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A View From the Other Side

by: Teddy Goodson

Tue Mar 02, 2010 at 17:10:43 PM EST

I just returned from a conference on world currency and investments held in Scottsdale, Arizona. The meeting was packed, mostly with retirees anxious about preserving (or restoring) their nest eggs, but with a heavy sprinkling of angry mid-level investors, business owners, and even a few blue collar workers, also worried about their futures. The participants were mostly white or Oriental, a few African-Americans, almost all American citizens (some Canadian, a few Latin American), overwhelmingly conservative, including a good number of Tea Party members who were generally applauded by the business people and would-be capitalists present. I considered it an education in outside-the-Beltway reality, and a serious warning about what to expect for the November elections and the general direction the country is headed economically and politically.
Teddy Goodson :: A View From the Other Side
While politics rarely came up explicitly from the platform, it permeated the substance of the seminars and was, simply, a given in any discussions. There was even a lecture entitled "It's All the Bankers' Fault---- Not!" given, of course, by the president of a bank, explaining that bankers were victims as much as anyone. The audience lapped it up, generally accepting the conclusion that simple, non-Wall Street bankers did not contribute to the meltdown, and that Washington (meaning President Obama) is compounding the problem, not solving it.

The entire conference was built around the presumption that policies of the federal government are wasteful and ineffective,  the dollar is in an inevitable long-term decline and will be replaced as the world's reserve currency to our detriment, our enormous budget deficits cannot be sustained, and therefore inflation, maybe even hyper-inflation, is inevitable. To protect the purchasing power of your savings, diversify out of the dollar and dollar-denominated investments immediately.

Frankly, I found myself in general agreement to that point, but where the speakers went from there was, in a sense, chilling: America has had its day; many predicted a long, long recession (some a double-dip or W-shaped economic trendline, some a very slow recovery with a lengthy L-shape), probable social unrest (see how the Greeks take to the streets, objecting to austerity cuts slashing deficit spending---- the time will come when Americans will demonstrate, too), lower standards of living, and the return of states' rights so smaller local jurisdictions will replace the overweening federal government when it comes to running things. More than once the suggestion was made to move one's family and wealth to a less expensive, less regulated, less tax-burdened country. One retired businessman told me he had purchased a lot in Costa Rica (after investigating Panama and Nicaragua) and was building a house there, glad to kiss the US and its meddlesome government goodbye.

Another businessman announced that, when Governor Parry of Texas suggested secession, he called Parry and offered to provide help. Not surprisingly, I found out the businessman was an oilman fed up with federal environmental regulations; his comment was generally applauded. Along the same lines, over drinks one evening a Tea Party couple from Pennsylvania insisted that a return to the "original" Constitution would restore power to the states where it belonged. They had for the first time become involved in politics, and the man was campaigning to become a member of the Republican Committee with the intention of getting rid of all this big government; Obama should never have been elected. I pointed out that Obama was in fact duly elected, because real citizens who had previously never been involved showed up and voted. "Well, they shouldn't have voted." After a brief discussion of that, he changed his mind and said, "Well, they should have voted but they should have known what they were voting for," meaning those Obama voters were deluded.  

The strict adherence to Milton Freidman Free Market Capitalism ultimately became so suffocating that I had to question it with a few of my fellow attendees. First reaction was a horrified "Don't you believe in capitalism?" (I was reminded of how Senator Mark Warner's very first comment at a business breakfast was to protest lengthily that he believed in "free market capitalism," and was not, that is, a heretic who should be burned at the stake). Next was something along the lines of "Did you vote for Obama? Ha! How's that working out for you?" Pointing out that Free Market capitalism did not work on a macro level and was missing important factors (emotion rather than pure rationality in making economic decisions, social costs, environmental costs) was dismissed: "The Market always makes allowances for all that." The idea that capitalism could take any other form than Free Market theory was inconceivable. The stranglehold this secular religion has on conservatives is awesome; the dominance of its myths appears unshaken by the global meltdown.

This complete acceptance of Free Market theory seemed to extend even to one of the blue collar attendees, an airline mechanic. He complained about how his airline had treated its union workers, breaking faith when the company took all the "give backs" the unions offered, but never delivered on the compensating donations management was to give to the workers.... yet there was no doubt he understood the need for profits.

I have to wonder how Obama can ever succeed in re-regulating various industries, protecting consumers and labor, or reforming the financial industry unless he can convince the public that Free Market theory is not working as presently practised. Unfortunately, he has not made the slightest effort in that direction, and shows every sign of total submission to the unmodified theory, following the advice of its acolytes (Summer, Geithner, et al).

I found one woman sympathetic to my contrarian point of view: an African American from Prince Georges County Maryland, who traded commodities. There may have been others, but we were so rare as to be invisible.

It is not that the people at the conference were not hurt by the meltdown and subsequent Recession. Indeed, they complained freely. Neither they nor the speakers and instructors ever questioned the economic model and theory which produced the crisis. What they want is to blame government and politicians, those rascals in Washington who dither and spend, and interfere with business. Just because the speakers have a good grasp of how the currency markets and world trade work and can project the rise of new world powers does not validate the rest of their theories, IMO.

Tea Party members who imagine a return to the Constitution of our Founding Fathers means breaking up the Union or replacing federal power with state power never realize that we have big national government because we had big companies and corporations which treated states like their own satrapies. If they are angry over Wall Street bonuses, toxic food, impersonal bureaucrats, and all those messy brown-skinned people muscling into their lily-white suburbs, how will they explain it when global corporations run roughshod over the weak locals once the federals are stripped of power?

I am rather more optimistic about America than many of my fellow attendees. Here's a spot of irony, however: There was a Pro-Am golf tournament in progress at the Fairmont while I was there. All day and night I could hear the private jets landing and taking off, ferrying in the elites to play with the pros. No Recession for that crew, it seems.  


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The Almighty Dollar
Sounds like the conference was a service conducting worship at the altar of the almighty dollar. Also sounds like those yahoos were spouting stuff similar to what I have read that was screamed in the Thirties by people who thought that FDR was a "traitor to his class."

If you want to purge yourself of the poison, you might try attending the Campaign for America's Future June 7-9 in Washington.

This is a conference for progressives - started as Take Back America back in the day. I may go myself this year just to purge myself of the bile created by Virginia's November election.

I do need help
and some sort of Pepto-Bismo.

Their grip on their type of reality is rock solid. The heck of it is, there is just enough truth in their stuff, and just enough shrewdness in their market savvy to be worth listening to. I say the same thing about the Freidman Free Market Theory: it's just enough correct to be dangerous.

It has bugged me that no one, outside of Paul Krugmann and Joseph Stiglitz (and they are not on the Obama team), are raising questions about this pernicious Freidman economic theory. Obama had a window of opportunity to do so, and it appears that he was so panicked by the meltdown, that he scrambled into the safety of Conventional Wisdom, and continued Bush's bailouts and Bernancke's policies. Couldn't afford to frighten the bankers, you know. What we are doing is not going to reform the system, only patch it together so we can suffer an even greater meltdown in the future.  

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Two things
First, if Americans could remember anything that happened longer than 30 years ago they would not be so enthusiastic about what they are calling capitalism. Because history is forgotten almost as soon as it is made the right wing propanganda machine is able to almost immediately rewrite history. Not long from now the right wingers won't even remember who George Bush was. Everything will become, once again, the fault of the Democrats.

I am beginning to agree more and more with the British documentatian, Adam Curtis. He believes almost everything is driven by ideology. I used to disagree, but recent studies show that people who are presented with facts which contradict their ideology start to believe the facts are some sort of conspiracy or propanganda. That goes for the Left as well as the Right.

The most dangerous part is that misguided leaders often create dangerous ideologies based on misguided or inaccurate assumptions. Then people follow these secular religions over the cliff for decades.

People need to stop seeing things through the ideological lense and realize that most things simply boil down to them against us, or modern tribalism.

It's natural
that those at the bottom will blame everything on those at the top. What's really worrisome is how many mis-identify "the top". For a long time, it has not been the government, especially in the US; it has been all those blameless corporations...  

Human Nature
Goebbels knew this truth; advertisers know this truth; psychologists have proven this fact over and over, in study after study:

A lie - repeated enough times - will be believed by large groups of people.

So, educated parents will refuse to vaccinate their children because they are fervent believers in the untruth that vaccinations cause autism; people will insist that a snowy winter like the one we have had is proof that a climate catastrophe is not real; without any proof that stands up to forensic analysis, some people still insist that a conspiracy was at work in Dallas Nov. 22, 1963; that FDR knew Pearl Harbor was going to be attacked Dec.7, 1941; that President Obama's health reform plan includes Palin's "death panels."

A lie - repeated enough times - will be believed by large groups of people.

Decline of the dollar...

People in this country fret about the amount of debt we have - both personal (mortgage, car loans, etc), and government.  

But if you look across the pond, you see exactly the same problems in some of the Euro-zone countries.   Japan has the same problem as well.  I hear talk about sovereign default, but at the moment they are more worried about Great Britain or Greece than they are about the US.  I suspect that in the future we will see a devaluation of all currencies, but there may be wild fluctuations in the exchange rates as each new problem comes to a head..

It amuses me that the small bankers try and pass the buck - who do you think was making all of these risky loans?  Put yourself in the position of being a banker with scruples in an environment where there are few regulations.   Your competitors without scruples would be making tons of bad loans, and you would be twiddling your thumbs.  Competitive pressures would either force you out of business or force you to also make bad loans.

I think the people at this conference are clearly uneasy about the losses they endured (and I suppose everyone is to a degree).  What these people want is a return to the "golden era" where you could just latch onto some bubble and make tons of money.

Concern about the deficits
in our budget and in our trade account is not misplaced; they do affect our ability to sell our Treasuries to finance our wars, our consumption, as well as our economic power which influences our military power and national security. I guarantee the deficits are going to be the Next Big Thing in politics, used against Democrats.

Once again, Free Market theory has everyone in its thrall, and that theory truly hates government deficit spending because, it says, it "distorts" markets. There is a valid argument for running deficits, especially in times of economic meltdown.

Have you noticed the growing attacks on so-called Keynesian economics (which has a place for government deficits) and on any professional economist, like Paul Krugman, who does not totally support Free Market? These attacks are pre-emptive strikes laying the ground work for Republican attacks on Democrats and deficit spending---- especially entitlements and jobs legislation---- in the coming elections.

We Never Carry Through with Keynesian Economics
All the industrialized nations seem quite willing to agree to the first half of Keynes' view: deficit spending to correct serious contractions in an economy. It's that second part they don't like, the part that says a national economy should pay down its debt in good times.

Of course, Bill Clinton - and, I hate to admit it, Robert Rubin - did set up that scenario, albeit one built on the technology bubble. What did the GOP and Bush sell the American people as soon as they got power? Tax cuts, tax cuts, tax cuts. That was their "solution" to the mild recession that Bush faced in his first term, his alternative to government spending. The biggest recipients, of course, were the wealthy.

It seems to me that the mistake all nations made for the last few decades was to have lived from bubble to bubble to bubble. Bubbles are a common phenomenon of capitalism, but we all made them into an art as the last century was ending. I guess the "killer bubble" was the belief that financial institutions could buy "insurance" against bad lending and bad bets, the infamous credit default swaps.

Now, an inevitable contraction is taking place. I just hope that the economic leaders of the world can avoid what happened politically the last time such a violent contraction took place: the rise of totalitarianism and fascism.

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