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Who's Your Nanny?

To some people, Western European socialism looks like a nanny state where capitalist assets which should be private are redistributed widely through society in the form of a social safety net. Safety net implies charity; the holder of the net clearly cannot be in the same boat as those who are falling. When we live in the United States where working without a net is preferred, because people are seen to fall out of personal weakness and a good bounce is considered a character building experience, a European style safety net at the least can look like an unnecessary and unwarranted diversion of investment funds and at the most like a means of weakening the social fabric (since if people know that there is a net, it somehow follows that they will become careless when walking the wire).When a social safety net is viewed as a form of charity, we can argue all day whether people deserve it or not. But I think that a safety net has very little to do with charity. Furthermore, while having or not having a strong safety net is of course a political issue, what underlies the issue is something intrinsic to modern capitalism as an economy.One word that we Americans like to use (and often misuse) is invest." We know that corporations invest and that people invest in corporations. But we also talk about investing in our homes, our education, and our jobs. Building a new school or a new road or a new water filtration plant is an investment." I have a friend who likes Beanie Babies, but she refers to her collection as an investment. We like to use the word investment because in our society investments are thought to be things that appreciate in value. We buy things to use and enjoy, but in our universal mercantile sensibilities we like to believe that the things we use and enjoy might also somehow grow in value all by themselves.

But investment isnt just about appreciation, no matter how shrewd we tell ourselves we are. Investments can also depreciate. We know this subconsciously at least. But we get confused because our desire to enjoy and find fulfillment in what we consume hides the true nature of the thing as an investment.Investmenttruly is speculation. We tend to use the word speculation to describe a class of risky investments. But all investment is speculation to one degree or another. All speculation means is that the value of the thing is driven by a market whose direction we cannot predict (especially now, since we are interlocked into an international too big to fail banking system and a lax regulatory environment that allows banks to have their big thumbs in every pie).When a capitalist economy collapses we are suddenly faced with the fact that all this investing we have been doing was speculation all along. We didnt buy a home. We bought a house in a housing market where we went toe-to-toe with massive swop-sealing investment banks and mortgage companies. Our educations may have been (at least by accident) enriching, but in fact we were playing roulette with our livelihoods at a table with 110 other foreign players and with the big people spinning the wheel. Almost everything we own or have, including what passes these days for our communities, is commoditized and we are in a formal speculative market relationship with whoever happens to be the biggest player in a particular market. All we have is always at risk.What the European system does is recognizes that market risks are far wider than we think they are in the United States. Big market moving capitalists are still allowed to speculate in Europe. Its just that Europeans know in a way we have forgotten, that companies are not just speculating with their own assets. In an integrated capitalist economy they are speculating with everyone elses as well.When the great auto companies moved out of Detroit and destroyed that city, they were playing with the public and private assets of all the people in that city. In a capitalist society public and private assets are commingled in a way that our individualist ideology just does not see. Detroit wasnt just about cars and the price of GM stock. The recent housing bubble wasnt just about houses. Risks flow very wide in a modern integrated capitalist economy. The social contract that Europeans have with their capitalists isnt about charity. Its about the appropriate spreading and valuation of risks. Its a system that does not allow capitalists to spread many risks beyond themselves. As a result, Europe has a smaller gap between those who have and those who have not.Its not about charity. Its about risk.

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I agree with every word of that, except you perhaps should have included Canada, especially as our banks are tightly controlled by something called the Bank Act, which the banks hate, and because the controlling conservative party was in a minority, they had not been able to dismantle. As a result our downturn, was just that, a downturn, not a huge recession. We only had that because you are our biggest trading partner, and demand in the US went down. We were and remain your biggest external market for oil and gas.We also redistribute income to an extent that would and does, horrify most Americans. Because of that we are seen as some socialist pariah, and so I say good luck with persuading to many Americans that you are right. That report this week pointing out that 147 multinational companies actually control the world, not the US Congress, was actually headed by a British company, and included a Canadian company in the top fifty.

"The social contract that Europeans have with their capitalists isnt about charity. Its about the appropriate spreading and valuation of risks."Um...all very nice in theory and abstraction. As for reality, have you noticed the 1.5 TRILLION dollar bailout of European state debt and the very real possibility of the collapse of the European Union due to excessive state benefits and state spending?The answer to the individualist ideology of the market is not the ideology of centralized statism (which often are in collusion with centralized capital markets), it is going back to basics of community and faith and LIMITS on both the market and the state and the rampant economic and moral individualism that of these leviathans both promote.

"Umall very nice in theory and abstraction. As for reality, have you noticed the 1.5 TRILLION dollar bailout of European state debt and the very real possibility of the collapse of the European Union due to excessive state benefits and state spending?"So let's see. Are you saying that if Europe had not had the level of state spending that they do they would not be in the same mess that we are in? I've never heard anyone say that before.My argument is that a social safety net is the appropriate way to properly distribute risks in a modern integrated capitalist society. It's just that in the States, we talk about safety nets as though they are some kind of charity designed for the weak to keep them weak. I'm not saying that they don't have costs. (Although I will say that I wish our economy looked more like Germany's right now...)Speaking about theory and abstraction, how do you propose we disentangle all of this massive economic power and get back to small communities. Small communities (in the old fashioned sense) have a very low market value, which is why we don't have many any more.

"So lets see. Are you saying that if Europe had not had the level of state spending that they do they would not be in the same mess that we are in? Ive never heard anyone say that before."Yes - we are seeing the insolvency of Greek, Italian, Spanish states due to the excessive pensions and state spending. The idea that state actors are any less risky or any more ration than markets seems to ignore the facts on the ground (trillions of dollar in debt and the facilitation of a new, state-led economic crisis) and the very basics of human nature.As for small communities, I would say that promoting resilience, local economies etc. is not so far fetched -- unless you are tied ideologically to the inhuman big state or big market world view.http://www.transitionnetwork.org/

Regarding the insolvency of the European states, we are seeing that some are and some are not. The social safety net is certainly an issue in whether a state can survive the recession, which was not in itself caused by state spending."As for small communities, I would say that promoting resilience, local economies etc. is not so far fetched unless you are tied ideologically to the inhuman big state or big market world view."I'm afraid it is far fetched. In the entire world all of these things are dying out. The inhuman big state and the big market aren't ideologies. They are facts. I'm afraid the ideology is the small self sufficient community. (I am not saying this because I like it or want it to be this way. But even the Amish are finding it hard to hold things together.)

"I am not saying this because I like it or want it to be this way. But even the Amish are finding it hard to hold things together."Well, they are certainly holding together better (in financial, moral, and positive population growth) than the European Union!

Brett --You haven't been reading very carefully. That 1.5 trillion the Europeans have agreed on is only *partly* for Greece which IS defaulting, but it is also a set-aside for the other shaky European nations (Spain, Italy) which *might* default if not backed up. Plus that money, if not used, will remain as a safety net for the future. Compare that with the billions and billions our recession has already cost us. Detroit alone cost us hundreds of billions (which the auto companies anyway are paying back nicely, thank you).The fact is, like it or not Americans, Germany and Canada are doing a lot better than we are. Ignore the facts at your own risk.

In any case, the Amish and complete self-sufficiency are not the model; local production, increased resilience and human community are.It is easy to dismiss opposition (and say that our current centralized systems is are only option) when you present opponents as straw-men or hobbits ;)

Crisis of billions compared to TRILLIONS. I am the one not reading carefully?In any case, both systems are of centralization are faulty, that is my point. Both the centralized welfare state of Europe and the centralized capital of the American system.

"Crisis of billions compared to TRILLIONS"That's a typo. She meant trillions.

the bailout 1.5 trillion euros = 2 trillion dollarsAnd their system is better at handling financial risk??

"the bailout 1.5 trillion euros = 2 trillion dollarsAnd their system is better at handling financial risk??"Given that EU countries (except Britain) don't have sovereign currencies any more (and can't just print money like we can) and given the relative size of their economy to ours, I would say, yes, as a matter of fact. But my point wasn't that Europe is better at handling financial risk. My point is that their capitalists are required to assume more of their social risks than ours are.

I recommend you read an article in Businessweek, which in its many pages includes this paragraph"People in societies without money dont barter, not unless theyre dealing with a total stranger or an enemy. Instead they give things to each other, sometimes as a form of tribute, sometimes to get something later in return, and sometimes as an outright gift. Money, therefore, wasnt created by traders trying to make it easier to barter, it was created by states like ancient Egypt or massive temple bureaucracies in Sumer so that people had a more efficient way of paying taxes, or simply to measure property holdings. In the process, they introduced the concept of price and of an impersonal market, and that ate away at all those organic webs of mutual support that had existed before."Its actually about David Graeber, who is described as the anti-leader of Occupy Wall Street.http://www.businessweek.com/magazine/david-graeber-the-antileader-of-occ...

Dear Brett --(And you ARE dear to me.) My problem with your unbridled optimism about the American system of government/business is that you aren't optimistic enough. You need to see that if , hey, the American system needs fixing, well, then dang it/by gum/what the hell/whatever, then we'll fix it. And we won't hang on to old thinking just because grandpa thought that way. And we won't reject it just because grandpa thought that way. We'll be willing to look at things differently, see what others are doing and have apparently done right. Then look back at ourselves as objectively as we can muster, and then . . . (I did notice that you say you have changed your mind about something based on evidence. Yay, for you!!!)

= )Thanks, Ann.I thought you would be happy about my semi-pessimism about the American system! I think 'grandpa' would cheer the American way without criticism, without self-reflection, the rugged individualist etc. etc. I guess neither you, nor I fit into our respective left/right boxes.PS - Michael, thanks for the interesting link.

If we accept the conclusion that the safety net is a risk-distribution mechanism, i.e. insurance (as I think we should, although I don't know of anyone who argues that it is a means to keep the weak, weak), then doesn't that lead logically to the question of whether this or that particular insurance policy we've "purchased" is adequate or effective? It could be "effective" in at least two ways: first, whether it appropriately addresses the level of risk we're willing to tolerate, and second, whether it actually spreads the risk well, or is in fact a cause of some risk. On the first, different people tolerate risk differently (and concomitantly buy different levels and different qualities of insurance policies), and it has long been noted that Americans generally favor higher economic risk over equality. Recent research suggests this has actually increased during the Great Recession. "Support for redistribution, surprisingly enough, has plummeted during the recession. For years, the General Social Survey has asked individuals whether government should reduce income differences between the rich and the poor. Agreement with this statement dropped dramatically between 2008 and 2010, the two most recent years of data available. Other surveys have shown similar results." http://www.scientificamerican.com/article.cfm?id=occupy-wall-street-psyc.... Would this peculiarity gum up the comparison to Europe? Should it?On the second, it seems legitimate to ask if the current arrangements in place are effective in spreading the risk, or perhaps pose some risk themselves. I thought Reihan Salam was effective in raising this in response to Elizabeth Warren's recent comment re: the social contract: "We can accept the premise that there is such a thing as a social contract and that we should all do our part for the cooperative venture that is a civilized society. Yet should we then suspend judgment about what is done with Elizabeth Warrens hunk, or can we take the view that the state is also a party to this social contract and that the state hasnt been doing its part and that a great deal of evidence suggests that simply giving the state a bigger hunk of whatever we happen to earn in the course of freely and voluntarily cooperating with each other isnt actually the best or the smartest way to get the state to do its work well? I think that we should care about the next kid to come along. We should care about her a lot. Heres the thing: there is someone between the rest of us and that kid. Theres a big machine that somehow takes tax money in one end and imparts various public services at the other end. When we pump money into the box that gives us most consumer products, we get a pretty decent product on the other end, for all kinds of reasons. When we pump tax dollars into the box that is most governments in the United States, Id argue that we actually dont get a very good product at all. This is why it helps to look at the guts of the machine, and to see what is working well and what does not. " http://www.nationalreview.com/agenda/278106/elizabeth-warrens-quote-reih...

"...then doesnt that lead logically to the question of whether this or that particular insurance policy weve purchased is adequate or effective?"You're starting off with an assumption (an incorrect one) that we have "purchased" something. You are implying that we have a choice here of one thing or another when in fact we have a choice here between nothing (the status quo) or something. This quote "Americans generally favor higher economic risk over equality" makes no sense unless you specify that Americans will favor the chance of a higher individual economic return (from economic risk) over equality. But the point is, they are not getting a higher economic return. It's all going to the top and has been since Reagan roamed the earth. The same is true of your characterization of insurance. People have different tolerances for risk not because they would intrinsically rather have more or less insurance, but because they would rather have less insurance in order to have more of something else. The point again is that right now, they are getting a whole lot of nothing as opposed to some amount of something. So your examples don't hold.You believe, as a matter of faith, that "When we pump money into the box that gives us most consumer products, we get a pretty decent product on the other end, for all kinds of reasons." This is patently untrue and the deep recession that we are in is the proof. You are confusing the 19th century idea of capitalism of people producing useful goods that are bought by other people with 21st capitalism. I would challenge you to explain what good all the rotten financial products that were sold in our post industrial economy brought. It is true that people fooled themselves into thinking that they were useful, but is that the same thing?You say "...we take the view that the state is also a party to this social contract and that the state hasnt been doing its part and that a great deal of evidence suggests that simply giving the state a bigger hunk of whatever we happen to earn in the course of freely and voluntarily cooperating with each other isnt actually the best or the smartest way to get the state to do its work well?" I haven't seen a lot of "freely and voluntarily cooperating" in the private economy lately. Have you? What I have seen are mass layoffs, mass outsourcing to foreign countries (still), financial gouging, and a business sector that is trying to pull back on what workers (middle and working class) are getting now in order to support their own expanding profitability. You want to juxtapose the private "free" and "efficient" economy with and idea that government is the opposite (un-free and inefficient). Government first of all is as free and efficient as we want it to be (and I have seen it become pretty efficient when it comes to protecting business interests). There is nothing about the public sector that makes people suddenly turn stupid and lazy when they enter it.But in any case, nothing in my discussion juxtaposed the free market with government, as though some sort of redistribution scheme (note I didn't use the word "redistribution") is support of "big government" by default.My argument in fact was that big business (especially financial business) in America is passing off costs to everyone else and getting a free ride for it. Perhaps I should have used the word "cost" instead of "risk" except that a lot of the costs were and are future costs i.e. "risks". It is not the false choice that you have created where we either buy "insurance" or we get to accumulate more wealth. The social safety net (which includes European job benefits) is not some frill; it's value that workers have earned that the rich have skimmed off. It's wages that have been withheld, not so that there is more investment income to create more jobs, but just so that the rich can have more. If you believe in the old idea of working hard, saving your money, etc., then you have to wonder how in this capitalist wonderland of ours the actions of some swops trader in New York caused some otherwise hard working upright guy in Alabama to lose his house, job, and retirement savings. The guy in Alabama didn't know that his house, job, and savings were actually speculative assets in a market that he never even heard of. He thought that his house was his home, his job was his livelihood and calling, and his savings were his. But believe me, the guy in New York knew what was going on, at least as far as the guy in Alabama was concerned.

Balance, not stasis. One size does not necessarily fit all. Sometimes "just right" is too much. It's probably amusing and satisfying to design perfect societies, but real people can't live in them. Life is always going to be an ongoing project, no matter how convinced you are that you've got the final solution.

"The social safety net (which includes European job benefits) is not some frill; its value that workers have earned that the rich have skimmed off. Its wages that have been withheld, not so that there is more investment income to create more jobs, but just so that the rich can have more."unagidon --There's the crux of the whole debate. Have the workers (us) earned a decent life? I say yes. The question becomes: how to see that they/us get what is their/our due. Conservatives say, "We should trust the capitalists to pay what they owe". History teaches us that that's a most naive assumption.

I'm not exactly sure what the nub of your argument is, as judged by your response. "Youre starting off with an assumption (an incorrect one) that we have purchased something. You are implying that we have a choice here of one thing or another when in fact we have a choice here between nothing (the status quo) or something."How is the conclusion that the particular set of social arrangements I assume you're referring to when you say "the social safety net" is a purchase by taxpayers (of all levels) inherenly incorrect? How can it not be anything other than a purchase? Some of us (and increasingly shrinking number) pay some portion of our income in order to provide services, benefits, and agencies that are intended to smooth out the (as you correctly say) unequal allocations of risks/costs. I think it's a price that we should rightly pay in order to tolerate the inherent risks (again as you rightly say) of our particular economic arrangements. If it's not a "purchase" or "charity" then what is it? Maybe my confusion is coming from misunderstanding what you're referring to when you say "the social safety net," as i assume that it is equivalent to the particular set of arrangements I've described.To me, the most telling comment in your response is the comment that the only choice we have here is a choice bewteen "nothing (status quo) or something." Throughout the rest of your response, you then proceed with a series of black-white juxtapositoins between big business and everyone else, between 19th and 21st century economies, between some guy in New York and some guy in Alabama. I agree - again I AGREE - with much of your analysis; I have lots of criticisms of how big business and in particular the big banks have and continue to behave, I have grave concerns over the so-called shadow banking system, I have lots of quibbles over how (as we've previously discussed) there appears to be at least two Wall Streets - one for . My only modest suggestion in responding to your original post was that in your analyasis of risk, you seem to be leaving out an essential component: that it was and is the safety net itself that has been the cause of much of the risk, that rather than spreading those risks/costs, it itself has played a part in this misallocation of risk. Take your example of the NYC trader versus the AL guy - you leave out an essential third player in this drama (as shown in Reckless Endangerment by Gretchen Morgenson) - the politicians (of both parties) who pushed policies with the premise that it would be a good idea for the guy in Alabama to be able to get a mortgage that he otherwise might not have been able to receive. It's not about, again as you rightly say, "big government" against some pure market. It's about how the mechanism for spreading the risks has instead increased the amount of risk.In short, I'm not a knee-jerk anti-government Tea Partier, nor do I simply blindly believe that unfettered markets will solve all our problems (although I do think there is actually solid evidence to beleive, contra your assertion, that products we get out of the private enterprise box are much better than the public service box, at least as compared to my experience at the Apple store versus the DMV). I have a lot of problems with the evolution of our economic structure, it's just that I also believe that a large part of that evolution has been the very the social safety net, and that we also need some fundamental reforms to it to ensure that it's more concerned with doing its job of spreading/allocating risk rather than driving up risk for us all (except for the politically well-connected who can make sure they'll get their investment in failed solar companies out before everyone else).

If its not a purchase or charity then what is it? Maybe my confusion is coming from misunderstanding what youre referring to when you say the social safety net, as i assume that it is equivalent to the particular set of arrangements Ive described.Big business, and especially financial business, and especially capital gains and transactions need to be taxed higher and they would be the ones paying for it. You might argue that they will just pass on the costs to the rest of us. But that assumes that the rate of profit somehow has to be held constant. We would be purchasing the safety net only insofar as we 1) were actually entitled to the money and 2) were actually going to get it in any case. We are entitled to the money, I believe, because capital has been expanding in the United States at the expense of the middle and working class by being allowed through lax regulation coupled with the way we think about taxes to pass costs on to us that they should have to bear. (I could have used cost rather than risk in my essay, except that future costs are in fact risk. But I can see how I misled you.)Our idea of taxation in the US is that a small amount of taxation is needed to cover necessary costs for things that the market cannot cover and the rest of it is a sort of imposition on the private property rights of the taxpayer. We argue over whether the additional imposition is warranted (and once in a while we argue about basic necessary costs), but an increase of taxes on the rich, say, in the current environment in order to cover the deficit and to stimulate the economy starts to look a lot like charity, especially when framed in the context of a class struggle where other classes fight with the rich over their rightfully acquired capital.In fact, the rich should pay more because they have been getting more. The current economic crisis has hardly affected them at all. The costs of the financial meltdown seem to have fallen upon the shoulders of the people who did not cause it. This is why people are occupying Wall Street. Clearly there was risk in the finance sector and the best way to figure out who was at risk is always to see who gets killed when the bottom falls out.Im aware of Gretchen Morgensons book Reckless Endangerment, but insofar as she makes a case that FANNIE MAE and the government were responsible for the meltdown, she is simply wrong. First of all, the government agencies had better risk profiles than the private ones. Second, no one forced the private companies to hand out risky mortgages; they were tripping over themselves to do it. Third, what caused the economy to collapse was the OTC market for risk management instruments, which were loaded with opaque toxic assets. What the recession was was a failure of the financial sector and its management of risk.Regarding my hypothetical Alabama worker, people didnt just lose their houses because they had inappropriate mortgages. They have been losing their houses because they have lost their jobs. People with good credit histories and good mortgages have been hit hard by the recession (and I am sure that you yourself know some personally). My point in the essay is that since this has happened, it is clear that their assets were at risk even though they did not know that they were even playing the market. This is part of the cost that capital passed on to the consumer (and away from themselves).The idea that the public sector is inefficient and the private sector is efficient arises, I believe, out of our ideas of the nature of taxation. The government becomes seen as a simple consumer and parasite; in fact, as a consumer competing with us for our own resources. On the other hand, we have the individualist myth of the private sector being ruthlessly efficient because efficiency is the source of profit. Insofar as the private sector box does operate this way, you are correct. But it doesnt follow that this is the logic of the private sector box. Or to put it another way, the larger the business, the more it acts like large government. We sort of feel this implicitly when we say that small government is more responsive and efficient. It is, but for the same reason that small business is more responsive and efficient.Regarding something you mentioned in another comment about a social safety net making the weak weak. Thats the whole thrust behind the concept nanny state; that it keeps people dependent and childlike i.e. weak.

unagidon - I'm afraid I'm continuing to lose the focus of your original post. I took your original post to be an argument that (1) a social safety net (which I understand to mean the various programs/agencies aimed at the poor and financed via taxes) is the primary means of attempting to allocate or minimize the unequal impact of risks/costs we as a society are (more or less) willing to tolerate as a result of (more or less) free markets, (2) as such, it is a matter of justice, i.e. a duty owed, primarily by those who benefit most from the (mis)allocation of risk, not simply charity provided out of the goodness of our hears, and (3) we have pursued policies which undermine this arrangement by shifting even more risks away from those who have benefitted most from them onto those who should be protected from them.Again, I (largely) agree with all three conclusions. I believe we should abolish the deduction for carried interests in private funds, I believe we should impose a financial tax on certain transactions, and am more open than I was a few weeks ago to raising the capital gains tax (I'm concerned about the impact such a tax hike would have on investors like myself, i.e. middle class people putting away a nest egg via 401(k)s, mutual funds, etc.). I think the investment bankers on Wall St. should hang their heads in shame for what they have done to the American dream (although judging the amount of money they've given to Democrats in this cycle, maybe their guilt is catching up with them). I do not believe in the hypoethitical purely efficient market you've posited as the foil to your description (although on the whole I do believe what Salam says - on the WHOLE products out of the private enterprise box are better than products out of the public funds box), and I'm not trying to make an argument, as Ann has suggested, that government should just get out of the way and let the markets solve it all.My only thought in response to your argument is that the description of the factors of the (mis)allocation of risk is lacking in regard to the role that the risk-spreading mechanism has contributed to the misallocation. I'm glad you are "aware" of Morgenson's book; I recommend you read it. She doesn't make the case that fannie and the government were the SOLE causes of the crisis; only that they were the necessary antecedents for the crisis. Without their actions, there would have been no market. And yes, we have to factor in people like your Alabama worker who, perhaps rationally at the time, thought, I can't afford this house, but housing prices have never dropped, so I'll be able to sell it for a profit (human nature isn't THAT different between the 1% and, say, the 53% is it?). Again, warm water and wind don't in themselves make a hurricane, but you can't have a hurricane without them. I just think the picture of the gross misallocation of risk is lot more complicated and muddy than the selective telling here or in Zuccotti Park.

"I think the investment bankers on Wall St. should hang their heads in shame for what they have done to the American dream (although judging the amount of money theyve given to Democrats in this cycle, maybe their guilt is catching up with them)."Here is Rep. Paul Ryan, as described by Peggy Noonan in the WSJ:"Republicans, in their desire to defend free economic activity, shouldn't be snookered by unthinking fealty to big business. They should never defendthey should actively opposethe kind of economic activity that has contributed so heavily to the crisis. Here Mr. Ryan slammed "corporate welfare and crony capitalism."""Why have we extended an endless supply of taxpayer credit to Fannie Mae and Freddie Mac, instead of demanding that their government guarantee be wound down and their taxpayer subsidies ended?" Why are tax dollars being wasted on bankrupt, politically connected solar energy firms like Solyndra? "Why is Washington wasting your money on entrenched agribusiness?""Rather than raise taxes on individuals, we should "lower the amount of government spending the wealthy now receive." The "true sources of inequity in this country," he continued, are "corporate welfare that enriches the powerful, and empty promises that betray the powerless." The real class warfare that threatens us is "a class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules, and preserve their place atop society.""http://online.wsj.com/article/SB1000142405297020355410457700226215045425...

Slightly off-topic.The Provinvial has abruptly announced that he is pulling the Franciscan community out of Providence within the next few months. They have been here for 55 years or so. I think that before removing the local chapter, the Provincial has a responsibility to make sure that the various ministries that they do in Providence are taken care of. They cannot just leave, as though we (the parishioners, the users of the food pantry, the Catholic gay community, the homeless people getting breakfast from them, the Catholic Korean community, the people in prison, the people hospitalized who receive their visits regularly,...) did not exist. There is a social obligation. "I will not leave you orphans".In particular the staff are at risk of getting laid off. Some of them have been working for them for 18 years, and the job comes with no unemployment insurance. I contend that the Franciscans have a responsibility of finding jobs for them, and, if not, providing them with some unemployment compensation. They don't have to by law, but they do by what's right, in my opinion. In general one should not lay off people, much less close social services, during a recession. That's the last thing to do for people conscious of their social obligations! Thoughts? When an organization is in financial trouble, is it ethical to just close it in the middle of a recession, without regard for the human impact?

Jim P. --Look at it a different way. Pushed to the wall by the country's realization that the financial sector was the big heavy in causing recession, Rep. Paul has to blame somebody, so he blames one and only one sector of the mortgage mess, the government lenders Fannie and Freddie. People like Paul can't admit they made a humongous mistake, so they distort the facts. In his case he calls the part (Fannie and Freddie) the whole. While PEggy Noonan claps her hands. Whee.

Oops -- I meant Rep. Ryan, not Paul.

Ann, I really think you're misjudging Ryan's intellect here. There is no single or predominant cause of the financial collapse except perhaps the sin of greed. Greed on Wall Street to be sure, but also greed in Washington on the part of Fannie and Freddie's directors; and the operating of the levers of government, at the behest of the greed-heads, to knock down the regulatory wall that is supposed to protect the rest of us from that greed. Those levers were pushed and pulled by Wall Street's cronies in Washington - cronies in many cases who came from the financial industry and hope to return to the financial industry some day, or to lobby on behalf of the financial industry. Washington and Wall Street belong, literally, to the same clubs. This is true whether Democrats or Republicans occupy the White House. Without Washington's active collusion, it's quite likely that the financial collapse would not have happened.I'd argue that a true understanding of human nature, based upon Christian anthropology, is that greed is inherent to human nature; we should expect it and plan for it. We need prudent regulation to prevent the excesses of human sin from ravaging the rest of us. In that sense, I would probably hold Washington *more* responsible than Wall Street for what happened in 2008. Washington could have stopped the excesses that led to the collapse, but it didn't. If anything, those drum-circlers and bong-hitters in Zuccotti Park should be *more* angry at Washington than Wall Street, just as many victims-rights advocates are more angry at the bishops who could have stopped sexual abuse but didn't than they are at the actual perpetrators. I would think that no poster or regular commenter here surpasses me in my support for free markets as the best way to bring about a vibrant economy, but I know that market mechanisms, as efficient as they are, and as indispensable as they are for allowing the fully human to express itself in economic creativity and labor, can never fully compensate for human sin. Markets by themselves aren't very good at tempering greed or chicanery. We need healthy markets, and the only way to ensure a healthy market is to have it operate inside a fence of wise and sturdy regulation.

But, Jim, the greed was allowed to operate mainly because the regulaiton was inadequate. Had there been adequate regulation the crisis would not have happened, regardless of who the greedy players were. That should be the lesson of the 2008 crisis. Ryan and a lot of other conservatives (not all of them) seem to have missed that grand lesson. And the fact that he singles out only one sector (gov't) that gambled away other people's money shows that he does not have a broad enough vision of he economy to make his judgments trustworthy.You can say that it required Fannie and Freddie for the crisis to happen, and I already agreed with that. But my point is that there were many factors, Ryan didn't see them, and the doesn't get the over-arching point: the financial sector needs regulation. In other words, Ryan was wrong, and Ryan, unlike some other conservative wonks, isn't big enough to admit it.You also say that "Washington" didn't regulate when it should have. Excuse me, but the Bush administration didn't regulate as it should have. because the Bush adminsitration didn't think regulation was necessary, and the SEC under him was a disaster. The Democrats gave us the Glass-Steagall act in 1933, and PHil Gramm (R-Tex.) and his friends had it repealed in 1999. So let's not blame all of "Washington" for the lack of regulation. As I remember, deregulation was a Reagan mantra. Is that what the conservatives don't want to admit? That the grand old man was wrong about something so fundamental? (I think the memoryy of Reagan has taken on mythic proportions for lots of Republicans, and psychologically that can be dangerous. It becomes a sort of idolatry.)

Just in time for Halloween, here's a story on Europe's economic prospects guaranteed to give any Social Democrat the willies. Subhead: "Europe runs out of money."http://www.weeklystandard.com/articles/forgive-us-our-debts_604175.html

Granted, you say we need wise and strong regulation, but you also go on about the market's "efficiency". I say, what efficiency? A train that can runs itself into a mountain is not an efficient train. OK, so markets are *usually* efficient. But that doesn't justify calling them essentially efficient when the fact is that they are efficient if and only if they are well regulated, and regulation by definition comes from outside the system.

Jim P. --In setting up the argument in that article, the author starts his second point with:"2) It is dangerous because it means that loss of confidence in Europes institutions moves from the periphery (Greece and Portugal, say) towards the core (France and Italy, say)."Oh, for heaven's sake! How in the world can somebody point to France and Italy as the core of Europe's economy? He doesn't mention Germany, the real core!!!! When you take Germnay out of the equation you have a different sitituation entirely, and its not the REAL situation. Further, he talks as if borrowed money were unreal money. Yes, long term only borrowing leads to disaster -- but one of the ways of avoiding the disaster is to take your medicine and borrow or print some money -- real money. Saying that "Europe is out of money" is sheer nonsense. It's credit is still good.Is this an ideal situation? Of course not. But beware of your economic predictions. If people believe them they can be self-fulfilling prophecies. Sorry, but this guy is wearing blinders.

Hi, Ann, there are five countries in Europe whose GDP, as of 2010, exceeded $1 trillion annually: Germany, France, the UK, Italy and Spain. Together, these five economies comprise over 70% of the European Union's cumulative GDP.Of these five, Italy is a subject of major concern, Spain slightly less, France less but on some watch lists. The UK is going through an austerity program in government spending like the US; and unlike the others in the top-five list, it is not on the Euro, so it doesn't have the same stake in maintaining the value of the currency that the others do. Germany is the healthiest.Germany barely summoned the political will to bail out Greece before (Greece's GDP, at a bit more than $300 billion in 2010, comprised less than 2% of EU GDP). As this article states, Greece has become a barrel without a bottom. How much more will can Germany summon to pour its resources into stabilizing Greece?The suggestion is that Germany probably lacks the resources, or the political will, or both, to bail out Greece AND Italy AND Portugal AND Spain, should all of them come to the door for a handout. If we look beyond Europe, the three largest economies (by far) are the US, China and Japan. The US and Japan both have been running high levels of debt for many years. The prospect of putting China in a position to dictate the terms of one's economic prosperity isn't palatable to anyone else in the world.If push came to shove, it's not very speculative to conclude that the burden will fall on us to stabilize improvident European countries. How much bad European sovereign debt should our central bank take on? Remember, the failure of a single private-sector investment bank (Lehman Brothers) was enough to knock worldwide financial markets into a tailspin from which they still haven't fully emerged three years later. The situation is very dangerous, for us and the rest of the world as well as for Europe.

"A train that can runs itself into a mountain is not an efficient train."Ann - a train can run itself into a mountain very efficiently. Its destination is independent of its efficiency in getting there.If, for some unknown reason, the federal government and the free market were both given the task, "run a train into a mountain", the market would accomplish it in a fraction of the time, at a fraction of the cost.Btw, the federal government runs a passenger railroad, AMTRAK. It is a perpetual money sieve. Our family recently looked at taking a railroad vacation rather than flying. The prospect of seeing beautiful American scenery rush past in one of those viewing cars is very appealing. But we just couldn't justify it. Even compared to the airlines that seem to have eliminated all amenities, AMTRAK is a striking example of inefficiency.

"Germany barely summoned the political will to bail out Greece before (Greeces GDP, at a bit more than $300 billion in 2010, comprised less than 2% of EU GDP). As this article states, Greece has become a barrel without a bottom. How much more will can Germany summon to pour its resources into stabilizing Greece?"I seem to remember that recently we barely summoned the political will to bail ourselves out. But with all of your statistics, I am interested in the one that says that Greek debt is bottomless. Bottomless sounds pretty bad. Could you wrap some infinite numbers around that?

"If, for some unknown reason, the federal government and the free market were both given the task, run a train into a mountain, the market would accomplish it in a fraction of the time, at a fraction of the cost."This is a red herring. The train in fact did run into a mountain. The private sector with trillions in unregulated risk management instruments, failed. And the financial sector that was the author of this prospers. It's irrelevant what the government might have done instead of the private sector. You wouldn't get on an airplane if someone told you it only crashes about ten percent of the time, private sector or Air Force.

"I seem to remember that recently we barely summoned the political will to bail ourselves out. But with all of your statistics, I am interested in the one that says that Greek debt is bottomless. Bottomless sounds pretty bad. Could you wrap some infinite numbers around that?"That phrase re: the bottomless barrel came from an article whose URL I provided above on 10/29, 1:34 pm. The article provides some numbers. I'm not sure if you want to dispute the barrel-without-a-bottom assertion, but if you do, it's with the author, or the commenter whom the author quotes.

"The private sector with trillions in unregulated risk management instruments, failed. And the financial sector that was the author of this prospers. Its irrelevant what the government might have done instead of the private sector."Conveniently, Tyler Cowen has a discussion of a newly released study that questions this conclusion. The authors of the book released this month conclude: "As for the data, then, we conclude that the full story remains to be told, but that our basic point stands: the bankerseven at Citigroup, which had the riskiest portfoliowere not behaving in patterns we would expect from reckless greedheads."http://causesofthecrisis.blogspot.com/2011/10/new-data-on-bankers-risk-a... conclusion is that one of the biggest factors overlooked in analyzing the cause of the crisis were the international financial regulations (Basel I & II) which lead the banks to over-invest in triple A rated mortgage-backed securities.h/t to Margina Revolution, http://marginalrevolution.com/marginalrevolution/2011/10/engineering-the...

Ah, yes, the ole "The Devil made me do it" defense.

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