November 23, 2008

"The biggest mistake Obama could make is thinking this problem is smaller than it is."

"On the other hand, there is far less danger in overestimating what will be necessary to solve it."

So asserts Yale finance professor Jeffrey Garten, quoted at the end of today's Thomas Friedman column.

Is this some general rule or profound truth that we need to understand? When you don't know the extent of a problem, overestimate it? Does that apply to everything or just finance or just the the current financial situation? I'm worried that this insistence on overestimation will be used to justify foisting a giant liberal wish list on us. I'm thinking of that Rahm Emanuel line Rush Limbaugh was playing for us all last week:
You never want a serious crisis to go to waste. What I mean by that is it's an opportunity to do things that you think you could not do before. This is an opportunity. What used to be long-term problems -- be they in the health care area, energy area, education area, fiscal area, tax area, regulatory reform area -- things that we had postponed for too long that were long-term are now immediate and must be dealt with. And this crisis provides the opportunity for us, as I would say, the opportunity to do things that you could not do before.
So I think I'm going to take the less dangerous approach of overestimating what these people are planning to do to us. Don't want make the big mistake of thinking it's smaller than it is, right?


Meade said...

"This is an opportunity."

Trust me - that is exactly what goes through the brain of a parasitic worm as he hits pay dirt grey matter.

Big Mike said...

Is there anything about this that wasn't foreseeable?

Do I have to wait until January 21st to display a "Don't blame me -- I voted for McCain" bumper sticker?

Anonymous said...

McCain would have been a bigger long-term disaster than whatever awaits. I am certain, in retrospect.

So we got Carter. We'll live. We'll even thrive in the future. Sometimes, movements dead-end. That's the conservatives right now. A fresh start is good. Also, as Democrats will soon learn, it's a lot easier to be the opposition in a lot of ways.

bearbee said...

Lawrence Summers to Head National Economic Council

Repost of yesterdays post.

Does Obama not read Althouse? Is he also going to tap Rubin and Greenspan for some position?

I was reading America’s Next Top Economist comments section mentioning Brooksley E. Born who served as chair of the CTFC in 1996-99(?). This from Wiki:

While on the commission and, after becoming its chair two years later, Born tried to bring derivatives, specifically swaps that are traded at no central exchange, known as the dark market, and thus have no transparency except to the two counter-parties, under the regulatory oversight of the CFTC. She was opposed in this effort by Federal Reserve chairman Alan Greenspan, and Treasury Secretaries Robert Rubin and Lawrence Summers.[1] Specifically, on May 7, 1998, former SEC Chairman Arthur Levitt joined the other members of the President’s Working Group – Treasury Secretary Rubin and Federal Reserve Board Chairman Greenspan – in objecting to the issuance of the CFTC’s concept release, in which Born attempted to shed light on the dark market, citing grave concerns about the possible consequences of the CFTC’s action. In particular, these concerns focused on the risk that the report would increase legal uncertainty concerning swaps and other OTC derivative instruments and, thus, destabilize what had become a significant global financial market. The potential turmoil created by the report and concerns about the imposition of new regulatory costs also might have stifled innovation and pushed transactions offshore.

Is it possible that if Greenspan, Rubin and Summers had acted on her concerns we would not have the current mess??!!

Darcy said...

I don't know it that bumper sticker will ever pack a punch, Big Mike. But this is certainly scary, and we have no one to stop all of the whole "wish list" from being implemented.

michaele said...

I keep hoping that the Obama presidency will be the proverbial "Nixon goes to China " thing and tough measures can be taken that the press woldn't let a Republican get away with. I am hoping that the seriousness of our troubles actually inspires Obama to put real problem solving first and partisan politics second. Call me a crazy, hoping fool but...

Paul said...

Fascism always ascends to power on the back of a crisis. A real one such as a war or depression, or a manufactured one such as AGW.

I'm Full of Soup said...

Therre are two main problems:

One is our national balance sheet. Our liabilities for medicare, soc security, state and local govt pensions are ginormous.

The other is confidence in general. Everyone is down in the mouth.

The only way to fix these in a reasonable period of time is for Obama to put on a strong, optimistic face (I am not kidding) and open our doors to about 30 million more immigtants while we put the brakes on the growth in entitlements.

That is the good news. The bad news is I don't believe Obama possesses a strong, optimistic face or outlook.

George M. Spencer said...

In Michigan, already "20 percent of the population are now on some form of public assistance, including food stamps and home heating credits, a record for the state," accd to today's NYT.

Also, "7 percent of families who are foreclosed on these days end up homeless."

And this only the beginning.

A cheerful article from yesterday's Wall St. J.....

"Over the two weeks ended Nov. 20, 2008, the Dow Jones Industrial Average fell 16%. Over the two weeks ended Nov. 20, 1931, the Dow fell 16%.

If you think that is scary, consider this: In the final five weeks of 1931, the Dow fell 20% further. Then it went on to lose yet another 47% before it finally hit rock-bottom on July 8, 1932.

It is vital to realize that markets are never under some obligation to stop falling merely because they have already fallen by an ungodly amount. It also is vital to explore how bad the worst-case scenario can get and to think about how you would respond if it comes to pass.

When it comes to worst-case scenarios, 1931-1932 is it. When the Dow finally stopped going down, in July 1932, it had lost 88% in 36 months. At that point, only five of the roughly 800 companies that still survived on the New York Stock Exchange had lost less than two-thirds of their value from their peak in 1929."

BJM said...

open our doors to about 30 million more immigtants while we put the brakes on the growth in entitlements.

We tried this in California by accepting millions of illegals and now entitlements are sinking the state's economy.

Immigrants do not have established family and community networks and thus initially consume more entitlements than their productivity and taxes offset.

Immigrants often have dependent extended families in their country of origin and remit billions to foreign economies not returning it to the local economy; creating even more economic imbalance.

Don't misunderstand I am not an isolationist, immigration is key to our survival, especially with an aging majority, but it must be at a pace we can absorb and fund or everyone loses.

Anonymous said...

immigration is key to our survival

No. It's not. The aging population problem is going to be over in 20 years. Such is the nature of mortality.

Jack said...

Insistence on over-estimation? Where is Ann getting that? No where does the column insist on over-estimation. It simply says there is far less risk ("danger") in overestimating the problem than in underestimating it.

I find it interesting how Ann, as brilliant as she is, so often seems unable to understand the clear meaning of the words she reads.

Maybe Ann just doesn't think our economic problems are as serious as Friedman does. Fine. If that's the case, then I guess Ann is merely distorting and misrepresenting what the column says, rather than misunderstanding it.

I'm Full of Soup said...

I meant we need industrious-type immigrants not immigrants looking for an easy handout.

Now we seem to have two varieties-those who embrace the chance to work hard and get rich versus those who come here to work under the table and get all the govt benefits they can for their family and parents, etc.

We need to end the entitlements to folks who are literally just off the boat.

Anonymous said...

It simply says there is far less risk ("danger") in overestimating the problem than in underestimating it.

You've told us what the article says. Good. That's a good start. Now tell us why that statement is true.

Thomas Friedman is possibly the world's biggest abuser of cliches and platitudes. His words are meaningless piffle.

I'm Full of Soup said...


A growing population is a key factor in economic growth.

An affluent society does not have enough kids to fuel a growing economy.

holdfast said...

I think today's NYT article on Citi woes should put a damper on any enthusiam for Rubin - it's basically like a party member getting denounced in the old Pravda.

Anonymous said...

AJ -- I agree.

Today's theme at Althouse is issues that make Seven Machos torn.

I'm Full of Soup said...

Speaking of themes, is Obama's cabinet shaping up like a real-life version of The Big Chill?

Anonymous said...

michaele said...I am hoping that the seriousness of our troubles actually inspires Obama to put real problem solving first and partisan politics second.

If this country was serious about solving it's problems we wouldn't have been given a choice between McCain and Obama.

BJM said... immigration is key to our survival, especially with an aging majority

Procreation is the key to many of these problems. Younger people being productive, generating wealth and paying taxes to support the old.

Instead we have younger and middle aged people with no children and lots of debt and little savings.

So other people do the procreating and we import them.

So somebody still has to do the dirty work of breeding and raising the next generation of tax paying worker bees.

Wince said...

Ironically, Emanuel espouses the strategy that Naomi Klein accused the Bush administration of using in her book The Shock Doctrine: The Rise of Disaster Capitalism.

Klein explains her theory at the Huffington Post during a "serious" kitchen interview with the co-star of Con Air.

I sat down with Naomi Klein to talk about her new book, The Shock Doctrine: The Rise of Disaster Capitalism. This revelatory work belongs in that rarefied air with A People's History of the United States by Howard Zinn and Witness to a Century by George Seldes.

Hello, Hollywood, enough with the Zinn already!

Unknown said...

"You never want a serious crisis to go to waste. What I mean by that is it's an opportunity to do things that you think you could not do before. This is an opportunity."

This sounds like the executive summary as to why, after 9/11, we should use military force to remove Saddam.

bearbee said...

This is the real “Code Red.” As one banker remarked to me: “We finally found the W.M.D.” They were buried in our own backyard — subprime mortgages and all the derivatives attached to them.

Buffett was warning back in....2003!! but no one cared to listen:

Buffett warns on investment 'time bomb'

Some derivatives contracts, Mr Buffett says, appear to have been devised by "madmen".

marklewin said...

I don't find Rush particularly funny so I don't listen to him much....however, who hasn't gone to some kinda workshop where the wide eyed, 5-hour energized, giddy, cheerleading presenter (I am visualizing Sarah Palin right now) has said: "Did you know that the Chinese symbol for crises is also the symbol for opportunity?" When I hear this hackneyed saying it makes me want to get my money back, walk out, or slit my own throat rather than endure the rest of the workhsop.

John Stodder said...

What Obama has to realize is that only some of his agenda will help address the financial crisis. Some of it is relatively unimportant in light of current events. And some of it will aggravate the recession and loss of confidence. He needs to have that butcher-like ability to carry out his duties irrespective of the interest groups that favored him. He's going to make a few of them happy and most of them mad, if he's doing his job.

I do think it would be a good idea to do one thing Friedman suggests -- get Obama's economic team confirmed early. Paulson is freaking me out. He's like McCain on meth.

John Stodder said...

"Did you know that the Chinese symbol for crises is also the symbol for opportunity?"

Next time you hear that, let the speaker know they're wrong.

First of all, that's a compression of the cliche. The cliche is that, in Chinese, the word crisis is comprised of two characters, the one meaning "danger" and the meaning for "opportunity."

But in fact, it isn't. The best translation of the two characters that add up to crisis is "dangerous moment." The character for moment also includes the meaning "opportunity," but not opporunity in the sense of "some propitious circumstance from which advantage can be derived." It means opportunity, like "I was downtown today and had the opportunity to watch a parade." Meaning a moment in time when an event occurred.

hdhouse said...

Would you not believe that one of the qualities most "wanna be presidents" have in common is the opportunity that problems give them?

I would think less of any president who, although problems are not a good thing, doesn't relish the prospect of doing battle with events that most of the populace would run away from? Obama has a horrible dealt hand and opportunity of a century. Plus he gets to follow in the very shallow footsteps of Mr. Bush. He must get up everyday and say "OMG what's gonna happen today and in the next breath say a prayer that he gets to follow Mr. Bush"