Contributors

Saturday, October 15, 2011

Finding Yourself In A Fantasy World

Paul Krugman's recent piece in the Times is very indicative of how I feel these days when I watch the GOP debates or talk to nearly everyone on the right. I'm Alice and I've gone down the rabbit hole. Thankfully, Krugman feels the same way.

And since economic policy has to deal with the world we live in, not the fantasy world of the G.O.P.’s imagination, the prospect that one of these people may well be our next president is, frankly, terrifying.

Terrifying, indeed. Common sense has been sacrificed in the name of orthodoxy.

In the real world, recent events were a devastating refutation of the free-market orthodoxy that has ruled American politics these past three decades. Above all, the long crusade against financial regulation, the successful effort to unravel the prudential rules established after the Great Depression on the grounds that they were unnecessary, ended up demonstrating — at immense cost to the nation — that those rules were necessary, after all.

This is what actually happened.

But down the rabbit hole, none of that happened. We didn’t find ourselves in a crisis because of runaway private lenders like Countrywide Financial. We didn’t find ourselves in a crisis because Wall Street pretended that slicing, dicing and rearranging bad loans could somehow create AAA assets — and private rating agencies played along. We didn’t find ourselves in a crisis because “shadow banks” like Lehman Brothers exploited gaps in financial regulation to create bank-type threats to the financial system without being subject to bank-type limits on risk-taking.

No, in the universe of the Republican Party we found ourselves in a crisis because Representative Barney Frank forced helpless bankers to lend money to the undeserving poor.

This is the fantasy that has been created by the right that I hear every single day. To say this view is monumentally frustrating is a massive fucking understatement.

The G.O.P. has responded to the crisis not by rethinking its dogma but by adopting an even cruder version of that dogma, becoming a caricature of itself. It’s a terrible thing when an individual loses his or her grip on reality. But it’s much worse when the same thing happens to a whole political party, one that already has the power to block anything the president proposes — and which may soon control the whole government.

The way I see it, this is what the election is going to be about: reality or fantasy. The truly sucktacular part about all of this is that the Democrats are going to address this insanity and will likely be sucked into managing fantasies. This will give it legitimacy and then this kind of thinking will be in the national conversation. With millions of people operating solely on anger, hate and fear, many will embrace these crazy ideas. Of course, they could choose to ignore it but that would probably make it worse. We'd probably have more people believe this garbage...the great lie and all, yer know.

I suppose I could take some solace that people like me and Krugman are at least grounded in reality. But with so many irrational people that have completely taken leave of their senses, there's not really much to be happy about at all.

13 comments:

Larry said...

Mark and Paul,
arsonists run amok
in a field of strawmen.

6Kings said...

But it strokes both their egos...

Haplo9 said...

>The way I see it, this is what the election is going to be about: reality or fantasy.

So true. Will we keep spending money we don't have, or get some semblance of sanity at the federal level? Will we keep praying at the altar of big government, hoping that somehow, this time, heavy regulation and strong centralized power will bring prosperity? Will we believe people who peddle the fantasy that the financial sector is somehow close to being completely unregulated, or will we recognize that having the government deeply intertwined with the private sector can cause massive market distortions? Will we continue to believe that "investment" by the government is something other than sending money to cronies and incompetents? (Not that I think it's likely that any of these things will change, no matter who wins the election, but seeing your apocalyptic visions over losing the status quo of fail does warm my heart.)

>these crazy ideas.

This sort of talk always cracks me up. It's crazy to think that people should generally be left alone? It's crazy to think the federal government should live within its means, and that when it doesn't, it has negative consequences for us and future generations? It's crazy to think that having a large proportion of people dependent on taxpayer money might cause us problems down the road? I'll take "crazy", otherwise known as "common sense", tyvm.

>I suppose I could take some solace that people like me and Krugman are at least grounded in reality.

Rofl. It must be frustrating to see so many other people that aren't as .. "reality-based" as you. Well you know what they say Mark - those who can, do. Those who can't.. talk about how smart they are.

Mark Ward said...

Hap, isn't it interesting that all talk of the debt has now fallen by the wayside? The GOP in the House just authorized funding to defend the DOMA. All the nominees are talking about increasing, nut cutting, defense spending. Isn't that spending money we don't have?

heavy regulation and strong centralized power will bring prosperity?

It already did. This is a fact that your theology won't allow you to accept. Now, that doesn't mean that this same level of regulation will work today in the global market but there needs to be more than there has been in the last 10 years. Correct me if I am wrong but is your solution simply to allow instruments like the derivative to be completely unregulated which will, because of the interconnectivity in the world markets, cause another collapse if there is failure? You have such a simplistic approach to markets...if people and companies are stupid, then they fail and start over. The End. If only it were that simple...

It's crazy to think the federal government should live within its means,

The federal government not living within its means is what built us into the economic superpower we are today. We flooded the world with the dollar and incurred massive debt in order to promote an LIEO, something I know you support. Living within your means can sometimes mean a weaker dollar. You really need to break out of that box you live in. Much of what you suggest isolates us from the world and that's a very dangerous thing, considering how power is shifting in the world right now.

Haplo9 said...

>Hap, isn't it interesting that all talk of the debt has now fallen by the wayside?

Not particularly. Both parties use the debt when convenient as a means to get elected. Neither is interested in doing anything about it unless forced to do so by either voters or interest rates.

>It already did.

Correct me if I'm wrong, but you're talking about post ww2 right? Don't you think that might be a bit of a special situation? It's like claiming that the late 90's is a model for.. anything, which, admittedly, you tend to enjoy doing.

>instruments like the derivative

Mark, I'm still not convinced that you know what a derivative is. Why do you think it is due special consideration for regulation over, say, a stock or a bond?

>simply to allow instruments like the derivative to be completely unregulated which will, because of the interconnectivity in the world markets, cause another collapse if there is failure?

Theres too much hand waving here to make sense of this. A failure in what? Do derivatives "fail"? What does interconnectivity of world markets have to do with derivatives, and why do you think they are special relative to stock? Are derivatives, or stocks, or bonds, anywhere close to being unregulated right now?

>have such a simplistic approach to markets...if people and companies are stupid, then they fail and start over.

Because markets work Mark. And they work best when left alone. Markets do a better job at bringing prosperity than any government bureau that has ever existed. Attempts to regulate markets will always be a day late and a dollar short, because a market contains far more information than a human can possibly process. This is why intervention in markets usually makes a hash of things, and more often than not represents capture by market players rather than disinterested, technocratic knob twisting of the sort you so fervently believe exists. You have convinced me of one thing though Mark - there is another God, it's name is government, and you are a worshipper. Hail!

But we should get back to the subject of your post Mark - tell us more about how intelligent and grounded in reality you are, because we always get a good chuckle out of it. :)

Mark Ward said...

Don't you think that might be a bit of a special situation?

Of course it was. Out of Bretton Woods was born a model that was built to prevent the large state to state conflicts that we saw in the previous 100 years. It hasn't been a perfect system but it has worked well. Part of the reason why it did was massive spending. President Reagan spent a great deal of money as well-also for a good reason (for the most part) and the results speak for themselves. To be so rigid about spending creates an irrationality that is ultimately destructive when you consider how power is currently shifting in the world. Certainly, I would agree that debt is a concern but it's not remotely as bad as you and some other folks are making it out to be.

I'm still not convinced that you know what a derivative is.

Well, that's odd because one of the guys I went to high school with (a math geek) helped write the formulas that were the foundations for many of these instruments. The Wall Street guys wanted something that the government couldn't regulate and Chuck produced it. It won't take you too long to investigate this stuff yourself if you know any similar types of people. But now we are getting back into the "Mark is right, I hate that, so now I'm going to question his intelligence" groove again...

As far your questions on interconnections go, they were explained to you very well in "Inside Job." There are plenty of other information sources out there for you to peruse but you don't like that kind of information. Anything that shows that the financial sector was at fault and the government was mostly not, you hate immediately and then we slide back into irrationality. In other words, if it ain't Barney Frank's fault for forcing the financial sector to give loans to poor, black people, then it ain't real, right? This truth is glaringly evident in the questions that you asked.

And they work best when left alone.

Not entirely true. Monopolies, Oligopolies, and monopolistically competitive markets erode consumer surplus. It's fundamental economics to say that governments can sometimes improve market outcomes. I have no problem if markets distribute resources unfairly. It's when they become inefficient that I have a problem. Health care is an example of this.

tell us more about how intelligent and grounded in reality you are, because we always get a good chuckle out of it. :)

Because I'm rational when the word "government" comes up and you aren't. It's really that simple.

Haplo9 said...

> In other words, if it ain't Barney Frank's fault for forcing the financial sector to give loans to poor, black people, then it ain't real, right?

Forcing the financial sector to make loans they otherwise wouldn't have is a problem, yes, but the bigger problem is encouraging home ownership via Fannie Mae and Freddie Mac. It's amazing how much intervention and distortion in a market you'll accept and ignore in order to take a whack at your favorite pinata, greed.

>Because I'm rational when the word "government" comes up and you aren't.

Yep, thanks for the chuckle. :)

>It's fundamental economics to say that governments can sometimes improve market outcomes.

I recall asking you to give some examples of this claim - I don't remember being very impressed.

>Of course it was.

And if it was a special situation, why are you trying to replicate it, and why do you think the same rules hold true?

>It's when they become inefficient that I have a problem. Health care is an example of this.

Ah yes. Now I remember. Straight from the textbook. And this faith of yours that the government can make things better. Not borne out by reality, of course. Mark, you could really escape a lot of the criticism you get on this website by just saying, "I, Mark A. Delphia, believe strongly that the government can fix all kinds of things, regardless of past failures." We know you are a naive idealist, you just don't want to believe it.

>To be so rigid about spending creates an irrationality that is ultimately destructive when you consider how power is currently shifting in the world. Certainly, I would agree that debt is a concern but it's not remotely as bad as you and some other folks are making it out to be.

Mark - what happens when the Chinese don't want to lend us any more money? Do you think that will be a positive thing? Wouldn't a principled person, who favors expansive interventions into the economy and robust government spending, you know, a Keynesian, want to actually follow his theories and try to run a surplus in good times to finance the monetary adventurism in the not so good times? I have this crazy idea that I don't want to saddle my daughter with future tax increases so that a tool like you can engage in his technocratic fantasies of controlling the economy. It's why you are so fundamentally silly Mark - you claim to have such certainty about what ails us and how to fix it. Yet your experience in the real world is nonexistent, and you repeatedly fail to understand the basic lessons of human nature - what drives individuals? Why does regulation so often not work? Why is government so often ineffectual and seemingly counterproductive? You know who is going to pay if your glib and ahistorical claims about the efficacy of spending and government are wrong? My kids. No surprise that I oppose nearly everything you stand for, huh.

Mark Ward said...

yes, but the bigger problem is encouraging home ownership via Fannie Mae and Freddie Mac.

Nikto put up a very thorough post today regarding what actually happened as opposed to the rewritten narrative that you and some folks have put forth to continue your government bashing. Further, Fannie and Freddie were just following what the market had already started. From Barons.com (http://online.barrons.com/article/SB121884860106946277.html)

A substantial portion of Fannie's and Freddie's credit losses comes from $337 billion and $237 billion, respectively, of Alt-A mortgages that the agencies imprudently bought or guaranteed in recent years to boost their market share. These are mortgages for which little or no attempt was made to verify the borrowers' income or net worth. The principal balances were much higher than those of mortgages typically made to low-income borrowers. In short, Alt-A mortgages were a hallmark of real-estate speculation in the ex-urbs of Las Vegas or Los Angeles, not predatory lending to low-income folks in the inner cities.

I think I asked you to check this out but you refused. I guess I'll try again.

http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards

This is a very detailed account of who was responsible and how it happened. It started in the private sector as shown very clearly in this video. Your choice on whether or not you want to be willfully ignorant and continue with your fact-less narrative.

I don't remember being very impressed.

Well, then I guess you don't give a shit about property rights or consumer surplus...oh well...

why are you trying to replicate it, and why do you think the same rules hold true?

As I said above, I'm not. I also pointed to Reagan's spending as being another example of how not having a balanced budget can work to your favor sometimes. With the current situation, it's clear that we can't go back to those days of very heavy regulation and higher taxes. But we do need to go part of the way back and that starts with actually prosecuting people who commit fraud. Now, that is on the government.

Mark Ward said...

"I, Mark A. Delphia, believe strongly that the government can fix all kinds of things, regardless of past failures."

A great example of how you warp things. The truth is closer to ""I, Mark A. Delphia, believe strongly that the government can fix some kinds of things, depending upon the situation." The problem here (once again) is YOUR bias, not mine. Anything to the right of the 1 yard line on the right side of the field is socialism/fascism/communism/government loving blah blah blah...

you repeatedly fail to understand the basic lessons of human nature - what drives individuals?

A classic project and flip. Greed is inherently part of human nature and that was the problem. How you completely fail to see that deregulation caused all of this is baffling to me. My only explanation is religion-libertarian version. It's all about balance, Hap, and that's why socialist fantasies and libertarian fantasies are exactly the same: they fail to account for human failings, one of which is greed. You foam at the mouth to me about "reality" and you ignore large swaths of it.

A great example of this your question regarding the Chinese. One of the main reasons why they have so much of our debt is due to the free market allowing the trading of money and debt. And what's their motivation to continue to finance our debt? Again, free trade which allows them to sell their products here at Wal Mart. They have just as much need of us as we do of them. Once again, someone with your ideology has slipped into apocalypsia....such a shame...

I have kids too, Hap and far too many times in the last 30 years I've seen what massive deregulation does to economies. It's so clearly the fault of the private sector combined with a neutered government that has been the cause that if this sort of thing continues, our children will suffer. And it will be because a substantial portion of people in this country (you included) have lost all reason and logic about the government.

Haplo9 said...

Mark, I'm really really curious. What, in your opinion, is the reason for the government being so heavily involved in the mortgage market? What is the rationale behind the government promoting home ownership? Why should the government have anything, at all, to do with the setting of lending standards?

>massive deregulation

Huh. I think we have a vastly different definition of "massive." Did Congress go and erase the portions of the federal register related to the financial sector at some point in the past decade? That would be "massive", I'd say.

>The problem here (once again) is YOUR bias, not mine. Anything to the right of the 1 yard line on the right side of the field is socialism/fascism/communism/government loving blah blah blah...

If you mean I'm skeptical of the government's ability to fix things, then guilty as charged. I also have a low opinion of government's apologists, (that would be you) if you haven't noticed. Claiming that free markets are more likely to cause misery than governments requires such monstrous historical amnesia that it's hard to comprehend how you can get there.

>Greed is inherently part of human nature and that was the problem. How you completely fail to see that deregulation caused all of this is baffling to me.

Wait - you concede that greed is a part of human nature, and yet you think that it is the source of these problems, and that you can overcome that human nature with regulation, or at least mitigate it? When that regulation is managed, implemented, and influenced by these same humans subject to human nature? Wishful thinking IMO. Remember your Thomas Sowell post from a few days ago? You completely mischaracterized the thrust of his thesis, btw. He doesn't claim that liberal believe humans are inherently good. His claim is that liberals believe that humans are perfectible. That is, given either the right set of people put in charge, or the right set of rules, society can be set to run in the ways that the liberal thinks is more perfect than it would otherwise be if left alone. Weird - that sounds an awful lot like you, doesn't it. You're a tinkerer - you're arrogant enough to believe that just a little bit of this and a little bit of that, and you can fix the economy to be just how you think it should be. And you don't seem to understand why the rest of us think are an idiot, rather than a savant.

>depending upon the situation.

Rather ambiguous, don't you think? How would you decide which situation would work and which wouldn't? Just wing it, as usual?

>I've seen what massive deregulation does to economies.

Once again, this alarmist phrase. Did the financial industry suddenly become massively less regulated than it had been in the past? When? What percentage of regulations were repealed that represents massive?

>Again, free trade which allows them to sell their products here at Wal Mart.

Wait, what? You're not saying what I think you are, are you? That the Chinese buy our bonds because if they don't, they fear political retaliation that would inhibit their ability to access US markets?

Haplo9 said...

http://online.barrons.com/article/SB121884860106946277.html

I can't reach that link?

http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards

Oh god. Inside Job all over again. Is it possible for you to process information that isn't delivered with somber overtones, dire sounding music, and apocalyptic imagery?

Mark Ward said...

. What, in your opinion, is the reason for the government being so heavily involved in the mortgage market? What is the rationale behind the government promoting home ownership? Why should the government have anything, at all, to do with the setting of lending standards?

Wow. Uh, I can't answer any of these questions because they have no basis in reality. Essentially, you are asking me a question that is about as rational as this: Why do so many Communists favor free markets with no central planning?

His claim is that liberals believe that humans are perfectible

They aren't perfectible but that doesn't meant that the free market solves everything eitehr. We need fundamental rule of law in this country and that's where the government comes in. This is why your ideology is such bullshit. You enjoy so many "invisible" things that the government takes care of for you (clean water, food inspection, drug inspection, clean environment). Like a teenager who rebels against his parents, you're not rational about the nature of such a relationship. I also think you are grossly mis-characterizing me with the all too obvious intention of avoiding the massive flaws with your ideology. I'm not talking about fairness of markets here. I'm talking about efficiency.

Certainly, there are corrupt people in government but you label them ALL as corrupt and then deride the entire system based on your irrationality. It's really quite ridiculous when you think about it.

And you don't seem to understand why the rest of us think are an idiot, rather than a savant.

I'm an idiot because I accept a fundamental fact about economics? That there isn't one right answer to all things economic? Seems to me that I'm not the short sighted one.

Did the financial industry suddenly become massively less regulated than it had been in the past? When? What percentage of regulations were repealed that represents massive?

You're kidding, right? Good grief...

The Baron's link must be old. Here's a current one that works.

http://online.barrons.com/article/SB121884860106946277.html#articleTabs_panel_article%3D1

Is it possible for you to process information that isn't delivered with somber overtones, dire sounding music, and apocalyptic imagery?

That doc was shown to me by last in line, a regular and quite conservative poster here. Your criticism here is kind of a genetic fallacy, is it not? Refute the evidence presented in the piece without the emotional reaction.

Anonymous said...

Paul Krugman, the guy who thinks the way out of the economic mess is to prepare for an alien invasion.

http://www.youtube.com/watch?v=nhMAV9VLvHA

I suppose I could take some solace that people like me and Krugman are at least grounded in reality.

Indeed.