21. The RW BS about the crisis even becomes racist.

There is a lot of BS about lenders being "forced" to give sub-prime loans to "poor minorities". :eyes:

[laughingliberal]

22. That's been their talking point from day 1. According to them it was all about

Fannie Mae, Freddie Mac, Barney Frank, and Chris Dodd. I've been listening to my RW acquaintances rant about that since October '08. And it's all code for, "The Democrats forced those institutions to make loans to poor black people." To them, that's the sum total of what happened to our economy.

[lxlxlxl]

31. it drove me crazy last year, and I think it makes me even angrier now

when i hear people continue to make that claim, its obvious that the GOP's 'staying on message' is much more powerful than the liberals 'circular firing squad' asking the democratic president to do EVERYTHING compared to the GOP's 'do-nothing'

we are stuck in a really sick and disturbing cycle of politics in this country.

[HillbillyBob]

48. Im agree

The cycle of polyticks (blood sucking) Rs have been on their twisted power trip since runnyraygun. That was the first election I was old enough to vote in, even I a naive redneck hillbilly knew that the folks voting for raygun were idiots or naive or just f in stupid and that it would lead eventually to this crap.

I was in the navy and trained as air traffic controller then that B------ killed the unions.. I ended up working at a f in pizza hut and diggin ditches for less than minimum wage instead of working for the FAA. I have seen nothing since except the US swirlling round the bowl and goin down ever since.

[RobinA]

45. This Argument

kills me. The inner city, devastated by mortgage foreclusures. That's the big problem these days.

:sarcasm:

[HughMoran]

24. Republicans are trying to make the US into a failed state

More power to the corporations! More power to the banks! Who cares if they are destroying freedom and robbing the average person!

[RainDog]

26. they've been too successful, unfortunately

I hope we do not have to get down to violence in the streets for our govt to wake the fuck up and recognize when power has corrupted our processes to such a degree that that power must be held in check by the interests of THE ENTIRE FUCKING NATION.

[lxlxlxl]

32. so god money and guns can take over...norquist was succesful

your 100% right. norquist more or less has instituted his program successfully. we were never prepared to accept the fact that he was going to be succesfull.

at my most paranoid, i saw the collapse last year as a balatant attack on this president and the government. lets face it. the banks and financial institutions can preserve any bubble of phony investments on their own without government intervention (see 1907 and JP Morgan). they burst their own bubble when it was obvious that a new administration and start in american politics was a threat to their control of macroeconomics in this country.

[earcandle]

33. None of them will work together but are waiting for a trigger crisis that will resolve entitlement

issues for them, which they see as the culprit, not the war
chest nor banks nor the derivative economies, nor the
possibility of increased taxes.  No for them, its all about
medicare and Social Security at the Peterson and Pew
Commission.  They have a mind set that this disaster that
won't be pretty will finally get spending and budget under
control because decisions will be made in unison that will be
caused by this disaster which will be bigger than their
current feud in congress.

In the meantime, we American have a new fear.  What will cause
this trigger?  how will it play out?  who will it kill?  how
will we all be affected?  Just to stop taxing the rich.  What
a crock.  Can we make some secret plans to rid ourselves of
this policy makers who will sacrifice us for the bucks they
will put in their pockets?  I don't mean murder them, but to
prosecute them instead for bad decision-making and planning
the demise of a large portion of the American people? 

See the CSPAN commission that met today (Pew) sure stinks to
me.  

[katty]

37. disaster...denial...on a loop

[onesmallrock]

39. I'm no expert but......

Fanny and Freddy are not blameless but even more guilty is Bill Clinton and most guilty is Fiscal Phil Gramm

[Vinca]

40. "So it's up to the Democrats -"

Heaven help us.

[bhikkhu]

41. Still, better us than them. n/t