Thursday, May 14, 2009

A Better Class of Victim

For the last half century in the United States the victims of any economic downturn were invariably the same, at least in the sense that they generally came from the bottom half of the income distribution. Oh, occasionally there'd be some regional variety--petroleum geologists in the Oil Patch back in the 80s, a bunch of white shoe paperhangers in the 60s (i.e., go-go year stock brokers), the occasional wave of aeronautical engineer layoffs in Southern California as the defense cycle turned, the almost comical geek zillionaires turned burger flippers. But, on the whole, the burden generally and relentlessly fell on the unionized worker, the craftsman, Joe Sixpack, AS the people for whom he voted dismissively labelled him.

Now, the for the first time, we may actually be in a situation where the pain and the burden falls disporportionately on the well employed, well-educated and well off. The 32% of the population that doesn't own a home are spectators to the popping of the housing bubble. The majority of Americans will less than $50,000 in financial assets (or is it $15,000) are not taking the paper losses on their 401ks that their supervisors, and their supervisors' managers, are letting pile up unopened. You've got to have some wealth to feel its destruction. And the elements in the service sector which are for the first time bearing the brunt of the downturn include lawyers and architects as well as retail clerks and minimum wage waitstaff. When an auto dealership closes, the credit manager, sales manager and service manager are all out of a job, not just the floor sales reps and the cleaning staff.

I don't want to overstate this. But the political implications of economic distress that really touches the midle class and the upper middle class in this country is unexplored territory. Conventional wisdom is that the reaction will be conservative--politically and socially. I don't doubt for a minute that in this instance there will be a conservative social reaction. But the political one is harder to call. The political right is so thoroughly tainted with responsibility that it is difficult, for a couple of election cycles, at least, to see it benefiting, even if Team Obama flubs completely. If Team Obama muddles through, I could see a shift to the right as the slog gets longer and longer and memories fade about how the mess came about in the first place. But, in the short term, it's hard to see it.

In terms of historical precedent, I'd offer two conflicting possibilities. One is the rise of fascist tendencies in '30s Europe. The other is the Populist/Progressive movements in the United States of a century ago. I'd guess we're more likely to see a reprise of the latter than the former (in the United States, at least), but I'm far from certain.

Tuesday, May 12, 2009

Criminalizing Financial Mismanagement

A nuance that has generally been missed about the recent episode allowing the banks to negotiate the outcome of the stress tests is the practical consequence to those responsible for running those institutions. In their discussions with their regulators, they cannot possibly have appropriately qualified their representations and negotiating positions to take into consideration all of the internally available information tending to question or undermine the assertions confidently made to, and taken at face value by, the federal civil servants who, if events do not play out as projected, will ultimately testify in criminal proceedings that they were not apprised on the information available to the defendants that contradicted or undermined their criminal misrepresentations. Let a lay jury determine, in light of subsequent events, whether criminal liability should attach to those conscious decisions to present without qualification unfounded hopes as though they were grounded in fact, rather than result-oriented self delusion.

Give the dialectic time to work out. The stakes are getting higher, and, like gamblers three sheets to the wind, the players aren't cognizant of it.

Monday, May 11, 2009

Weapons of Class Destruction

As we lurch towards a new global financial architecture, each country has something to learn from the other, and each has something to offer. In the spirit of international brotherhood, I'd like to offer some suggestions--about what the United States has to offer China, what China has to offer Russia, and what Russia has to offer the United States.

From the United States, the Chinese can draw valuable and specific lessons as to how various technocratic policies and initiatives can effectively work to refine and fine tune a powerful, globally competitive economy. While the example of the last 24 months isn't particularly edifying, U.S. policies drawn from the second half of the last century can be mined for extremely valuable precedent.

From China, the Russians need to take away a more impressionist sense of how better to accomplish the transition from a command and control economy to one that unleashes the productive potential of a large population occupying a continental space. Over reliance on natural resources and preferential dismantling of state enterprises transforming former managers into oligarchs did not work so well as continuous agnostic meddling. The first step is for the apparachiks to acknowledge they have something to learn from the Mandarins.

From the Russians, the Americans need to learn how to deal with their oligarchs. The first step, of course, is to stop thinking of the financial oligarchy as a meritorious elite in any sense, and admit the cognitive capture of the regulators by Wall Street. Then, redefine the Masters of the Universe as Enemies of the People. The Masters of the Universe were, after all, the ones who orchestrated the evisceration of the American economy and the conversion of a productive citizenry with savings into a mewling horde of consumers indebted up to their eyeballs. While showtrials and bullets in the stairwell aren't in the American tradition, tarring and feathering certainly is.

What we need are weapons of class destruction that maximize wealth impairment while minimizing the loss of human life.

Sunday, May 10, 2009

Happy Mo-Fo Day!

On behalf of hedge fund managers, financial services CEOs and other Masters of the Universe, I wish to publicly protest the injustice of this Hallmark Greeting card holiday called 'mother's day'.

Why doesn't the public celebrate Mother Fucker's Day?

Yes, the financial elite has captured the commanding heights inside the Beltway. Yes, we have secured the better part of a trillion dollars to support our equity, and God knows how much more for the preferred, the debtholders, the counter-parties, and the control group. But how much respect, how much affection, has accompanied that niggardly acknowledgement of just how necessary financial oxygen is for the morons to keep on breathing.

We want the morons to worship us as infants worship their mothers. Suck on this!