Archive for the ‘World Affairs’ Category

Debt and what should be done about it.

April 23, 2013

For what i consider to be a few no very preposterous suggestions, read  Robert Kuttner‘s The Debt We Shouldn’t Pay which appears in the current issue of the New York Review of Books.

Public debt was not implicated in the collapse of 2008, nor is it retarding the recovery today. Enlarged government deficits were the consequence of the financial crash, not the cause.1 Indeed, there’s a strong case that government deficits are keeping a weak economy out of deeper recession. When Congress raised taxes in January at an annual rate of over $180 billion to avoid the so-called fiscal cliff, and then accepted a “sequester” of $85 billion in spending cuts in March, the combined fiscal contraction cut economic growth for 2013 about in half, according to the Congressional Budget Office. Moreover, some of the causes of public deficits, such as Medicare, reflect to a large extent inefficiency and inflation in health care rather than profligacy in public budgeting.

Here comes a point that’s now been lost sight of both in most countries tha are now been fed the austerity cure: 

It was private speculative debts—exotic mortgage bonds financed by short-term borrowing at very high costs—that produced the crisis of 2008. The burden of private debts continues to hobble the economy’s potential. In the decade prior to the collapse of 2008, private debts grew at more than triple the rate of increase of the public debt. In 22 percent of America’s homes with mortgages, the debt exceeds the value of the house. Young adults begin economic life saddled with student debt that recently reached a trillion dollars, limiting their purchasing power. Middle-class families use debt as a substitute for wages and salaries that have lagged behind the cost of living. This private debt overhang, far more than the obsessively debated question of public debt, retards the recovery.

We may think that debt – however incurred – has to be repaid: it a moral duty on us as individuals and as a society. Then again maybe there is a time when we have to think again.

In the case of a broad downturn,2 debt ceases to be purely a moral question, and becomes a pragmatic one: Will it help the overall economy for the law to demand that debts always be paid in full? Was it economically sensible to throw debtors into jail? Is it sensible now to force troubled corporations or banks to liquidate? To compel sales of millions of homes in a depressed market? To destroy the economic potential of entire nations so that they can service old debts that were incurred corruptly by previous governments or banks? Society properly discourages borrowers from taking on imprudent burdens, and the prospective loss of property or even liberty functions as a deterrent. But in a general collapse, debt forgiveness may become necessary if the economy is not to sink further.

He reminds the reader that debt relief and forgiveness has not been unknown, even in recent history. During the Great Depression and Roosevelt era

… the US government became serious about debt relief, with a series of policies that refinanced distressed home mortgages, reformed and recapitalized banks, extended relief to bankrupt consumers, financed a huge war debt at below-market interest rates, and wrote off some of the international debts of allies and enemies alike. (Britain, America’s closest ally, received near-total forgiveness of wartime Lend-Lease debt.)

Germany, today’s enforcer of Euro-austerity, was the beneficiary of one of history’s most magnanimous acts of debt amnesty in 1948. The Allies in the 1920s made the catastrophic error of helping to destroy Germany’s economy with reparations and debt collection policies. In the 1940s, after a brief flirtation with World War I–style reparations, the occupying powers agreed to behave differently: they wrote off 93 percent of the Nazi-era debt and postponed collection of other debts for nearly half a century. So Germany, whose debt-to-GDP ratio in 1939 was 675 percent, had a debt load of about 12 percent in the early 1950s—far less than that of the victorious Allies—helping to produce postwar Germany’s economic miracle. Almost every German can cite the Marshall Plan, but this larger act of macroeconomic mercy has disappeared from the political consciousness of Germany’s current austerity police.

Kuttner is wise enough to know the chances of countries such as Ireland having their debts relieved are remote.

The question of who gets debt relief reflects the distribution of political power—and power normally lies with large creditors such as banks.

 Just so.


Is Obama winning healthcare battle?

September 24, 2009

It’s heartening to read that the GOP opposition to President  Obama’s reform of healthcare is not so much evaporating as never there in the first place

 A Bloomberg poll asked which right-wing objections people found legitimate, and which were “scare tactics.” Basically, voters rejected GOP rhetoric almost 2-to-1. About 63 percent think Sarah Palin’s “death panels” are a distortion, versus 30 percent who fear them. It’s 61 to 33 percent on the claim that health reform means government-paid abortions, 58 to 37 percent on the false claim that illegal aliens will get subsidized insurance, etc.

 However it is worrying to read that the penalties being paid by the poorer sectors of the American population – those it’s designed to help – could put them in opposition to it.

The bill as proposed by Sen. Max Baucus, Democrat,  Montana, would, it seems, “force millions of working Americans currently without coverage to spend up to 13 percent of their annual income on private health insurance policies they can’t afford.”

 Democratic bloggers boast about how brilliantly Obama schooled George Stephanopoulos on ABC News’ “This Week.” The host wondered whether a government mandate requiring people to buy health insurance wasn’t a steep tax increase. Obama argued semantics. “For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.”

No, Mr. President, it’s not. Technically speaking. But it’s thousands of bucks out of the pockets of people who’ve already decided they can’t afford insurance. Sure, some are improvident deadbeats willing to take their chances, visit the emergency room as necessary, and stick everybody else with the bill. But most just can’t find the money.

Former Vermont Gov. Howard Dean insists that, for the bill to be effective, in must affordable to the least well off, and that means that it must include something that’s not included in its present form – a competitive public insurance plan.

 “Because it’s the only thing that works … If controlling costs, which is part of the president’s agenda, is going to happen, you have to have a public option. If you want to get some people insured by 2010, which I think is essential for the future of the Democratic Party, you have to have a public option.”

Hedge funds want to be left alone…..

May 1, 2009

In his How the World Works column for Andrew Leonard, while explaining why the Obama administration found it so difficult to save Chrysler in the way it wanted,  has a good rant about hedge funds and their failure to play any part in helping to save the US economy.

 The main grief the holdout lenders appear to have is that, according to bankruptcy law and tradition, they believe that the Chrysler debt that they purchased (often at a discount, long after it was clear that the company was in deep trouble) has rights that are superior to some of the “junior” parties involved. The government, they believe, is stumbling into a Hugo Chavez role, running roughshod over everyone in its way. First — a take it or leave it deal for Wall Street hedge funds. Next nationalization of Citigroup! And then finally, everyone who works on Wall Street gets forced to wear a dunce cap and kick-me sign……

…. These are smart people, we have been led to believe. Do they not understand the mood in the country? Do they not get, that to many people, the Obama administration has been too soft on Wall Street. How can they not understand that there are times to bitch and moan, and times to just take your punishment, and now is the time for the latter.

What he doesn’t say is that these people know only too well that if they willingly make concessions now, people will no longer find them as attractive an investment as they used to and that as a result they will never be able to go back to business as usual after the crisis is over. If they can tell potential investors after the crisis that all the concessions they made during it were forced on them by others, then their credibility remains intact, and when the crisis is over they can get back to business as usual.

Can the US learn from Ireland?

April 21, 2009

It’s interesting to note that the Nobel Prizewinning economist, Paul Kugman, who, incidentally, has found the Obama administration wanting in its handling the economy crisis, has written a brief piece for the New York Times ( reprinted in today’s edition of The Guardian warning the US government that if it continues on its current course, it could well end up in a similar bind as the Irish government has.


How did Ireland get into its current bind? By being just like the US, only more so. Like Iceland, Ireland jumped with both feet into the brave new world of unsupervised global markets. Last year the Heritage Foundation declared Ireland the world’s third-freest economy, behind only Hong Kong and Singapore.

One part of the Irish economy that became especially free was the banking sector, which used its freedom to finance a monstrous housing bubble. Ireland became in effect a cool, snake-free version of coastal Florida

 Then the bubble burst. The collapse of construction sent the economy into a tailspin, while plunging home prices left many owing more than their houses were worth. The result has been a rising tide of defaults and heavy losses for the banks. And the troubles of the banks are largely responsible for putting the Irish government in a policy straitjacket.


Krugman gives an excellent summary of the hoops that the Irish government have gone through since the “bubble burst” He acknowledges that the Obama administration is still free to make decisions that are no longer open to the Irish


… For now, the US isn’t confined by an Irish-type fiscal straitjacket: The financial markets still consider government debt safer than anything else. But we can’t assume that this will always be true. Unfortunately, we didn’t save for a rainy day: thanks to tax cuts and the war in Iraq, America came out of the “Bush boom” with a higher ratio of government debt to GDP than it had going in. And if we push that ratio another 30 or 40 points higher – not out of the question if economic policy is mishandled over the next few years – we might start facing our own problems with the bond market.

That’s one reason I’m so concerned about the Obama administration’s bank plan. If, as some of us fear, taxpayer funds end up providing windfalls to financial operators instead of fixing what needs to be fixed, we might not have the money to go back and do it right.

And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks.

Anybody wishing to know more about Krugman’s latest thinking can read his always readable The Conscience of a Liberal blog which a permanent feature in The New York Times.

Obama’s Cassandras.

April 16, 2009

Andrew Leonard, the senior Technology & Business writer at, has compiled a useful list of people of all political persuasions who have on thing in common, and that is the firm belief that the Obama administration’s handling of the economic crisis is flawed.


phrophets-of-doomApril 16, 2009 | At a moment of economic stress greater than most living Americans have ever experienced, it is no wonder that every move made by the administration of President Barack Obama to address the multiple simultaneous crises afflicting the economy has been greeted with howls of criticism from the left, right and middle. Now is a fertile time for a harvest of Cassandras, all preaching apocalypse. But it can be confusing — is the stimulus too big, or too small? Should banks be allowed to fail, or should they be nationalized?

Hard answers are in short supply. But here’s a guide to the prophets of doom. We’ve identified them, attempted to ascertain the moment when they first turned against the White House, and summarized the basic points of their critique. We’ve included economists, members of the business community, bloggers and, just for fun, two of the most anti-Obama Republicans we could dig up…[read on]

This could very well turn out to be Obama’s “O con noi o contro di noi” dilemma. Are those people who are not for him really against him?

Department of Homeland Security picks on us. Why?

April 15, 2009

It appears that a report sent to local police forces by the U.S. Department of Homeland Security warning them of “right-wing extremist activity”, and warning that the  domestic threat of violence and terrorism “may include groups and individuals that are dedicated to a single-issue, such as opposition to abortion or immigration” and “groups that reject federal authority in favor of state or local authority”, has got many conservatives seething with a righteous indignation the could not summon when the same department – of Bush’s devising, incidentally – did not have them in its sights.’s Glenn Greenwald, who has been, and still is, a vociferous critic of the Department of Homeland Security and its activity, argues in newsletter today that “When you cheer on a Surveillance State”, as many of these same people have done in the past, you have no grounds to complain when it turns its eyes on you” His argument is that if you create a massive and wildly empowered domestic surveillance apparatus, it’s going to monitor and investigate domestic political activity.  That’s its nature.” 

One suspects that Greenwald takes some pleasure in being able to in naming those conservatives who are who are shouting foul most loudly.

Conservatives have responded to this disclosure as though they’re on the train to FEMA camps.  The Right’s leading political philosopher and intellectual historian, Jonah Goldberg, invokes fellow right-wing giant Ronald Reagan and says:  “Here we go Again,” protesting that “this seems so nakedly ideological.”  Michelle Malkin, who spent the last eight years cheering on every domestic surveillance and police state program she could find, announces that it’s “Confirmed:  The Obama DHS hit job on conservatives is real!”  Lead-War-on-Terror-cheerleader Glenn Reynolds warns that DHS — as a result of this report (but not, apparently, anything that happened over the last eight years) — now considers the Constitution to be a “subversive manifesto.”  Super Tough Guy Civilization-Warrior Mark Steyn has already concocted an elaborate, detailed martyr fantasy in which his house is surrounded by Obama-dispatched, bomb-wielding federal agents.  Malkin’s Hot Air stomps its feet about all “the smears listed in the new DHS warning about ‘right-wing extremism.”

It is awfully difficult to get indignant on their behalf,


Obama & presidential powers..

April 13, 2009

Those who thought that the Department of Justice –henceforth to be referred to as DOJ – under President Obama’s was going to behave any differently than it had under Bush (and Cheney) are having something of a wake-up call. The Obama administration, it is now generally agreed, continues its claim to the very presidential powers that, as Bush critics, they condemned as radical, lawless and authoritarian.

According to Glenn Greenwald’s opinion column  in today’s Salon, “it is becoming increasingly difficult for honest Obama supporters to dismiss away or even minimize these criticisms and, especially, to malign the motives of critics”.  

The Electronic Frontier Foundation (EFF) — which, to the cheers of liberals everywhere, was one of the nation’s most stalwart defenders against the Bush assault on core civil liberties — declared last week:  “In Warrantless Wiretapping Case, Obama DOJ’s New Arguments Are Worse Than Bush’s.”  On Tuesday night, Keith Olbermann began his show by announcing:  

President Obama‘s Justice Department now is not just defending Bush officials from lawsuits surrounding National Security Agency domestic spying, but seeking to expand the government’s authority by making it immune from any legal challenge regarding wiretapping — ever.

Olbermann went on to add that “the Obama administration is just flat-out dead wrong about this” and then contrasted Obama’s campaign statements on transparency with his conduct as President and concluded:  “That was then, this is now.”  Law Professor Jonathan Turley — who, as a regular on Olbermann’s show during the Bush years, was one of the single most-cited and praised sources by the netroots on matters of executive authority — said that Bush officials should wave a “Mission Accomplished” banner because they “have Barack Obama adopting the same extremist arguments and, in fact, exceeding the extremist arguments made by President Bush.”

Greenwald’s lengthy piece ends with this thought:

It’s also possible the Obama may (or may not) take actions in the future — releasing the last OLC torture memos, granting full due process rights to Guantanamo detainees, offering habeas hearings to abducted-and-rendered Bagram prisoners — that could substantially improve his record in the areas of accountability, transparency and adherence to Constitutional guarantees.  If he does those things, credit will be warranted — but only if and when he does them.  And thus far, he has not.  In most instances, he has done the opposite.

Whatever else one might say, the rule of law, the Constitution, and core civil liberties are the centerpiece of a healthy and well-functioning government, and nothing justifies an assault on those safeguards.  That was the argument most progressives made throughout the Bush presidency, and the more Obama continues on the Bush/Cheney path in this area, the more solid the progressive consensus against his actions becomes.  

In Ireland, we used to believe that the man who “puts things on the long finger” was the man who intended to postpone things indefinitely. Any change from the ” Bush/Cheney path in this area” is, I believe, “on the long finger” as far as Obama is concerned.

Krugman & the Obama administration.

March 31, 2009

In his March the 21st blog – The Conscience of a Liberal – Paul Krugman, the Nobel Prize-winning economist and Op-Ed columnist for The New York Times, has some harsh things to say about the way the Obama administration is handling the US banking crisis.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

There are those in the media who have begun to treat Krugman as a something crank, who has turned on an administration to which he should be aligning himself.

Andrew Leonard of Salon is not one of them Indeed, in an article published yesterday, he presented readers with what seems to me a single compelling reason to taking Krugman’s critique of Obama seriously.


We take Krugman seriously as an Obama critic because he was right about George Bush, and therefore he may well be correct about Obama (or Geithner). This is not a “15 minutes” phenomenon. This is the culmination of a groundswell long in the making. CNBC’s Rick Santelli gets his 15 minutes when he rants about “mortgage losers.” Paul Krugman will be a force to be reckoned with for many, many years to come. There’s a difference.


The first 30 days of President Barack Obama

March 15, 2009

The veteran American political journalist Elizabeth Drew has contributed a fine essay to The New York Review if Books summing up the successes and failures, as she sees them, of the Barack Obama administration’s first thirty days in office.

As carefully as Barack Obama prepared for it, the presidency has held some surprises for him—some foreseeable, some not, and some of his own making. Seeking to avoid the mistakes of the early Clinton era, Obama concluded that, unlike Clinton, he didn’t want to hold the numerous meetings that can chew up so much of the president’s time. Instead, according to his press secretary, Robert Gibbs, Obama’s style is to drop by an aide’s office—a restless man, he roams the White House corridors—or stop an aide in a hallway and ask, “How are you coming on that thing we were talking about?” Gibbs says, “The worst thing is not have an answer.” Asked what happens then, Gibbs replied, “He gets that disappointed parent look, and then you better go find an answer.”………….

She is especially good on how and why the Republicans have attempted to thwart the administration’s every move.

The most important problem that Obama and his aides weren’t prepared for was the degree to which the Republicans would oppose him. In part, this was circumstantial: the first major bill to test the President’s stated desire for bipartisanship was on the subject that arouses the most partisanship: taxing and spending. The Democrats were bent on using the opportunity of the stimulus bill to expand or create as many domestic programs as they could. Against the evidence of the past eight years, the Republicans remained wedded to tax cuts as the way to stimulate the economy. To some extent, Obama set himself up by calling for bipartisanship—especially on this subject. He was acting on his campaign pledge to “change the ways of Washington,” or “end the partisan wrangling,” which didn’t necessarily mean winning bipartisan support for every bill.

The House Republicans, greatly reduced by the 2006 and 2008 elections, were now as a whole more conservative than they’ve been in a generation—moderate Republicans having been reduced to a mere dozen or so. There were signs from the outset that the Republicans had no intention of cooperating with Obama. Lacking the leverage to affect policy, or the votes sufficient to defeat Obama’s stimulus plan, they could do what they wanted, however short-sighted, without being saddled with responsibility for killing it. Moreover, they concluded from their losses in 2008 that they hadn’t been conservative enough ; they had come under a great deal of criticism for having presided over too much spending. The House has been particularly polarized for decades: when each party gains the majority, it takes revenge for having been, as they see it, mistreated by the other. Since House Speaker Nancy Pelosi was rushing the bill through the House, it was easy for Republican leaders to get their followers worked up against it. Emotion —over issues, over procedure—plays a larger part in parliamentary politics than people may realize.

Don’t speak too soon, Barack.

March 15, 2009

I hope that somebody from the Obama administration read Joan Walshs piece in yesterday’s edition of Salon. In it she issues a timely warning to the administration not got fall into the trap of claiming too early that the things it’s done to fix the economy are working.

I’m alarmed by the way the Obama administration has been hyping the slight uptick in good news about the economy in the last few days. Yes, the Dow had its best week since November, Citigroup and Bank of America say they expect to make money this quarter, GM won’t need an immediate infusion of tax dollars, and retail spending seems to have stabilized, at least for now. On Thursday Obama himself told business leaders that the crisis is “not as bad as we think,” and on Friday National Economic Council director Larry Summers said the spending numbers were “modestly encouraging signs” that the stimulus might already be having an effect.

As someone who has repeatedly defended Obama from GOP efforts to blame him for the current crisis and to deride the “Obama economy” only 55 days into his presidency, I think the administration could be playing a dangerous game. Live by the week’s economic news, die by it as well. If the Dow dives next week, or retail spending dips again, does that mean the stimulus failed?…….