How to watch the news

greenspan

1. Nobody believes in ‘neoliberal ideology,’ including the the neoliberals themselves.

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2. ‘Smart’ = conformist (via Alex)

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3. Obama exists to sell you two things. The first is the socialization of loss.

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4. The second is the spectacular suppression of spectacular atrocity (Guantanamo) as legitimation for a renewed commitment to structural atrocity (American exceptionalism).

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artchinaclintonjiabaogi

5. Human rights and the associated interventionist politics of the ’90s boom years are too expensive for the new green globalism. Which is more humanitarian anyway, statistically speaking.

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6. The expansion of morality is both a reaction to credit failure and the utopian expression of the green energy bubble. This development itself can be used for ‘good’ or ‘evil,’ but like other bubbles, will eventually burst.

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7. Crisis is the only justification capitalism has left.

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15 Responses to “How to watch the news”

  1. I’m not sure “nobody believes in neoliberal ideology” is so accurate. Just because Greenspan is having second thoughts about the ideas he peddled for generations doesn’t mean that Bernanke, Summers, and Geithner are any less enthusiastic about the tenets of neoclassical economics.

  2. traxus4420 Says:

    i think they are portrayed as being surprised that all these bailouts aren’t ‘working,’ i.e. aren’t lifting recession, but no actual interviews i’ve seen suggest this. everyone knew this system of hopping from investment bubble to investment bubble (i.e. dotcom to housing) wasn’t going to last forever. the models of neoclassical economics are political tools, knowingly deployed as such. for me it follows that the newspaper legitimations are also knowingly deployed by all but the most clueless. this NLR piece puts it pretty well:

    An alternative explanation, much favoured in social-democratic circles, argues that both Wall Street and Washington were gripped by a false ‘neo-liberal’ or ‘free-market’ ideology, which led them astray. An ingenious right-wing twist on this suggests that the problematic ideology was ‘laissez-faire’—that is, no regulation—while what is needed is ‘free-market thinking’, which implies some regulation. The consequence of either version is usually a rather rudderless discussion of ‘how much’ and ‘what kind’ of regulation would set matters straight. The problem with this explanation is that, while the New Wall Street System was legitimated by free-market, laissez-faire or neo-liberal outlooks, these do not seem to have been operative ideologies for its practitioners, whether in Wall Street or in Washington. Philip Augar’s detailed study of the Wall Street investment banks, The Greed Merchants, cited above, argues that they have actually operated in large part as a conscious cartel—the opposite of a free market. It is evident that neither Greenspan nor the bank chiefs believed in the serious version of this creed: neo-classical financial economics. Greenspan has not argued that financial markets are efficient or transparent; he has fully accepted that they can tend towards bubbles and blow-outs. He and his colleagues have been well aware of the risk of serious financial crisis, in which the American state would have to throw huge amounts of tax-payers’ money into saving the system. They also grasped that all the various risk models used by the Wall Street banks were flawed, and were bound to be, since they presupposed a general context of financial market stability, within which one bank, in one market sector, might face a sudden threat; their solutions were in essence about diversification of risk across markets. The models therefore assumed away the systemic threat that Greenspan and others were well aware of: namely, a sudden negative turn across all markets.

    Greenspan’s two main claims were rather different. The first was that, between blow-outs, the best way for the financial sector to make large amounts of money is to sweep away restrictions on what private actors get up to; a heavily regulated sector will make far less. This claim is surely true. His second claim has been that, when bubbles burst and blow-outs occur, the banks, strongly aided by the actions of the state authorities, can cope with the consequences. As William White of the bis has pointed out, this was also an article of faith for Bernanke.

    and the top people haven’t thought that capitalism was going to raise all boats since well before fukuyama’s end of history thesis. there’s a widely circulated christian parenti quote of volcker (opposite of greenspan in terms of financial policy but not in stated ideology) where he defends his subsequent massive hike in interest rates to 21.5% or so: “the standard of living of the average American has to decline…I don’t think you can escape that.” he puts it in the same moralistic terms that the current crisis is being staged in. but if you buy perelman, harvey, and gowan on this, this is plainly a defense of the dollar against everyone and everything else, and was followed by the ‘reagan revolution’ where the power of america’s ruling class was re-consolidated on the corpse of organized labor. here’s volcker in december ’08: “It is the United States as a whole that became addicted to spending and consuming beyond its capacity to produce…It all seemed so comfortable.”

    i think in order to believe volcker, greenspan, bernanke, et al. believe their own cant you have to assume they were blithely following academic models over these past 40-odd years because they had faith it was best for the american people, despite all signs to the contrary — this i seriously doubt. we can talk about the complexity of the psychology involved, but i suspect blind idealism played a relatively minor role.

  3. I was thinking I was being too negative because most people I know are very happy about Obama and believe that things really are getting better and will eventually become qualitatively ‘good’ again. And I don’t think either is true.
    I read this and recognize my own instincts and knowledge, covered up by day-to-day bullshit.
    So thanks…and right on.

  4. I think I agree with you on all particulars. But I doubt there’s a process of deliberate malice at work. It seems that a faith in monetary rescue of any possible financial crisis led a number of these thinkers to believe that non-stop expansion was what was best for everyone. I think a “rising tides raise all boats” belief is implicit in Bernanke et. al.’s way of thinking, even if the addendum is added, “but they shouldn’t rise too fast or too far, and if they do, they need to be checked.” At the least, there is some version of consequentialism – the belief that what is best for Wall Street is also the “greatest possible good for the greatest possible number.” The problem, as Peter Gowan rightly points out, is “the commonsense idea that changes in the so-called real economy drive outcomes in a supposed financial superstructure.” Do the finance gurus understand that the finance tail wags the economy dog? I’m not so sure that they do. Certainly, some of the oddball outsiders understand that, the ones everyone tells us not to listen to – Soros, in particular. I’m not so sure about the rest of them. Just look at DeLong’s response to David Harvey: http://delong.typepad.com/sdj/2009/02/department-of-huh-in-praise-of-neoclassical-economics-department.html

  5. traxus4420 Says:

    well, this is the question of ideology — i’m aware of three competing theories: there’s the common sense one, where public advocates ‘really believe’ in what they preach (though they may not practice it, or it may have unintended consequences). there’s zizek’s lacanian version, where the tenets of an ideological system are fetishized and belief is disavowed and/or attributed to an Other — ‘unlike authentic racists i know black people aren’t really lesser beings though i exclude them anyway.’ and there’s the marxist version, where ideology is in the service of class interests. i prefer the last one, as long as it’s understood to not be making a simplistic psychological claim that results in imaging conscious activities of capitalists as the nefarious schemes of mustache-twirling archvillains. but doesn’t it make the most sense to assume that at least the most consequential capitalists know what they’re doing, especially given that events so consistently work out in favor of their class and against everyone else? geithner, bernanke, et al. know perfectly well that the ‘finance tail wags the economy dog’ and are interested in maintaining that structure as closely as possible. this is gowan’s argument — how he views the last 40 years of american economic and foreign policy. certainly the things the top capitalists themselves say suggest this, even if the message is distorted by pundits and academics. one can say that when capitalists crush labor or subjugate third world economies that they believe they’re ultimately doing ‘good,’ but they obviously know they’re crushing labor and subjugating third world economies, rendering any alleged universalism on their part moot. assuming just for fun that some do ‘really believe’ that belief is inconsequential even for them.

  6. interests? class? no no, it’s the principle of the thing, the work ethnic and all that, surely: doesn’t matter whether you are rich or poor, a citi shareholding rentier or a sanitation worker, you have to pull your own weight. These traders would be just as angry if they were getting every penny of the Treasury’s largesse themselves, because it just isn’t right to be a parasite living off other people’s hard work.

  7. Holy Shit.

    does one start with the populist revolutionary ‘mob’ of day traders or the sanctimonious founding fathers rhetoric? i mean, fair’s fair, i guess.

    for wee must Consider that wee shall be as a Citty upon a Hill, the eies of all people are uppon us; soe that if wee shall deale falsely with our god in this worke wee have undertaken and soe cause him to withdrawe his present help from us, wee shall be made a story and a byword through the world, wee shall open the mouthes of enemies to speake evill of the wayes of god and all professours for Gods sake; wee shall shame the faces of many of gods worthy servants, and cause theire prayers to be turned into Cursses upon us till wee be consumed out of the good land whether wee are going: And to shutt upp this discourse with that exhortacion of Moses that faithfull servant of the Lord in his last farewell to Israell Deut. 30. Beloved there is now sett before us life, and good, deathe and evill in that wee are Commaunded this day to love the Lord our God, and to love one another to walke in his wayes and to keepe his Commaundements and his Ordinance, and his lawes, and the Articles of our Covenant with him that wee may live and be multiplyed, and that the Lord our God may blesse us in the land whether wee goe to possesse it: But if our heartes shall turne away soe that wee will not obey, but shall be seduced and worshipp other Gods our pleasures, and proffitts, and serve them, it is propounded unto us this day, wee shall surely perishe out of the good Land whether wee passe over this vast Sea to possesse it;

    Therefore lett us choose life,

    that wee, and our Seede,

    may live; by obeyeing his

    voyce, and cleaveing to him,

    for hee is our life, and

    our prosperity.

  8. I don’t think even Nixon would have the chutzpa to call a floor of day traders “the silent majority.”

  9. traxus4420 Says:

    MW: In your book The Great Financial Crisis, you are critical of Paulson’s capital injections into the banks saying that “at most they buy the necessary time in which the vast mass of questionable loans can be liquidated in an orderly fashion, restoring solvency but at a far lower rate of economic activity–that of a serious recession or depression.” On Friday, Timothy Geithner told CNBC that “We will preserve the system that is owned and managed by the private sector.” This suggests that the Treasury Secretary might not liquidate the toxic assets at all, but try maintain the appearance that these underwater banks are solvent. What do you think will happen if Geithner refuses to nationalize the banks?

    JBF: I would not interpret Geithner’s statement that way. Rather we are experiencing one of the greatest robberies in history. I have written on the question of nationalization for the “Notes from the Editors” forthcoming in the March 2009 Monthly Review. All the attempts to rescue the financial system at this time go in the direction of nationalization. The federal government is providing more and more of the capital and assuming financial responsibility for the banks. However, they are doing everything they can to keep the banks in private hands, resulting in a kind of de facto nationalization with de jure private control. Whether the federal government is forced eventually toward full nationalization (that is, assuming direct control of the banks) is a big question. But even that is unlikely to change the nature of what is going on, which is a classic case of the socialization of losses of financial institutions while leaving untouched the massive gains still in the hands of those who most profited from the whole extreme period of financial speculation.

    To get an idea of what is happening one has to understand that the federal government, as I have already indicated, has committed itself thus far in this crisis $9.7 trillion in support programs primarily for financial institutions. The Federal Reserve (together with the Treasury) now has converted itself into what is called a “bad bank.” It has been swapping Treasury certificates for toxic financial waste, such as collateralized debt obligations. As a result the Federal Reserve has become the banker of last resort for toxic waste with the share of Treasuries in the Fed’s balance sheet dropping from about 90 percent to about 20 percent over the course of the crisis, with much of the rest now made up of financial toxic waste.

    Obviously, full, straightforward nationalization would be more rational than this. But one has also to remember the system of power—both economic and political—that we are dealing with at present. The classic case of full bank nationalization was Italian corporatist capitalism of the 1920s and ‘30s, and was carried out by the fascist regime. Without suggesting that we are headed this way now it should be clear from this that nationalization of banks itself is no panacea.

    The fact that Geithner, Obama’s pick for Treasury Secretary, is overseeing the enormous robbery taking place, probably exceeding any theft in history, with the ordinary taxpayers picking up the tab, should certainly cause one to ask questions about the “progressive” nature of the new administration.

    MW: Former Fed chief Alan Greenspan has dismissed criticism of his monetary policies saying that no one could have seen the humongous credit bubble developing in housing. In your book, however, you make this observation: “It was the reality of economic stagnation beginning in the 1970s…that led to the emergence of the ‘new financialized capitalist regime’s kind of ‘paradoxical financial Keynesianism’ whereby demand in the economy was stimulated primarily ‘thanks to asset bubbles.’” (p 129) The statement suggests that the Fed knew exactly what it was doing when it slashed rates and created a speculative frenzy. Debt-fueled asset bubbles are a way of shifting wealth from one class to another while avoiding the stagnation of the underlying economy. Can this problem be fixed through regulation and better oversight or is it something that is intrinsic to capitalism itself?

    JBF: Greenspan is of course trying desperately to salvage his reputation and to remove any sense that he is culpable. I would agree that the Fed knew what it was doing up to a point, and deliberately promoted an asset bubble in housing—what Stephanie Pomboy called “The Great Bubble Transfer” following the bursting of the New Economy tech bubble in 2000. The view that no one saw the dangers of course is false. It reminds me of Paul Krugman’s face-saving claim in his The Return of Depression Economics and the Crisis of 2008 that while some people thought that financial and economic problems of the 1930s might repeat themselves, these were not “sensible people.” According to Krugman, “sensible people” like himself (that is, those who expressed the consensus of those in power) knew that these things could never happen—but turned out to be wrong. It is true, as Greenspan says, no one could have foreseen precisely what really happened. And certainly there were a lot of blinders at the top. But there were lots of warnings and concerns. For example, I drafted an article (“The Great Fear”) for the April 2005 issue of Monthly Review that referred to “rising interest rates (threatening a bursting of the housing bubble supporting U.S. consumption)” as one of the key “perils of a stagnating economy.” Other close observers of the economy were saying the same thing.

    The Federal Reserve Board, indeed, was internally debating in these years whether to adopt a policy of pricking the asset bubbles before they got further out of control. But Greenspan and Bernanke were both against such a dangerous operation, claiming that this could bring the whole rickety financial structure down. Since they didn’t know what to do about asset bubbles they simply sat on their hands and tried to talk the market up. The dominant view was that the Federal Reserve could stop a financial avalanche by putting a rock in the right place the moment there was a sign of trouble. So Bernanke went ahead, closed his eyes and prayed, raising interest rates to restrict inflation (an action demanded by the financial elite) and the rest is history.

    At all times it was those at the commanding heights of the financial institutions that called the shots, and the Fed followed their wishes. Greenspan himself is no dummy. He wrote in Challenge Magazine in March-April 1988 of the dangers associated with housing bubbles. But as a Federal Reserve Board chairman he pursued financialization to the hilt, since there was no other option for the system. Needless to say, such financialization was associated with the growing disparities in wealth and income in the country. Debt itself is an instrument of power and those at the bottom were chained by it, while those at the top were using it to leverage rising fortunes. The total net worth of the Forbes 400 richest Americans (an increasing percentage of whom were based in finance) rose from $91.8 billion in 1982 to $1.2 trillion in 2006, while most people in the society were finding it harder and harder to make ends meet. None of this was an accident. It was all intrinsic to monopoly-finance capital.

    interview with John Bellamy Foster

  10. did you see this stuff IT linked? You will get a huge kick out of it:

    http://www.ito33.com/whitepapers/0803_nail.pdf

    http://www.ito33.com/whitepapers/0505_ayache.pdf

    http://www.ito33.com/html/wp.html

    Meillassoux meets Milken. It’s really priceless.

  11. Haven’t heard it yet, but it seems that rant was planted by certain dubious parties:

    What hasn’t been reported until now is evidence linking Santelli’s “tea party” rant with some very familiar names in the Republican rightwing machine, from PR operatives who specialize in imitation-grassroots PR campaigns (called “astroturfing”) to bigwig politicians and notorious billionaire funders. As veteran Russia reporters, both of us spent years watching the Kremlin use fake grassroots movements to influence and control the political landscape. To us, the uncanny speed and direction the movement took and the players involved in promoting it had a strangely forced quality to it. If it seemed scripted, that’s because it was.

    What we discovered is that Santelli’s “rant” was not at all spontaneous as his alleged fans claim, but rather it was a carefully-planned trigger for the anti-Obama campaign. In PR terms, his February 19th call for a “Chicago Tea Party” was the launch event of a carefully organized and sophisticated PR campaign, one in which Santelli served as a frontman, using the CNBC airwaves for publicity, for the some of the craziest and sleaziest rightwing oligarch clans this country has ever produced. Namely, the Koch family, the multibilllionaire owners of the largest private corporation in America, and funders of scores of rightwing thinktanks and advocacy groups, from the Cato Institute and Reason Magazine to FreedomWorks. The scion of the Koch family, Fred Koch, was a co-founder of the notorious extremist-rightwing John Birch Society.

    http://www.ritholtz.com/blog/2009/02/rick-santellis-faux-rant/

  12. traxus4420 Says:

    thanks all —

    kenoma, that’s surprising only for its audacity. i actually didn’t know before watching it was supposed to have been spontaneous — i just assumed the extent of it was a prior arrangement with the network. only one part of the truth, apparently.

    chabert, haven’t read it all yet but that is hilarious. for a while i’ve been perversely hoping someone exactly like ayache existed; my additional hope that he also be american was perhaps too good to be true.

  13. “my additional hope that he also be american was perhaps too good to be true.”

    ah well.

    someone emailed me about it and said “not content to be master of just one universe….” Almost every line is just too magnificently funny.

  14. […] I should add another rule to how to watch the news: […]

  15. If you find me magnificently funny then I must be getting something right!
    And alas, I am French, not American.

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