Monday, July 19, 2010

Botox economics

I’m not doing much posting during my vacation break in Santa Fe NM. I’ve also cut way back on my web surfing but I came across an exceptional two-part guest post on Naked Capitalism. It’s titled “Botox Economics” and describes how government economic policy throughout the developed world has been covering over the enormous problems of these nations’ economies. The US, of course, is the leader in this endeavor but by no means alone.

What is especially good about this article is that it provides a great summary of the primary causes of the financial collapse and subsequent “Great Recession.” It really is a primer on the current economic mess and how we got into it. A piece like this demonstrates again what an awful job our primary news outlets have been doing actually telling people what is going on. It's hard to know if it's just incompetence or willful deception (perhaps on the belief that people really don't want to know). The story is not pretty and its implications are grim but it's not that hard to understand. In any case, hiding it from people will certainly not make it go away.

The main message of these posts is that the problems that caused the collapse are still present. Basically governments have been trying to nurse things along by taking on the bad debt of the mega-banks and other industries to give them time to recover. It is not at all certain, however, that time is going to solve this. We may instead just be postponing the real day of financial reckoning. Note also that little has been done to take on the bad debt of consumers. Their economic survival seems to have a low priority in the various national treasury departments and finance ministries.

I’ve also included the link to a piece from Huffington Post which looks at why Tim Geithner is opposed to Elizabeth Warren being the head of the new Consumer Financial Protection Bureau. No one questions her qualifications—and that’s the problem. Treasury and Federal Reserve officials are scared she will be too good and take her job too seriously. Specifically, Geithner is afraid she will pull back the curtain on what the government has done to protect the banks from the consequences of their own recklessness. Most importantly, she will likely curtail the banks’ ability to gouge their customers with new fees in their attempt at generating profits to pay for all those losses still lurking on their books. It’s a prime example of the policies described in the Botox articles.

Botox Economics: Part 1

Botox Economics: Part 2

The Real Reason Geithner Is Afraid of Elizabeth Warren

No comments: