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How the banksters bet the rent money on the ponies, lost it, and made us pay for it

An interesting timeline and a clear, non-technical exposition from Brad Delong. Read it all.* And then again.

Via Lord Eschaton. Although I don't agree that the thoroughly bipartisan policy elites have "punted" on permanently high DISemployment. I think it's their preferred policy option.

ASIDE *... even if it is in some friggin Scribe, that you can't friggin cite into or quote because it's a proprietary data format invented by yet another scum-sucking rent seeker. Although data formats are not the topic of this thread.

NOTE Reinforcing, it's an ASIDE!

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Joe's picture
Submitted by Joe on

I wonder how many less people will read this because it's in Scribe. I'm too busy today to click through that crap.

Too bad.

Submitted by gob on

DeLong has an interesting point at the end, which he presents in terms of Nietsche and ressentiment: there's little public support for mortgage cramdowns or job security for government employees because too many people feel they got screwed and it's only fair everyone else should be screwed too. I wonder how true this is. Do public opinion polls back up his assessment that these policies lack support?

In any case, why drag good old Nietsche into it? Sounds like misery loves company to me.

I'm no fan of Brad's, but this was a good read.

Submitted by jm on

DeLong, in this case, refuses to remove his blinders when his credibility as a member in good standing of the economic establishment might be called into question. Interestingly, he seems to see himself as something of a rebel when he proposes the Nietzschean Ressentiment Hypothesis as a possible explanation of why more wasn't done to limit the scale of the present clusterfuck:

Let me mention one last hypothesis--one that may get my economist union card revoked and get me transferred to a department of rhetoric, or perhaps cultural studies.

Sure there's truth to what follows about the commonly held view among a certain segment of the population that economic losers get what they have coming because, well, they're economic losers. But this is at most a contributing factor and DeLong's heterodoxy doesn't stray far (or, more tellingly, in a dangerous direction).

DeLong almost gets to the heart of matter when he offers an earlier hypothesis:

The Washingtonians are prospering: for them and for the financiers of New
York “recovery summer” is a reality. Their absence of close connection or
even sustained contact with what is going on out in the periphery of the
country means that they feel no sense of urgency about the macroeconomy
at all.

Hypothesis?! As if it isn't as obvious as the double chin Delong's comfortable sinecure at Berkeley makes possible. The very reason the Washington-New York nexus of power exists is to redistribute as much wealth as possible into the pockets of the powerful.

DeLong implicitly, if unconsciously, recognizes this a few pages earlier when he says

A President Obama who valued policies to reduce unemployment rather
than extending the hand of comity one more time to Republican senators
would, I think, have gone about staffing the administration in a very
different way.

Duh. Why oh why can't we have better public intellectuals?

Submitted by lambert on

Haw. Good one. Gotta propagate that.

+1000 to the commenters who point out Krugman and DeLong's role as gatekeepers to what's "on the table" (see under HCR debacle, single payer).

That said, the history is lucid. It's an excellent starting point for a timeline from a different and more.... realistic perspective. I recommend that all readers take the time to plow through the friggin Scribe or read the PDF; it really will pay to get the sequence of events firmly fixed in your mind, especially when you have the lens of all the work we've done to view DeLong's post through: For example, he's excellent on Paulson and Goldman Sachs... Yet somehow manages to avoid Obama's role in the process. (Obama did, after all, legitimize and normalize everything by whipping the CBC for TARP.)

Submitted by Hugh on

I'm not real impressed with DeLong's revisionism. A lot of what he thought was unthinkable back in 2008 many of us were, in fact, thinking. He tries to write off a lot of his being wrong as the "consensus" view. Not buying it.

It's true, as I wrote a couple of years ago, that there are workable solutions to the economic and financial mess, but that the costs of these solutions increase over time as they are not exercised and the crisis deepens. But DeLong continues to miss a lot of the fundamentals. From the moment the housing bubble burst back in August 2007, the banks were effectively insolvent.

He completely misreads the size of the initial blowup putting it at around $500 billion. We are talking about an $8 trillion housing bubble, a 40% write off (to get back to something like pre-bubble levels) would be $3.2 trillion. On top of this you had hundreds of billions in HELOCs and at least another trillion in commercial real estate. And this does not even begin to touch all the CDS that multiplied the risk and losses. All this really dicey stuff was baked in 2006. So the idea that there was a simple $500 billion unwind at any point is just fancy.

DeLong also thinks that the PPIP (buying the banks' dreck) and HAMP could have been handled more successfully. The PPIP was a dreadful idea from the getgo, and HAMP was, and was always meant to be a joke program to keep the rubes quiet. Nor can DeLong really get his mind around that Obama's economic policies were not forced on him by political circumstance but represented his own priorities.

DeLong is, and remains, a neoliberal. He managed to get through his whole spiel without mentioning fraud, foreclosuregate, wealth inequality, kleptocracy, or our failed elites of which he is a card carrying member. He makes loaded statements like unions collapsed in our country. They didn't collapse. They were quite consciously destroyed. I was frustrated throughout his piece. I see a lot of this in economic writing where there is an obvious awareness that something went wrong. There are bits and pieces of what happened but overall it remains a jumble.

As for ressentiment, it has long been a ploy of class warfare to set those within a class against each other, i.e. if I'm suffering then let the rest suffer too. It weakens both and keeps either from focusing on the real authors of their woes, our elites, the rich and corporations.

Submitted by lambert on

One has to read through DeLong, rather than read DeLong. Of course he doesn't mention fraud. As I've pointed out numerous times, neither does Krugman, and for the same reason: Class interest. I should have made my working assumptions clear.