[Rant warning! All this stuff has been boiling this week and, well, consider yourself warned.]
The word 'paradigm' is used by every two bit local politician these days - most of whom have no idea where the term comes from or what it means. For those of you unfamiliar with Thomas Kuhn, here are some links from an earlier post:
Thomas Kuhn (link to Science Friday audio about Kuhn), whose The Structure of Scientific Revolutions (Wikipedia link) introduced the word paradigm into the modern American vocabulary, said that even when scientists (he used the word only about scientific paradigms) know their paradigm isn't quite right, they hold onto it until they have a better one with which to replace it.
After I posted last week briefly on the Financial Crisis, I called an economist at UAA to ask if this was the economic equivalent to 9/11. I intended to ask a couple more economists for their thoughts and never posted his reply. As time has passed, the things he said were not significantly different from what we are hearing on the air, on the internet, in newspapers. No, it's not 9/11. It's what we need to do, but we need some safeguards, etc.
But my economist friend, like Treasury Secretary Paulson, comes to this from the perspective of an insider, living inside the paradigm of economics. It seems to me mainstream economists simply want to rebuild the system that didn't just broke. I'm not saying we don't need to include them in solving this, but that it generally takes someone from outside the paradigm, someone who is smart, reasonably informed, but not an expert in the area. Someone to ask dumb questions. Dumb in the sense that insiders wouldn't ask because the question is so basic and they take the answer for granted. But those dumb questions raise new possibilities. Chip away at the assumptions the insiders long ago stopped questioning altogether. So, here are my dumb questions and comments.
First, let me point out the most appealing sound bite I've heard - "We have to take care of Main Street, not Wall Street." I point it out just to remind people that journalists who vaguely, if at all, understand all this, love a catchy sound bite. But what the hell does it mean? Basically, we will watch out after the common person, not the rich Wall Street types that got us into this. Yeah, but operationally, what does that mean? There may be meat behind this - provisions for people who were sucked into liar loans, accountability for those who made obscene profits from this, etc. But I'd suggest caution when you hear the cute phrases. Keep asking questions about what they mean.
OK, What happens if Government doesn't bail out the financial institutions? A McClatchy article in today's ADN says:
Without a government rescue of U.S. financial markets, experts say some worst-case scenarios could ensue:
Your employer won't be able to make payroll because the company's bank account has been frozen in a bank failure.
Your credit card will be rejected when you try to pay for groceries or fill your gas tank.
Your bank may close.
But are there other options? These are creative folks (they made up all sorts of convoluted ways to package loans and make profits on them each step of the way) but only within a narrow set of parameters. Here are some factors I'd toss out:
- There's other money out there besides the US Government's. For example, Money Markets have about $3.5 trillion dollars - money that investors have on hold since other investments look so grim.
- How many institutions need to be saved to save the economy? Can some be left to die while the stronger ones are saved?
- Who is out there that has impeccable credibility to set up an investment opportunity for people with money-market accounts? My personal nominee is Warren Buffet. I'm sure he could set up a team of insiders and outsiders to create attractive, patriotic crisis investment funds that would help fix the problem and offer the possibility of not losing much or even making a profit.
- Add in some tax incentives for people who invest.
This should be a bonanza for the homeless Everyone's talking about how terrible it is that housing prices are so low. What about all the people who haven't been able to afford houses when prices were high? Where does the Department of Housing and Urban Development fit in all of this? There's a certain irony in having a homeless problem while we have so many vacant houses. Let's use some outside the paradigm brain cells to work on this. (OK, I realize that you can't take the mentally ill homeless and just stick them into foreclosed houses. But you can set up programs to assure that people moving into houses for the first time can maintain their new home values.)
Reinstate steep taxes for the higher income bracketsI'd argue that one of the factors that helped move us to this point was the lure of millions and millions of dollars - to the real estate industry that sold houses to people who couldn't afford them, to the financial industry that loaned the money to home buyers, and then repackaged those loans.
A friend who was on a grand jury looking into the mortgage problems says that all sorts of schemes - some illegal and some merely unethical - were concocted. Everyone along the way made a profit when a home was sold, a loan was made, a repackaged loan scheme was sold. Often very big profits. Yes, they knew the buyer didn't have enough money - they even called them liar loans. They knew the loans they repackaged and resold weren't worth anything. But the commission system paid them for whatever they sold and sell they did. And their bosses were making even more money in salaries, bonuses, etc. They were in the proverbial money pit and no one was going to blow the whistle while they were grabbing all they could for themselves. You could make all this money and keep most of it after taxes.
If those high end taxes were reinstated, the incentives for all this would be dampened considerably.
Create Opportunities for Patriotic Service for the US and WorldThis is a national and international crisis no less than was 9/11. We need - as John McCain said yesterday - to get beyond politics to solve this. (Though I question the altruism of McCain's attempt to cancel Friday's debate.) The money-market funds I mentioned above could be sold in the spirit of US savings bonds - this is a patriotic opportunity which may even result in a loss, but will keep the economy stable and protect everything else you have. Let's take a second look at the CEO's who have been making $30 million a year and the new MBA's making multi-million dollar salaries a year or two out of school. Is this really being a good American or just high stakes theft? Let's wean ourselves from our rampant consumerism and reinvest in human beings - mental and physical health, education, families, community.
This is Bigger than Financial ProblemsBut if we just focus on the the financial crisis and getting us back to, say 2002 status, we're missing the point completely. This is about the war (how many trillion is that now?), this is about international trade (how much of our money and jobs does China have now?), this is about energy (where would we be if Gore had been elected in 2000 and we'd taken the energy crisis and global climate change seriously then?), this is about fair health care, education, and the pursuit of happiness. This is about Americans recognizing that there are about
6.4 billion people in the world in addition to the 300 million Americans and that we have to learn to live with them not as superiors but as equals, as brothers and sisters. Or is it only majority rule when we are in the majority?
I'm willing to believe that not making a fix now could lead to serious problems. But I'm also leery of turning the solutions (there need to be many different fixes, not just one giant one) over to the people who got us here, the people who told us all was fine not too long ago. Their definitions of fine aren't, apparently, the same as mine.
And remember, many of these are the same people who haven't done anything about climate change either. What are they waiting for on that score?
While it seems like everyone else was out on the park strip at the Hold Palin Accountable Rally, I was at UAA where New York politician and activist George Martinez was stirring up Anchorage Youth to get out and vote. There was music, poetry, inspiration, and local politicians - when I had to leave to enjoy the beautiful fall weather out in the woods. (see last post)
