Tim Geithner’s book Stress Test is illuminating already- and I am only half way through.
He was chair of the NY Federal Reserve and an advisor to Bill Clinton. He also became Obama’s Secretary of the Treasury. He was one of three executive BIGGIES during the recent financial crisis and Tim never even got his degree in economics.
His book is mostly about dealing with the American capitalist system and doing so as it grew to encompass all the countries over the last few decades in the phenomenon known as globalization. The first half is about how he ‘learns on the job’, follows the practices of those whom he followed and how the world of capital and the economies embracing it, are basically out of control.
I think the second half is about how he and two others captained the world through 2007/08 despite not knowing very much about what would work or not.
‘Course he has yet to actually use those words but he he writes of ‘bubbles’, crashes, recessions, depressions and the like throughout. He seems to expect financial chaos as part of the system. And he openly admits his lack of understanding. He talks of “no one really understanding the complexities of derivatives and credit default swaps and all the fancy financial instruments that have been allowed to proliferate”. And he talks about the inherent inabilities of regulatory bodies to influence much. This is kind of telling when you consider that understanding and regulating the banks and Wall Street was the job he was always hired to do.
He also told about the International Monetary Fund riding to the rescue of faltering economies with strict economic reforms attached to the rescue only to change their minds half-way through their work. The over-riding impression: no one really knows what the hell was going on before the 2007/08 crash and I am inclined to surmise that none of them has gotten much more learned since.
But, never mind. The world’s economies revolve around confidence and manipulations and that is psychology on a monumental scale. I doubt that any one person – especially economists and bankers (not known for their expertise or even empathy with the humanities) – could have a grasp on such matters at any time. George Soros, maybe.
“So, what is your point, Dave?”
Well, to paraphrase Rafe Mair, “Never overestimate the abilities of experts”. Basically, that means that the people in charge don’t know what they are doing. Which isn’t news, really. But Geithner is pretty open about it. They just ‘wung it’ during the financial crisis and, in the short term, it seems to have worked.
In the long term, it won’t. It can’t. Impossible. Very briefly: all economies are now linked and yet none of them are equal. In fact, the capitalist system is based on having inequalities and it has built-in mechanisms to keep it that way. Thus one can expect financial chaos to be forever present somewhere.
Being linked means inequities and people revolt over that kind of thing. If they don’t revolt, they at least migrate and that is already happening on a massive scale as the rurals go urban, the southerners go north and the easteners and the westerners get riled up (Islam).
And don’t forget: all economies are based primarily on the ups and downs of confidence and who has that?
Do you have confidence in the system?
Well, yeah. You do. Otherwise you would be buying bullets instead of bargains at Costco. But is your confidence high? Probably not. Most people are feeling the financial pinch and the main message in the news is fear. One would have to be ridiculously Pollyanna-ish to remain bullish and optimistic in the face of what they see and experience around them. Especially given climate change.
But we are not the gauge by which to judge. Think about the Muslims. Think about the Africans. Think about the average Asian or Indian or Pakistani or Russian. Think about the ‘drug-cartel’ managed countries of Central and South America. The only reason most of those folks aren’t showing the signs of lessening confidence in their system is because they had very little in the first place. Economic globalization is exacerbating that sense of insecurity already and many of them are leaving for safer and higher ground – namely, here.
I can’t help but see it this way………the ship is sinking slowly and all the lifeboats have been launched or are being lowered. But there are way more passengers than there is room in the lifeboats. And the weather is bad and promising to get worse. Now THAT is basic economics – supply and demand – all in a bad and unpredictable climate.
Don’t believe me? Read Stress Test.
Our Off the Grid Home 
One aspect of the concentration of wealth is the rise of those opposed to inequality. Historically the super rich fall to the discontent of the poor. Whether it’s the Tzsar or the French nobility or Baptista they fell because they mocked the poor. Historical inequality has been challenged by force of arms or force of ideas. Currently the debates around economics are shaped by ‘dog whistle’ politics. We are are told that socialism is bad but as a society we have many socialist policies including socialized medicine. We are told that government taxation is bad but folks expect to have roads to drive on and water delivered to our homes. No homeless man is spinning a yarn to justify his lot in life. One percent of the world’s population owns ninety-nine of the world’s wealth. How long can this stand? Is inequality driving the conflict in any off the hot spots in the world? Daily we hear that poverty is not a catalyst to our woes.
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” Is inequality driving the conflict in any off the hot spots in the world?” I think the answer is a resounding yes. Even this Islamic ISIL crap is all about the GREAT SATAN and the debauchery of the western world. Another way of saying, “I want some of what they are wasting!” Certainly the drug cartels have embraced inequality with a similar extremism – not unlike nation-states carving out territory, they carve out their ‘turf’. Israel carved out their turf and those around them don’t like it. Cooperation and acceptance is a rare thing but essential to sharing and equalization. Capitalism is about specialization, mini-monopolies and, to be fair, innovation. But, once the ‘capitalist minded’ have secured their ‘market share’ even the doctors and the missionaries fight to control it. To a large extent that was and is what unions were about. For the world to have a chance at equality, we have to drop all the barriers to our private clubs and that ain’t gonna happen any time soon.
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Hmmmmmm, It all comes down to the “Haves” and the “Have Nots”.
Perhaps we should form a Socialist “Utopia” like Russia?
Democracy ….Putins Version.
.http://www.theglobeandmail.com/news/world/russian-opposition-leader-boris-nemtsov-shot-dead-in-moscow/article23234473/
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Don’t think so. I traveled behind the iron curtain in the 60’s and that was some major kind of dystopia. Communism doesn’t work. Capitalism does. NATURAL Capitalism works best but we had a few too many JP Morgans to thank for the current kind of Capitalism. Profit-first Capitalism is even counter to Adam Smith’s original WEALTH OF NATIONS treatise.
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It would seem that economic book reviews are almost as bad as political rants for my readers. Sorry. I’ll have to do better. Ravens, of course. Whales. Oysters and clams maybe (they are so cute and so much fun!). But my latest topics have had trouble getting off the ground. Clearly, I should keep it to OTG. But, as you know, I haven’t BEEN OTG for the last few months. I have been OTMGR – on the merry-go-round. When it was actually moving, I mean. Most of the time it was the MJST – Merrily just sitting in traffic. Anyway, we are off somewhere tomorrow. Headed home to paradise.
Ooohhh…those ravens will fly off the pages then!
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Welcome back to paradise time to d stress. check out Live Happy Take care!
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Thanks, RH. Those are my intentions. But Murphy will likely be there to greet us.
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Concentration of wealth under the Tzsar, the French nobility or Baptista did not occur under a Capitalistic system but under some degree of Totalitariaism. Economic systems that concentrate wealth in the hands of a few thus promoting inequality are sewing the seeds of their own destruction. Globalization is currently concentrating wealth in the hands of a few. This is a very dangerous trend but could, if the will were there, be moderated. We all know about Ba Ba Black Sheep and the distribution of its wool which was before the rhyme was sanitized…one for the master and two for the Dame and none for the little boy who cried in the lane. Thus was the world of Social Darwinism. I think it is important that Off The Grid Living continue to raise these controversial issues for discussion. I do not consider them to be rants but an invitation to pause, think and discuss. There is a solution to inequality.
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I take you point about an economic system vieled in obsfication rendering it inaccessable to all but well place insider. Why do we hear the dog whistles when somebone questions crony corporate globalization?
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