It's About Coalitions, Not Purity, Part Forty-Six

The Chickens Come Home To Roost, But It's Too Hot In The Hen House ... The Financial Meltdown, Part 3

As the nation continued to struggle with record oil and gasoline prices, the best we could get from the Bush administration and many Republicans was how this was all part of the free market at work. On top of this, reports of escalating foreclosures began to scare the hell out of many people, including people who worked on Wall Street, or who were in some way connected to Wall Street, as they began to wonder when the financial consequences of large numbers of foreclosures would become more evident. The consequences began to show up.

In March 2008, large investment bank "Bear-Stearns" teetered on the brink of insolvency, largely as a result of the then developing mortgage and foreclosure crisis. Bear-Stearns could not get loans from other banks, as confidence in the old bank (the bank dated from the early 1920s) went out the window, and financial markets were shaky over the whole situation. The Federal Reserve (aka, "the Fed") stepped in and through a complex deal, including bailout money, orchestrated a deal whereby Bear-Stearns was acquired by J.P. Morgan Chase. Fed Chairman Ben Bernanke said the Fed's decision to intervene was made in order to prevent a spill over into the rest of the economy if Bear-Stearns went down. The "free marketers" nearly had a collective stroke, as this whole process went against their vaunted principles of "free market capitalism;" known to some of us as "dog-eat-dog capitalism." I also explain the concept as, "We can do ANYTHING to the public, and we mean ANYTHING, and they can't do a damn thing to us. We don't a give a good damn about people, only about money!" I actually think the public should return the "favor," and not a give a good damn about these miserable, insatiable merchants of greed.*

The Fed intervention didn't come close to righting the miserable shape of the American financial system, but it calmed things briefly. A few months later, it became more and more evident the American banking system, and, therefore, the entire American economy (and the world's, for that matter), was on the ropes, and that the predicament with Bear-Stearns had not been an isolated incident. We waited for the other shoe to drop. Lehman Brothers, another large investment bank, dating to the mid 1800s (yes, 1800s!), was next to suffer the consequences of irresponsible capitalism. After serious declines in its stock price and announced layoffs of personnel, clients abandoned the bank in droves, withdrawing their money and assets almost instantly. The bank announced it would file for bankruptcy, and the DOW dropped 500 points in one day, with further staggering losses to follow. The Fed did not intervene, thus giving the "free marketers" their wish. With Lehman's collapse, the situation became so serious, the Bush administration, that bulwark of "free market capitalism," having oft essentially said about American economic problems, "we can't do anything about anything, because its a free market economy," announced, along with the support of the Fed, that they needed a special fund of $700 billion (with a "b") to shore up the financial system or that the country faced a new DEPRESSION, perhaps worse than the one dubbed "the Great Depression." With that name taken, what the hell would we call it?

Folks, having principles is one thing, but carrying principles to an extreme is lunacy. Driving off a cliff doesn't make you pure, it makes you NUTS, and then DEAD!

With the economy unraveling before our very eyes, the nominating process for candidates to succeed George W. Bush was taking place. On the Republican side, John McCain, who had made a run for the nomination in 2000, faced a number of candidates, most of whom dropped out of the race early on, with only Mike Huckabee of Arkansas posing any real challenge to McCain until March 2008. On the Democratic side, New York Senator and former First Lady Hillary Clinton made a strong bid to become the first woman to secure a major party nomination for president, but she was challenged by Illinois Senator Barack Obama, a powerful speaker and a man of mixed black and white racial background. So Democrats had two choices, one of which would be for the history books: the first female presidential candidate or the first African-American candidate. 

Next, the economy plunges and the political coalitions of the election of 2008 ...    

* The basic argument by the "free marketers" is, capitalists take risks hoping to make a profit on something. If that risk blows up on them, they should suffer the consequences, and government should do nothing to help them out. I would dare say, most of us probably agree with that whole concept "on paper." The problem is, these banks had become so big (remember "too big to fail?"), the failure of any one of them posed a threat to the entire economy and people's livelihoods. Further, suspicions were then rising that Bear-Stearns was not the only big bank in serious trouble.

WORD HISTORY: 
Melt-This word, closely related to "smelt,"^ and related to "malt" and "mild" (all from Germanic), goes back to Indo European "meld," with the meaning, "to soften, to make soft." This gave Old Germanic "meltanan," which meant "to melt, to dissolve." This gave Old English (Anglo-Saxon) "meltan," meaning, "to melt, to turn solid to liquid with fire, to dissolve;" thus also, "to digest." This then became "melten," before the modern form. By the way, the adjective "molten" is simply the adjectival use of the archaic past participle of "melt." The relatives of "melt" in the other Germanic languages tend to be directly connected to the closely related "smelt," and, as far as I can find, only English has both forms, "melt" and "smelt," with the latter being borrowed from Low German or Dutch, and more typically applied to the process of melting metal; whereas, in the other Germanic languages, it means the more general "melt." Icelandic has "melta," which means "digest;" that is, "the dissolving of food in the digestive system."  

^ This is the word meaning "to melt metal." English also has used the same spelling for a form of the past tense and participle of "smell," more common in England and other parts of Britain, although not uncommon in "spoken" American English. 

Can You Answer This Question?

I'm very curious about the answer to a question I have. It isn't scientific and I haven't researched it, but rather it is more of an impression from just listening to or reading the news over the years, as the question isn't just about now or the very recent past, it goes back quite a while, if my recollections are correct. Maybe my premise is wrong, and I'll be glad to see evidence to correct my impressions.

Here's what has me so puzzled: We hear how business people want "government to get out of the way;" how government doesn't belong in the economy, and that such things don't work, that free markets are the only way to fly. Okay, so how come when the Federal Reserve or the administration (any administration, not necessarily just the current one), or Congress, announce certain policies deemed to help the economy, often of the Keynesian nature (or even bailouts), the stock market goes up? After all, if these things don't work, why would the market go up? Hm, that's strange, because the stock market is really about confidence, usually somewhat longer term, but that's not totally carved in stone, and I've got to believe most business people own stock, perhaps even large amounts of stock, so they must be in on the uptick, too. You'd think if these policies didn't work, that once announced, the markets would plummet as investors ran for the hills. Or do you think this might be something of "what I say I believe and what I really believe are two different things?"

WORD HISTORY:
Root-This is the noun, the basic meaning of which is, "underground part of a plant," although other meanings have developed from that idea. This word goes back to Indo European "wrehd," which meant "root." This gave its Old Germanic offspring "wurtiz," which meant "root," which then produced the derived "wrot(s)," with the same meaning. This gave Old Norse "rót," with the same meaning. This then was borrowed into Old English as "rot" (with a long "o"). At that time, English already had the closely related "wyrt," which also meant "root," but also "plant, herb," the latter meanings of which then dominated, and the word became modern "wort." ^  There were other related forms in Old English meaning "root," but they died out. English "rot" then later became "root." For those learning (American) English, "root" is pronounced a couple of ways: the most common has the double "o" rhyming with "boot," while the other rhymes with "foot." When I was a kid, the second form was not uncommon, but just from my personal experience, it seems to be in decline and the first form is now far more common. Forms of "root" are common in the other Germanic languages: German has "Wurzel," Low German Saxon has "Wortel," Dutch has "wortel," West Frisian has "woartel" (which also means "carrot," of course a "root"),  Danish has "rod," Icelandic has "rót," and Swedish and Norwegian have "rot." While English is classified as West Germanic, along with German, Low German, Frisian and Dutch, it borrowed the form of the word that became "root" from Old Norse; that is, the old form of North Germanic, where the "w" had disappeared; thus, English differs from its close West Germanic cousins by not having the beginning "w."

^ For the history of "wort," see:  http://pontificating-randy.blogspot.com/2012/10/its-about-coalitions-not-purity-part_19.html

Erased Wealth For Some, Gains For Guess Who?

Federal Reserve data released earlier this month showed a huge drop in the net worth of American families; a drop of 39% from 2007 to 2010. This only tells us "the Great Recession" was "greater" than many at first realized. The interesting part of this is, middle class families took much of the blow from those three years of  "the Great Recession.." While middle class people and the poor took a beating, the wealth of one segment of American society actually rose somewhat. I'll bet you'd never guess it was the wealthiest families in America. So you've been losing ground while they've been gaining ground amid the worst times since the 1930s and the Great Depression. Still want to give them more tax cuts? Better think about all of this folks, as it would amount to another transfer of wealth from YOU to people who DO NOT need it! This is NOT a tough one! 

WORD HISTORY:
Wether- This is NOT a misspelling.  I came across this word quite by accident, which then prompted me to check into it. To my recollection, I had never heard of it (keep reading). It certainly is not common in the U.S., but perhaps it is still used in England? Or by people involved with animals, especially with sheep? Anyway let's broaden our language knowledge at bit. The word now means "a male sheep (ram) or goat, usually one that has been castrated." Originally it meant "an animal (usually a lamb) of one year or less." It goes back to the Indo European root "wet," which meant "year." This gave its Old Germanic offspring "wethruz" or "wethraz." This gave Old English (Anglo-Saxon) wether "male sheep, ram." Above, I mentioned that I didn't recall ever hearing of the term, but during my research on the word, I found that it is the second part of "bellwether," a term still much in use, usually as to "leader in trends" or regarding election results. The original meaning of "bellwether" was "a male sheep or goat with a bell around its neck, which led the rest of the herd." German has "Widder," with similar meaning to its English cousin. Apparently the word has died out, or is of very limited use, in other Germanic languages, as for instance, both English and Dutch now use "ram" in common speech.

A Diversionary Crisis, Part One

How soon we forget. Sometimes it's a good thing to take a look back at events of the not too distant past so we jar our memories, and then hopefully our common sense, back into place.

In March 2008, large investment bank "Bear-Stearns" teetered on the brink of insolvency, largely as a result of the then developing mortgage and foreclosure crisis. Bear-Stearns could not get loans from other banks, as confidence in the old bank (the bank dated from the early 1920s) went out the window, and financial markets were shaky over the whole situation. The Federal Reserve (aka, "the Fed") stepped in and through a complex deal, including bailout money, orchestrated a deal whereby Bear-Stearns was acquired by J.P. Morgan Chase.* Fed Chairman Ben Bernanke said the Fed's decision to intervene was made in order to prevent a spill over into the rest of the economy if Bear-Stearns went down. The "free marketers" nearly had a collective stroke, as this whole process went against their vaunted principles of "free market capitalism;" known to some of us as "dog-eat-dog capitalism." I also explain the concept as, "We can do ANYTHING to the public, and we mean ANYTHING, and they can't do a damn thing to us. We don't a give a good damn about people, only about money!" I actually think the public should return the "favor," and not a give a good damn about these miserable, insatiable merchants of greed.**

The Fed intervention didn't come close to righting the miserable shape of the American financial system, but it calmed things briefly. A few months later, it became more and more evident the American banking system, and, therefore, the entire American economy (and the world's, for that matter), was on the ropes, and that the predicament with Bear-Stearns had not been an isolated incident. We waited for the other shoe to fall. Lehman Brothers, another large investment bank dating to the mid 1800s (yes, 1800s!), was next to suffer the consequences of irresponsible capitalism. After serious declines in its stock price and announced layoffs of personnel, clients abandoned the bank in droves, withdrawing their money and assets almost instantly. The bank announced it would file for bankruptcy, and the DOW dropped 500 points in one day, with further staggering losses to follow. The Fed did not intervene, thus giving the "free marketers" their wish. With Lehman's collapse, the situation became so serious, the Bush administration, that bulwark of "free market capitalism," having oft essentially said to American economic problems, "we can't do anything about anything, because its a free market economy," announced, along with the support of the Fed, that they needed a special fund of $700 billion (with a "b") to shore up the financial system or that the country faced a new DEPRESSION, perhaps worse than the one dubbed "the Great Depression." With that name taken, what the hell would we call it?

Folks, having principles is one thing, but carrying principles to an extreme is lunacy. Driving off a cliff doesn't make you pure, it makes you NUTS, and then DEAD!

Part Two to follow, about debt.

* The actual deal is not the subject of this article, but for those interested, there has been plenty written about the subject, and you should have no trouble finding the details of the acquisition.

** The basic argument by the "free marketers" is, capitalists take risks hoping to make a profit on something. If that risk blows up on them, they should suffer the consequences, and government should do nothing to help them out. I would dare say, most of us probably agree with that whole concept "on paper." The problem is, these banks had become so big (remember "too big to fail?"), the failure of any one of them posed a threat to the entire economy and people's livelihoods. Further, suspicions were then rising that Bear-Stearns was not the only big bank in serious trouble.

WORD HISTORY:
Market-This word "may" trace back to Etruscan, a language primarily once spoken in central and northern Italy. Etruscan is not Indo European, or at least, linguists have not thus far connected it to Indo European. The modern Italian region of "Tuscany" is named after the Etruscans. Latin, an Indo European language related to English further down the family tree, obviously came into much contact with Etruscan in Italy, where "some" believe Latin picked up what would be the ancestor of "market," but not all agree with that hypothesis, and these people just feel the origin of the word is unknown. Whatever the case, Latin had "merx," which meant, "things for sale, wares." This spawned Latin "mercatus," which meant "trade, sale of wares; thus, "market." Now we enter another uncertain area, as some believe English acquired "market" from Old French "marchiet," which was "market" in northern French dialect. Old French had inherited, so to speak, the basic form of the word from Latin, as French is a Latin-based language. Another point of view is that English and other Germanic languages acquired the word directly from Latin, as the result of trade with the Romans, or rather their descendants in northern Italy, as apparently the word only shows up in Germanic AFTER the Roman Empire. To be quite honest, it could have come into the Germanic languages via both sources, with some acquiring it from Old French (I lean toward this for English) and others from the Latin dialects of northern Italy. The word shows up in English during the 1100s with the meaning, "a time and place set for buying and selling," with the word continuing when actual buildings were later erected for the sale of goods. The verb form came from the noun during the 1200s. German and Dutch have "Markt, although the Dutch word is spelled with a small case "m." Swedish has "marknad;" Icelandic has "markathi;" Danish and Norwegian have "marked;" Frisian has "merk."

Can We Get Out Of This Mess? Part Five

One of the problems that made economic matters worse was that, earlier on, influential people like Bernanke and Paulson*** were unable to get their arms around the economic problem in order to wrestle it to the ground. There’s no doubt in my mind that a large part of this failure to recognize the economic problems and then to act was due to ideology. Conservatives don’t believe in governmental action, unless of course your name is George W. Bush, and you choose a “preemptive war“ against Iraq. But to engage in “preemptive” actions to stave off economic disaster? Hell no!!! You can’t tamper with the “free markets.” Instead of seeing what was becoming obvious to many Americans already battered by high prices for just about everything, stagnant wages, benefit cuts, foreclosure and the like, these folks consistently UNDERESTIMATED (or turned a blind eye to) the mounting dangers to the American economy. Even just last summer, Bernanke and the Federal Reserve continued to harp on the possibility of inflation spiraling out of control. Oh yes, prices had been escalating,^^^ but that “free market” ideology said, “We can’t control prices on ANYTHING, because that’s against free market principles.” Even if those high prices are strangling many American families and thus the American economy?+++ Of course, in order to try to solve a problem, one must first admit that there IS a problem and get the diagnosis of the problem correct. Just imagine if you went to the doctor with a severe headache and the doc said, “The REAL problem you’ve got is that you have corns on both feet.”

The failure to see the mounting problems, and then the misdiagnosis of the problems led the Fed and the Bush Administration to do nothing at first, but it seems that their “free market” minds couldn’t see how severe the problems really were, leaving the severity of the problems terribly underestimated, as well as misdiagnosed (“Take two corn removal pads and call me in the morning!”).


NOTE: I'm working on Part Two of "Why Do We Call Them These Names" for "Word Histories," and it will be posted separately.

*** And even earlier, Greenspan. When the history of this era is written, Greenspan may get a good deal of blame, as halting a problem early on is often easier than letting it fester.

^^^In my opinion, driven much higher by greedy speculative investors with too much money on their hands. I’m telling you folks, you can’t give them more money through huge tax cuts and expect that they’ll suddenly donate their savings to “The Mother Theresa Society” or to the “Mahatma Gandhi School of Non Violent Public Protest.” Currently, many of those who benefited by this speculative behavior are still in the process of defending it by saying that prices were driven higher by “supply and demand,” that good old free market standby. These “free marketers” just seem unable to admit that free market systems have a downside to them. They don’t get it, just like the bankers and officers of many companies now in meltdown who still feel “entitled” to huge bonuses. And the conservatives have the nerve to say that many other Americans have a sense of “entitlement;” and that’s over basic subsistence, not mo’ money, mo’ money, mo’ money! One part of the “free market” philosophy these folks seem to forget, is that part about “merit based compensation and job retention.” Using their own “principles,” these corporate bigwigs, and also members of the Federal Reserve and the Bush Administration, would have been terminated.

+++For those in need of special medications to help them stay alive, the free market philosophy says, “Sorry to hear that, but we’ll send flowers to your funeral.” Most are too hypocritical to say such a thing openly, because I hope that inside them they know they’re wrong, but their greed overrules any inclination toward humanity. This “never wrong” free market crap has just provided them with an excuse.

The Free Market Dies, Funeral Pending

"Free Market Capitalism" died this week, after a long illness and the funeral could cost "hundreds of billions," according to Treasury Secretary Hank Paulson, or even as much as a couple of trillion; that is t-r-i-l-l-i-o-n, according to others. Free Market Capitalism is survived by.... well, it seems that no one wants to claim to be related. The "free marketers" have been discredited, and to prove the point, they all now claim that they didn't mean what they said before.... ah before, well, this week. These folks who claimed that free markets can do no wrong, that government is the enemy, that regulation is the enemy, that health care for ALL Americans is the enemy, that huge bonuses for CEOs, even those overseeing floundering companies, are just fine, well they now say that they are related to someone, and that someone is Uncle Sam. Many years ago on the television series "Get Smart," the main character, Secret Agent Maxwell Smart, would confront an enemy by calling him some nasty name, like "you stupid gorilla." Max would then go at his adversary with a punch to the face, a karate chop to the neck, and a swift fist to the gut. When the "gorilla" barely flinched, Max would put his arm around the guy and say very nicely, "Hey, I hope I wasn't out of line with that crack about you being a stupid gorilla." Well that's where the free marketers are now. They hated Uncle Sam, but now they claim to have been misunderstood, and that they really love their bearded uncle. "Hey Uncle Sam, we hope we weren't out of line with that crack about you being the enemy. By the way, could you spare a few hundred billion?"

While I'm on the television kick, there was another show called "Fantasy Island." The basic premise of the show was that various people would visit the island and get to live out their ultimate fantasy. Often this required turning back the clock to an idyllic time. In the end, the old saying about "Be careful what you wish for, you might get it," came true, and the people got to see the folly of their ways. Well now, we've had these free marketers take this country back in time to an age where there was virtually no law or regulation to stop them from doing anything and everything to make money. The problem with this scenario is, it is NOT a TV show, and millions of Americans have paid a terrible price for these folks' fantasies. And, as I noted above, the costs associated with this "turn back the clock" mentality haven't all come to pass, as yet. Let's just hope that what Uncle Sam has decided to do will now work, and that we avoid an even worse situation.

Uncle Sam To The Recue?

Here's a link to an article that says the government has developed a plan to take over mortgage giants Freddie Mac and Fannie Mae:


http://www.msnbc.msn.com/id/26567533/

The Government & The Economy

If you haven't seen the previous blog on the subject, see:

http://pontificating-randy.blogspot.com/2008/08/government-intervention-in-free-market.html

This is sort of a "Part Two" to the above. Now, having given the Bush Administration and the Federal Reserve a pat on the back, I now must give a more scathing view of their action, or inaction, but first, a short preface.

Many people are skeptical of politicians, and with good reason. There's nothing wrong with some healthy skepticism about anything in and around our lives. The problem for us becomes when politicians switch positions on a given issue, or at least seem to do so. Did they change to get votes, or did they really change out of conviction? We're often not sure, but just as often, our answer to that question probably mirrors our political views. If a politician swears by chocolate ice cream, but then changes to vanilla ice cream, if you like chocolate, you may well feel that this politician is pandering to the vanilla vote. If you like chocolate, you welcome a new convert. There isn't a really good answer to the question, but hopefully we try to decide these things on an individual basis, and get some info on the particular subject and the politician involved. We're in an election year, when all such things are intensified, but I hate to think that a politician of either party must always hold to some idea and never change or modify their position without being called a "flip-flopper." On the other hand, there are some blatant changes that go on which only concern politics, but we always have to keep in mind that this is part of the "genius" of our system. Politicians tend to want to get on the side of the bulk of the electorate, and that makes our system go.

Now, having muddied the waters... I mean having gotten that out of the way, there are certainly some valid criticisms of the recent government involvement in the economy. The administration did little to help anyone early on in the current crisis. Their "free market" mantra led them to utter statements about how if you buy a home and can't pay, tough sh... ah, luck. Then the chickens came home to roost, as the banks and mortgage companies began to reap what they had sown, and losses on their balance sheets mounted. Now, this was something the Bush Administration could understand, the plight of millionaires. When banks were threatened with insolvency, the administration quickly got off of their butts and just as quickly forgot about their own "free market" crap.. I mean positions. The pro-business, free market mantra is, "If you take whatever action, then you have to bear the consequences or the benefits." So, if banker XYZ lends Joe Shmo 200 grand to buy a house, and old Joe makes $8.50 an hour and he can't pay the mortgage, banker XYZ takes a hit. With this administration, when Joe Shmo couldn't pay, they didn't give a damn, but as soon as Joe's loss hurt banker XYZ, they sprang into action.

Now, I'm not ideological on this, as I think, as distasteful as it is, banker XYZ had to be helped, for fear that the whole system could come tumbling down. Don't forget, it really isn't just banker XYZ, but many, many bankers in trouble, and this crisis doesn't appear to be over yet, but as the article (with link in part one) notes, the administration favored helping bankers, but when Congress added help for homeowners, they balked, until political reality set in, and they went along, although reluctantly. So what does this mean? To the Bush Administration, if you're a banker and you gave that loan to Joe Shmo (even if you knew, or should have known that Joe couldn't afford it), you should be protected against Joe's default on the loan. If you're Joe Shmo, "The hell with you!"

As the crisis deepened and the government took stronger actions, thus increasing government power, the administration spokespeople kept spouting the free market nonsense, and acting as if they really believed in it, in spite of the actions they were taking. It has been much the same with oil/gasoline prices. When the cry went out to curtail speculators in the oil and gasoline markets, the administration spokespeople, led by Treasury Secretary Paulson, said that there really wasn't much speculation causing prices to soar, it was just the free market setting the price, which was another flight from reality by this bunch. Now, in the last couple of weeks, as oil and gas prices have plummeted, it has been noted that speculators have been fleeing the oil markets. I thought speculators weren't the problem? You can't have it both ways!!! (Note that just because oil has fallen in price, don't get too gleeful as yet, as we will have to see what happens in the longer term.)

Government Intervention In The "Free Market"

Below is a link to an article describing how the government has intervened in the free market economy in just the past year or so. I have to offer a congratulations to the Bush Administration, something you've not heard much from me, for adapting to a crisis. This administration has preached this "free market" nonsense for so long, however, that they haven't really gotten much credit for intervening during the current crisis. It just shows that ideologues of what ever persuasion need to draw in their horns and take action, after a dose of harsh reality. In this case, promoting "free markets" is one thing, and seeing and acting upon the weaknesses of free markets is another. Ben Bernanke and the Federal Reserve have acted, too. Bernanke, from what I understand, concentrated much of his economic schooling on understanding The Great Depression, and it seems to have served him well, so far. Let's hope we can pull out of this mess without actually experiencing a severe recession, or even a depression. One analyst on CNBC (a cable business channel) noted recently that Bernanke and the Fed have been trying to keep the slowdown in America from "morphing into a depression."

http://www.msnbc.msn.com/id/26101238/