Welcome Dean Baker, (blog) and Host William D. Cohan, (blog).

The End of Loser Liberalism: Making Markets Progressive

Host, William D. Cohan:

Progressives need a fundamentally new approach to politics. They have been losing not just because conservatives have so much more money and power, but also because they have accepted the conservatives’ framing of political debates. They have accepted a framing where conservatives want market outcomes whereas liberals want the government to intervene to bring about outcomes that they consider fair.

This is not true. Conservatives rely on the government all the time, most importantly in structuring the market in ways that ensure that income flows upwards. The framing that conservatives like the market while liberals like the government puts liberals in the position of seeming to want to tax the winners to help the losers.

This “loser liberalism” is bad policy and horrible politics. Progressives would be better off fighting battles over the structure of markets so that they don’t redistribute income upward. This book describes some of the key areas where progressives can focus their efforts in restructuring market so that more income flows to the bulk of the working population rather than just a small elite.

By releasing The End of Loser Liberalism: Making Markets Progressive under a Creative Commons license and as a free download, Baker walks the walk of one of his key arguments — that copyrights are a form of government intervention in markets that leads to enormous inefficiency, in addition to redistributing income upward. (Hard copies will be available for purchase, at cost, in the near future.) Distributing the book for free not only enables it to reach a wider audience, but Baker hopes to drive home one of the book’s main points via his own example.

[As a courtesy to our guests, please keep comments to the book.  Please take other conversations to a previous thread. - bev]  [To refresh your browser, PC=F5, MAC=Command+R]

226 Responses to “FDL Book Salon Welcomes Dean Baker, The End of Loser Liberalism: Making Markets Progressive”

BevW September 18th, 2011 at 1:51 pm

Dean, William, Welcome to the Lake.

William, Thank you for Hosting today’s Book Salon.

William D. Cohan September 18th, 2011 at 1:54 pm

thank you for having me

Dean Baker September 18th, 2011 at 1:55 pm

Thanks for hosting this salon.

William D. Cohan September 18th, 2011 at 1:59 pm

So Dean, nice to have you on FDL today to discuss your new book.
perhaps we could start with you quickly explaining what is the opportunity that progressives have ceded to conservatives and what should progressives be doing differently?

Mauimom September 18th, 2011 at 2:02 pm

Welcome, Dean. I love your writing. So nice to have it concentrated in book form. The book’s really well-organized and useful. Thanks.

William D. Cohan September 18th, 2011 at 2:03 pm

maybe that first question was too long and involved. how about this: am also curious about your comment in the book that the repeal of glass-steegal was not to blame, in part, for the financial crisis. you are one of the only people i know who thinks that…

Dean Baker September 18th, 2011 at 2:04 pm

Thanks William,

very simple, I argue in the book that the right has been rigging the structure of markets over the last 3 decades in ways that redistribute income upward. The upward redistribution over this period was not intrinsic to the market, it was the result of deliberate policy.

However in response to this rigging progressives have lashed out at the market itself. We have argued that we need the government to counter-balance market outcomes that we don’t like.

This is really bad politics since it makes it appear as though we want to tax the winners — people who are creative and hard working — to help out the losers (hence “loser liberalism.”) It is also really bad policy, because we can in fact use the market to accomplish progressive goals and there is no reason that we should not try to reverse the rigging so that it accomplishes this result.

dakine01 September 18th, 2011 at 2:04 pm

Good afternoon Dean and William and welcome to FDL this afternoon.

Dean, I have just downloaded the book so have not read it but do have a question.

How do we get the Power that be to listen to economists such as you and William, economists who have been correct on the ‘market’ and the overall economy rather than all the economists who are continually ‘surprised‘ at whatever bad economic news is out each day? (Please forgive the small diary whoring)

Dean Baker September 18th, 2011 at 2:06 pm

William,

i would be happy to blame the repeal of Glass-Steagal, I opposed it, but I can’t see anything that happened in 2002-2007 that would have been prevented had Glass-Steagal been in effect. I absolutely believe that Greenspan had all the power he needed to prevent the housing bubble from growing to such dangerous proportions, he opted not to use it.

twobeers September 18th, 2011 at 2:06 pm

I’ve had so many epiphanies reading your book that I’ve run out of light bulbs.

Your book would be the perfect Xmas present to a certain brother of mine who can’t hold a conversation without spouting neo-liberal talking points. When can we expect a hard copy to be made available?

Mauimom September 18th, 2011 at 2:06 pm
In response to dakine01 @ 8

dakine, you stole my question!!! I should have copyrighted it.

But yes, Dean, I too am curious about how we “spread the word.”

William D. Cohan September 18th, 2011 at 2:08 pm

dean
but in june 2004, securities firms pressured the SEC to raise leverage rations, which made them all into houses of cards (no pun intended) and was done to allow them to compete better with commercial banks, so they claimed…

Zaid Jilani September 18th, 2011 at 2:08 pm

Dean, William, thanks for doing this.

I’m curious as to why both of you think “loser liberalism” exists in the first place? Is it just progressives/centrists not knowing the facts of how markets can be used for better ends?

BevW September 18th, 2011 at 2:09 pm

Tech Note:
As a technical note, there is a “Reply” button in the lower right hand of each comment. Pressing the “Reply” will pre-fill the commenter name and number you are replying to and helps for everyone in following the conversation.

Dean Baker September 18th, 2011 at 2:09 pm

dakine01,

I don’t have a simple answer to how we get the power to get progressive economists into the debate. Part of the answer probably requires being a bit rude. Every time we see a mainstream voice we should not be hesitant to ask when they stopped being wrong on the economy.
It really was incredible incompetence for an economist not to recognize an $8 trillion housing bubble or to realize that its collapse would wreck the economy. They all have forgiven each other with a big “who could have known,” but there is no reason that the rest of us should be so forgiving.

Tens of millions of people are suffering because of their incompetence or corruption

Mommybrain September 18th, 2011 at 2:11 pm

Thanks to you both for your efforts in explaining it all to us. I’m on Chapter 3 and loving it.

In conservative-speak, all the screaming since the 70′s about our social programs “redistributing the wealth” to people who don’t deserve it because they aren’t, what, handsome, beautiful, fortunate in birth or psychopaths has been cover for the fact that they were busy doing it themselves?

What can we do to reclaim the conversation? The first thing Ineed to do is become economically literate, so here I am.

William D. Cohan September 18th, 2011 at 2:11 pm
In response to Dean Baker @ 15

but volcker saw it as early as feb 2005; i think wall street didn’t want to stop the fun because it was making too much money

Dean Baker September 18th, 2011 at 2:11 pm

William,

I am aware of the 2004 SEC ruling allowing greater leverage at investment banks. The repeal of GS did not require this later SEC ruling. Furthermore, its impact is somewhat ambiguous. Investment banks had been much more highly leveraged in the late 90s.

Scarecrow September 18th, 2011 at 2:12 pm

Welcme Dean and William — the book is a great resource for progressive arguments, full of helpful data and tables to refute the right wing talking points we see every day. And that suggests you believe we have a chance of winning the rhetorical battle if we just understand these facts and convey them convincingly. Your Beat the Press blog can be understood as a test of that theory. Folks here link to you all the time, and there are other econonists pitching in. So are you/we making progress?

What signs do you see we are making headway in the effort to reframe the discussion? And if it’s been frustratingly slow, to what do you attribute this?

Mauimom September 18th, 2011 at 2:13 pm

Dean, a variant of my question would be: is there any value in attempting the “educate” the chattering classes or other shapers of opinion? Or is it better to focus efforts on the general public?

For me, sitting down to read your book was enlightening. [As twobeers said, "so many epiphanies."]

But it seems to me to pursue that track means book sales, blogging, media appearances. [Are you booked on the The Daily Show yet?]

I’m searching for the most efficient way to spread your word, and how all of us can assist. [Other than those Christmas presents to relatives.]

Mommybrain September 18th, 2011 at 2:14 pm

Do I remember correctly Greenspan disingenuously questioning whether there was a bubble at all? He was disingenuous about a lot of things.

Dean Baker September 18th, 2011 at 2:14 pm

Zaid,

I think Loser Liberalism is a combination of ignorance and convenience. Many people that I put in this boat genuinely accept the market outcomes as given as just a fact of life. However it is also a much more comfortable view around people with money. The deal is that we are rich and successful, but because we are good people we will toss a few dimes to those who ended up on the short end of the stick.

I have often said that both Rubin Democrats and Republicans think that income should flow upward. The difference is that the rubin Dems believe that the rich should pay their taxes.

William D. Cohan September 18th, 2011 at 2:15 pm
In response to Dean Baker @ 18

yes but all of a sudden they were chock full of risky securities so that if there a two percent decline in their value, it wiped out their equity, and this the SEC allowed them to do, in part because they complained that commercial banks were getting into their businesses

Dean Baker September 18th, 2011 at 2:16 pm

Scarecrow,

I like to think that we are making progress — it keeps me getting up every morning. I hope the book will be helpful in trying to get people to think about basic issues differently. I hope it has an impact.

twobeers September 18th, 2011 at 2:17 pm

Your suggestion to subject professional jobs to free trade is brilliant. I support the idea of “beating up professionals” (present company excluded), and demonstrating that “everyone’s salary is a cost to someone else.”

William D. Cohan September 18th, 2011 at 2:17 pm

dean

with interest rates so low, why is unemployment still so high?

Dean Baker September 18th, 2011 at 2:18 pm

Mommybrain,

yes Greenspan denied there was a bubble. I first looked at the issue closely in 2002 when he gave testimony saying that there was no bubble. None of the reasons he gave passed the laugh test. I then looked at the data closely and decided there was in fact a serious bubble — of course that was in 2002. Naturally it got much worse over the nnext 4 years,.

Mauimom September 18th, 2011 at 2:19 pm
In response to Dean Baker @ 15

I like your suggestion about “aggressive correcting.”

Whenever I stray over to Huff Post, or read comments in the NYT, I’m astounded at the ignorance and repetition of conservative talking points — not just the “surface” ones, but all the way down to the underlying assumptions.

Personally, I try as frequently as I can to register a “corrective” comment. Your book is so valuable in helping to frame those missives.

Maybe there needs to be some organized way to respond to this avalanche of crap. We can’t expect you to do it all, but perhaps you can educate us on how to do it better ourselves.

Phoenix Woman September 18th, 2011 at 2:19 pm

Welcome, William and Dean!

This topic seems to be especially timely today, as it looks very like another effort was just made to neutralize and silence NYS AG Eric Schneiderman and warn him and other state AGs off the bank-crimes beat, this time by attacking one of his subordinates.

Dean Baker September 18th, 2011 at 2:19 pm

William,

we have to replace around $1.2 trillion in lost construction and consumption demand from the collapse of the bubble. There is no component of GDP that is anywhere near sensitive enough to interest rates to do this. And keep in mind that the real rates are not that low, since we have inflation in a 2.0 percent range.

Teddy Partridge September 18th, 2011 at 2:19 pm

I have never sat up late at night at the kitchen table reading a book about economics. Not even when I needed to, the night before my Econ 101 final in college! But this remarkable book made me do just that.

I’ve never seen such extraordinary proposals for turning the “market” arguments on their head. Thank you, Dean Baker — this book renewed my flickering hope that we can wrest our country from the oligarchs who’ve nearly destroyed America’s middle class.

I especially like the idea of subjecting high-compensated degreed-professional workers (doctors, lawyers, economists) to the same trade competition as most of them seem excited to apply to American hourly wage earners. That would be lots of fun.

Thank you for writing this book. I don’t know if there’s a political party left in America whose leaders will embrace these ideas; maybe you’ll help start one?

Henry S. September 18th, 2011 at 2:19 pm
In response to Dean Baker @ 24

Speaking of progress, have you seen a change in the White House and Obama administration’s approach to dealing with (or at least talking about) the balance of the free-market and regulation?

Mauimom September 18th, 2011 at 2:21 pm
In response to Phoenix Woman @ 29

PW – congrats on your excellent diary on this.

Scarecrow September 18th, 2011 at 2:21 pm

Some like Galbraith, Black, Yves Smith, et al have argued that it’s critical to have a non-fraud banking sector to support a market economy, but that this is not possible under the current framework in which fraud is still a fundamental driver in the banking sector. Failing to root that out, if I understand that view, means that even if one did everything else to restructure the market to help reallocate wealth more fairly, the banking sector would still extract too high a fee for going through it. One can see the same in forcing health care costs to go through a private insurance system — now expanded in the Affordable Care Act — to extract a slice and thus move wealth upwards, just as your analysis predicts, etc.

But that implies major prosecutions/investigations for fraud, defunding private insurers and deleting the non-market rules that force people to buy their products, etc. How does the analysis in The End of Loser Liberalism mesh with their analysis?

Dean Baker September 18th, 2011 at 2:21 pm

Mauimom,

that’s a good question as to how to be more systematic in going after bad reporting. Maybe picking a particular target (reporter, columnist or newspaper) that people could go after. The point would be to keep it strictly factual. We don’t want to say bad things about their mothers, we want to point out that they get their facts wrong. If this could be done with one person, then it could be an example for others.

I am not the person to organize such a campaign, but I think it could be done.

jean2 September 18th, 2011 at 2:23 pm

what would be an example of subjecting degreed-professionals to trade competition?

William D. Cohan September 18th, 2011 at 2:23 pm

i thought that was an unusual suggestion too. but then, dean, you give the bankers and traders a free pass on their compensation and many of them make 10 times as much as doctors and most lawyers

Tammany Tiger September 18th, 2011 at 2:23 pm

Democrats have done an awful job–stop me if you’re heard that before–explaining that many so-called free markets really aren’t on account of crony capitalism, captive regulators, etc.; and they’ve done an even worse job of explaining that the market doesn’t function well with respect to some goods and services, most notably health care.

Dean Baker September 18th, 2011 at 2:24 pm

Thanks Teddy — sorry to keep you up late, but glad I did.
I’m glad you liked the part about professional protectionism. I think it is really an important part of the story. Doctors, lawyers, etc. may be smart and hardworking, but that is not the main reason they are doing relatively well in the current economy. the main reason is that they get to protect themselves from foreign competition in ways that autoworkers and dishwashers do not.

Teddy Partridge September 18th, 2011 at 2:25 pm
In response to Dean Baker @ 35

I nominate Samuelson.

Not the textbook guy, the Washington Post guy who’s cruised on the textbook guy’s name (“Samuelson — sounds econ-ish. He must know something about econonmix?!”) his entire career!

spocko September 18th, 2011 at 2:25 pm

progressives can focus their efforts in restructuring market so that more income flows to the bulk of the working population rather than just a small elite.

Great essential insight.

I’d like to hear how this can be applied to trade issues.

Just the other day I was lamenting the way that capital chases cheap labor around the globe and puts the burden of environmental and safety on people in foreign countries whose wages and lack of regulations used to force a new norm and get concessions in the US. “We are competing in a global market.” they say, “We have to race to the bottom to compete! There is no other choice!”

twobeers September 18th, 2011 at 2:26 pm

Your remedies for the economy are like a software patch for capitalism, and are certainly worth fighting for, and what choice do we have but to fight for them?

You don’t present scenarios in the (likely) event we don’t save the system from itself. How do you see the situation developing/deteriorating in the next few years?

Dean Baker September 18th, 2011 at 2:26 pm

William,

I have a whole section talking about cracking down on finance, including a financial speculation tax. If that doesn’t put some serious downward pressure on traders pay, I don’t know what would.

But yes, I also want trade agreements that make it as easy for us to get health care from a qualified Mexican doctor as it is to buy a pair of pants from Mexico.

Teddy Partridge September 18th, 2011 at 2:26 pm
In response to jean2 @ 36

There are several, including getting around the “not trained to US standard” excuse, in Dean Baker’s book. I’ll let him provide spoilers if he likes… or you could buy and read the book.

jean2 September 18th, 2011 at 2:27 pm
In response to Dean Baker @ 39

How do you propose “unprotecting” from or exposing doctors and lawyers to foreign competition?

Dean Baker September 18th, 2011 at 2:27 pm

twobeers,

we have to work with what we have. If we see some complete social breakdown or an environmental catastrophe (both real possibilities) we will have to deal with them at time. I can’t see much use in speculating about situations which will take unpredictable shapes.

Teddy Partridge September 18th, 2011 at 2:28 pm
In response to Dean Baker @ 39

Flipping that elite and vocal segment from pro-”free trade” to job protectionism (because they are suddenly at risk for competition from low wage workers abroad) might be just enough to shift gears in America.

jean2 September 18th, 2011 at 2:28 pm
In response to jean2 @ 45

I shall read it!

William D. Cohan September 18th, 2011 at 2:28 pm
In response to Dean Baker @ 43

yes i read the section on finance and thought it interesting, including the speculation tax. i just found it curious you would single out doctors and lawyers but not bankers when they make so much more money…are you thinking maybe their compensation is subject to market forces in a way that doctors’ salaries are not?

Dean Baker September 18th, 2011 at 2:29 pm

Jean2,

I have some suggestions for removing protections for professionals, but the basic point is to make the standards (our standards) as transparent as possible, allow testing in the home country to reduce costs (our testers) and then allow completely free work authorization to professionals who meet the standards.

Mommybrain September 18th, 2011 at 2:31 pm

What about the way Econ and finance are taught at B schools and Universities? If the underlying assumptions being taught to all students are flawed, I would think that would be a tough nut to crack.

deleteme September 18th, 2011 at 2:31 pm
In response to tammanytiger @ 38

“the market doesn’t function well with respect to some goods and services, most notably health care.”
___

Couple of things:

“Conservative” economists love to tout their beloved “efficient markets hypothesis” as the panacea for all things socioeconomic. Yves Smith, though, nails it with her observation that efficient markets are by definition low-margin. Opacity = Profit.

The other thing is that, absent rational and effective regulation, “free markets” inexorably become a Greshham’s Law race to the bottom.

Dean Baker September 18th, 2011 at 2:31 pm

William,

i also discuss CEO pay, which I think is a case of CEOs using a corrupt management structure to rip off their companies. But, I think that if we squeezed much of the money out of trading then the pay of traders would be brought down to earth. If we put in a speculation tax and we still see traders regularly pulling in 8-figure salaries, then I would be willing to reassess this view.

Joojoobees September 18th, 2011 at 2:31 pm

Something that bothers me: People keep saying that redistribution is socialism, but it seems to me that the system that requires constant redistribution of money is capitalism. Now the money has concentrated in too few hands (due to policies like elimination of inheritance tax) and this is A) aristocracy, not capitalism — you have money if you are born into it, and B) the root cause of our jobs crisis — rich people don’t spend money, they just speculate on gold, oil, and other commodities. Without constant redistribution of money throughout society, our markets fail, jobs disappear, middle class shrinks … this isn’t socialism this is aristocracy.

jean2 September 18th, 2011 at 2:32 pm
In response to Dean Baker @ 50

You mean “our testers’ test in various home countries?

Scarecrow September 18th, 2011 at 2:32 pm

Dean — the example you cite in the book about Arne Duncan essentially letting private colleges off the hook for what looks like fraud — that seems to be the pattern in this and the previous administration. How do you see progressives affecting the debate so that such practices aren’t tolerated? And what other examples would you point to where we need to focus?

Dean Baker September 18th, 2011 at 2:32 pm

Mommybrain,

yes, bad thinking permeates economic teaching. Much of it is a propaganda exercise. We have a huge amount of work ahead of us.

Phoenix Woman September 18th, 2011 at 2:32 pm

And I’ll bet that with hospitals pressured to cut costs and salaries (which have to be high for US doctors as they typically rack up a cool quarter-million of student loan debt, at minimum), and with more doctors being imported from places with free universal public education up to and including university-level education, we’ll see this shift happening fairly soon.

Dean Baker September 18th, 2011 at 2:33 pm

Jean2,

I mean that we have use authorized testers giving medical and law exams in India, China and other countries. This way if we don’t trust the integrity of their systems, we have out own people administering the exams.

William D. Cohan September 18th, 2011 at 2:34 pm

dean

i agree with your point that the economy is suffering from a lack of demand. how do we again stimulate that demand when many people are sick and tired of consuming?

Scarecrow September 18th, 2011 at 2:35 pm
In response to Dean Baker @ 53

On the financial transactions tax, news reports suggest Tim Geithner argued against the Europeans do this, even as he lectured them on how to expand their bank bailout capacity. Not much chance of that getting through this Congress if the Sec. of Treasury is opposed to it — he’s a “slow walker,” so we recently learn.

David Kaib September 18th, 2011 at 2:36 pm

One of the things I loved about this book is that Dean repeatedly shows how much various things we do not talk about cost compared to the Bush tax cuts, which have talked a great deal about. It may be less fun to talk about things like prescription drugs or the high dollar, but it is important that we get past that.

Dean Baker September 18th, 2011 at 2:36 pm

Scarecrow,

another example would be the mortgage and securities fraud that many banks engaged in on a large scale. Unofrtunately, no one is talking about sending these people to jail. These are really serious crimes with very serious consequences, however because they were done by wealthy people no one in a position of authority seems to think in terms of jail time.

The same applies to pharmaceutical companies that lie about their drug test results. These are serious crimes, they deserve more than a wrist-slap.

William D. Cohan September 18th, 2011 at 2:38 pm

also dean, am intrigued by tax on the traders but don’t forget the bankers — there are a lot of them too — they don’t trade and they make way way too much money, multiples of doctors

eCAHNomics September 18th, 2011 at 2:38 pm

Just coming in & I haven’t read all the comments, so ignore this Q if it’s a repeat. Who are the progressive economists? Name names.

And why is it not easy to subvert them just as many “labor leaders,” like Gompers, bc tools of corps?

Dean Baker September 18th, 2011 at 2:39 pm

William,

as a wealthy country, we should be a net exporter of capital. this means that we should export more than we import. At least that is what they used to teach in economics when I was in grad school — somehow that story disappeared when the U.S. became a huge net importer.

However, the other important point is that we don’t have to fill the gap in demand. We can just work less. Our basic problem right now is that we have an economy that can produce too much. This should not be a situation that leads to general suffering.

I thought we learned this from Keynes in the Great Depression, but apparently not.

David Kaib September 18th, 2011 at 2:39 pm
In response to Dean Baker @ 63

Yes, as Joseph Singer said,

another word for “regulation“ is “the rule of law.“

Mommybrain September 18th, 2011 at 2:39 pm

I have at times despaired when thinking of the complexity of our now world economy, but thinking about cycles always cheers me up. I believe the time of ascendancy for the new robber barons is about over and the tables will be turned. I’m an old lady, so I may not live to see it, but my Sprout will benefit.

Dean Baker September 18th, 2011 at 2:40 pm

William,

i think part of the excess pay is from their “too big to fail” subsidies. let’s take that away. Also, I think that a lot of finance characters rip off state and local governments, most obviously in their pension fund dealings, but also in selling them inappropriate financial instruments. We have to make these scams more difficult, even if we may not be able to eliminate them altogether.

eCAHNomics September 18th, 2011 at 2:40 pm
In response to Dean Baker @ 53

Agency problem. CEOs work for themselves, not the shareholders.

bluedot12 September 18th, 2011 at 2:41 pm
In response to eCAHNomics @ 65

Me too. Late comer and who are the progressive economists we should all trust?

TarheelDem September 18th, 2011 at 2:41 pm

Dean,

What are the mechanisms that might prevent markets from automatically distributing income upward?

What are the changes that government needs to make to ensure that those mechanisms are put into place either in government regulations or in market operation?

Teddy Partridge September 18th, 2011 at 2:42 pm

I like the idea that Medicare recipients, as medical traders (tourists), would split with Medicare the savings for their hip replacements, heart bypass valve replacements, and other needed procedures when done overseas in certified clinic settings.

twobeers September 18th, 2011 at 2:42 pm
In response to Dean Baker @ 46

Fair enough, and anyways, it’s a beautiful day here in San Francisco, and the Giants and 49ers are both leading…

I realize you’re an economist and not a sociologist. You only directly address the issue of class a few times, yet it is implicit throughout the book: the obstacle to the reforms you propose is in the power of the financial industry to control economic policy, and in the (general) refusal of the professional class to rock the boat.

Discussions of class are all but forbidden in the US, but until we can openly declare that “workers without college degrees” are losing (or have already lost) a class war, how can change the subject away from “how much austerity shall we impose?”

Did you make a conscious decision to use the euphemism “workers without college degrees” instead of “working class”?

Dean Baker September 18th, 2011 at 2:42 pm

eCahnomics,

I could put together a pretty good list of people I consider progressive economists. Stiglitz and Krugman would be at the top. I would put Jamie Galbraith, Robert Pollin, and Larry Mishel as other prominent ones. One good days Jeffrey Sachs makes the list. there are many others.

gordonot September 18th, 2011 at 2:44 pm

Dean,

You’ve written about the framing that NPR does. Do you have any idea who controls that and how?

Dean Baker September 18th, 2011 at 2:44 pm

twobeers,

I did make a decision not to refer to class in the book. I want to try to reach as many people as possible. In choosing a word you always have to decide whether it is more inflammatory than informative. I think that “class” often is.

bluedot12 September 18th, 2011 at 2:45 pm
In response to Dean Baker @ 75

What do you think of the MMT types like Mossler, Wray and Mitchell?

eCAHNomics September 18th, 2011 at 2:46 pm
In response to Dean Baker @ 66

Excess supply is not solely U.S. problem; it is global.

Last time U.S. had massive excess supply, Gilded Age (for much the same reasons as now), it went on a colonialism binge to “open markets” to U.S. goods. China, viewed as the consumer prize, with its concessions to European colonizers, was one of the few nations in the East not to be outright colonized (Japan too). Doesn’t seem as if “concessions” from China are anywhere in sight, WTO signatory notwithstanding. Didn’t really work back then anyhow, as, for example, Brits had to get Chinese addicted to opium to get trade to move toward the western desired outcome.

Scarecrow September 18th, 2011 at 2:46 pm

Dean — for your replies, it helps to start by hitting the “Reply” button at the bottom right of the comment to which you’re referring. It makes it easier for the rest of us to connect your answer to the question/comment. thanks.

William D. Cohan September 18th, 2011 at 2:48 pm

dean

the fed’s policy of low interest rates baffles me at the moment. first, it goes against one of your arguments about the Fed and bankers liking high interest rates and aren’t low interest rates a gift to bankers that back up to the fed and a terrible tax on savers?

Dean Baker September 18th, 2011 at 2:49 pm

Gordonot,

you asked about NPR’s framing. I have found this very interesting because I have gotten to know several reporters there some. I think the process is very interesting. They are constantly around people who say the same things — deficit bad, out of control Social Security and Medicare, greedy geezers. This permeates their thoughts about the world.

They can talk to me and others like me and think that we are a peculiar oddity that they can’t fully understand — sort of like someone who know who might belong to a religious sect that we don’t understand, but we may still in some ways respect. Anyhow, they let us speak occasionally so they have fulfilled the obligation to give the other side, but they never really question the basic assumptions they have in their reporting.

I think the corruption comes in through the fact that those who did question the basic assumptions might get some serious heat from their higher ups. However, this is rarely an issue, because these people don’t think there is anything questionable in their assumptions.

Dean Baker September 18th, 2011 at 2:49 pm
In response to Scarecrow @ 80

thanaks

Scarecrow September 18th, 2011 at 2:51 pm

One of the problems you deal with in the book is the disempowerment of the labor movement and the companion efforts to disenfranchise voters who may be inclined to support fairer outcomes. The counter to that is not just econonic; it’s political and social which suggests progressive economists should align strategically with others, not just unions, wages those battles. What’s the most important action/thing we, as bloggers/activists, can do on that score?

Dean Baker September 18th, 2011 at 2:51 pm

Bernanke could be much more aggressive in targeting a higher rate of inflation. Given the circumstances something as orthodox as the Taylor Rule would say that we want a much lower real interest rate. However with short-term rates at zero, the only way we get there is with higher inflation.
btw, Bernanke is not a nut — he would not raise interest rates with the economy so weak.

Dean Baker September 18th, 2011 at 2:52 pm
In response to bluedot12 @ 78

I’ll confess to some confusion on the MMT arguments. Insofar as it is basic Kenyes, I am 100 percent with them. Insofar as they are going beyond how I understand Keynes, I am afraid that I do not follow what they are saying.

William D. Cohan September 18th, 2011 at 2:53 pm
In response to Dean Baker @ 82

i was also scratching my head a bit on the idea that journalists and high-level bureaucrats are biased toward a strong dollar because they travel alot…

eCAHNomics September 18th, 2011 at 2:53 pm
In response to Dean Baker @ 75

Gah on most of your list. Stiglitz maybe yes, but he has disappeared himself from being a public intellectual. Krugman’s (a Bernanke hire at Princeton, need I say more) sole purpose is to confine the discussion on the left to a straightjacket. That is, he prints some mild criticism, gets jumped all over, and that chills a more fundamental and far-reaching discussion that is the real one that should take place. I’ll only add one more to my attack. Sachs is a gut wrenching fraud, largely responsible for Russian economy descent into oligarchy, chaos, depression. He’s a fly-by-night who flips from one project to another when his previous on fails.

twobeers September 18th, 2011 at 2:54 pm

If I’m reading you correctly, you make the point that that the longer we wait to lower the dollar (to the end of restoring some manufacturing jobs), the harder it will be to restore the eroding capacity when demand returns. So, ironically, as a result of current supply-side policy, there may come a time when supply-side stimulus would actually be called for!

marymccurnin September 18th, 2011 at 2:55 pm
In response to Phoenix Woman @ 58

and nurses, too.

Dean Baker September 18th, 2011 at 2:55 pm
In response to eCAHNomics @ 79

We should expect fast growing countries like China to be running large trade deficits. that is the econ orthodoxy.

i blame the imbalances largely on the Rubin-Greenspan-Summers, Committee to Save the World (TIme Magazine, 1997) effort in the East Asian financial crisis. They imposed such harsh conditions on the countries in the East Asian financial crisis that all the developing countries decided that they never wanted to be in the same position. this meant accumulating massive amounts of resreves. Hence, under-valued currencies and large trade surpluses for them and large trade deficits for the U.S.

bluedot12 September 18th, 2011 at 2:55 pm
In response to Dean Baker @ 86

I am not an economist but you mentioned Steglitz and Krugman and I know they have some serious disagreements with them but not at this time with demand being where it is — or not.

gordonot September 18th, 2011 at 2:56 pm
In response to Dean Baker @ 82

uh huh…like an atmosphere of incestuous amplification leading to automatic self-censorship. Like when the Planet Money guys start beating up on Elizabeth Warren for having a perspective out of the mainstream banker-think. They attack her like antibodies who’ve discovered an alien virus.

Dean Baker September 18th, 2011 at 2:57 pm

I’ve seen it meany times — even among staffers for progressive members of Congress. I wouldn’t say that this is the whole story or even most of it. If a high dollar hurt Goldman Sachs and Wal_mart, they would get it down very quickly and screw the congressional staffers. But it certainly makes it harder to build up any counter force that your natural allies may be in the other camp.

Phoenix Woman September 18th, 2011 at 2:57 pm
In response to marymccurnin @ 90

Yup, whose schooling costs nearly as much as doctors’ schooling.

eCAHNomics September 18th, 2011 at 2:58 pm

Ditto on that. Besides, any economist who professes a “theory” on how the economy works automatically goes into my garbage heap. When I was an econ forecaster on Wall St., I would sometimes get asked what “school” of economics I adhered to. My A was: none. I looked at the data and tried to figure out what they were saying about the economy, coupled that with some structure from my mostly worthless econ courses.

Dean Baker September 18th, 2011 at 2:58 pm
In response to gordonot @ 93

Absolutely, the attacks on Elizabeth Warren were outrageous. She has said some things that are not entirely right, but who hasn’t? Trying to make her sound like an ignorant do gooder was garbage journalism. She knows her stuff.

Scarecrow September 18th, 2011 at 2:58 pm

Your analysis of the centrality of the housing bubble, its collapse, and the hole that the depressing housing industry left in demand seems key to a lot of your economic recovery recommendations during the little depression. Can you expand on that — and in particular, how the failure to see the importance of that hole misleads even well meaning progressives to suggest remedies that miss the point.

And as a follow up, are we doomed to just wait until the huge housing surplus is used up, or is there something policy makers should be advocating now to speed that along?

Mauimom September 18th, 2011 at 2:59 pm

I read somewhere that Nebraska has the largest number of Medicare-paid hip replacements in the nation.

Maybe we can get a group rate on a bus to Mexico for those Red State patients.

William D. Cohan September 18th, 2011 at 3:00 pm
In response to Dean Baker @ 94

hasn’t the dollar been relatively weak for years despite all the pretend jawboning by Treasury secretaries that they want a strong dollar?

Dean Baker September 18th, 2011 at 3:00 pm
In response to bluedot12 @ 92

yes, in my list of progressive economists I am not saying that I agree with everything they say or that they agree with everything each other says. These are people who I expect in general to be on the right side of arguments — let;s just say that they are working for our team.

twobeers September 18th, 2011 at 3:02 pm

Have you ever been consulted by anyone in the current Administration? In Congress?

I find it maddening that the people who have correctly anticipated the consequences of bad policy (you, Stiglitz, Krugman, etc.) are ignored when their predictions prove accurate. Instead, we go back to the same poisoned well…

bluedot12 September 18th, 2011 at 3:03 pm
In response to Dean Baker @ 101

That sound right.

I may have missed this but do you favor a strong or a weak dollar?

DWBartoo September 18th, 2011 at 3:03 pm
In response to eCAHNomics @ 88

Good on ya, eCAHN!

Late to this party and have to leave soon, but glad I am that you could make it.

;~DW

Dean Baker September 18th, 2011 at 3:05 pm
In response to Scarecrow @ 98

I think that by not seeing the importance of the housing bubble many people end up looking in the wrong place for solutions. For example, many people are trying to find ways to get consumers to spend more. I keep pointing out that consumers are actually spending a lot relative to their income (the saving rate is now 5 percent, compared to a pre-bubble average of 8 percent), so we should not expect to see a burst of consumption fill the gap.

Similarly, the financial system is not keeping firms from investing. Investment in equipment and software as a share of GDP is almost back to its pre-recession levels, which is impressive given the massive amount of excess capacity.

If we don’t look in the wrong places then we see that the fundamental problem is that we have a large trade deficit that creates a huge gap in demand. This can be filled in the short-term with government spending and by reducing work hours. the longer term story must be a lower dollar and higher next exports.

In terms of the excess supply of housing, I think we can be more creative about penalizing banks for holding vacant units. I have advocated “right to rent,” let homeowners stay in their house as renters post-foreclosure. We can also tax vacant units. Let’s bring the price of housing down. It is almost a third of people’s budget. This is a way to give them some relief.

ComRad September 18th, 2011 at 3:06 pm

Technological advancements allowed the manipulation and corruption of markets. There must be some lesson about the regulation of the use of technology. If you are too averse to that, consider the over-investment in military technology and the immense damage that enables.

What would you recommend, Mr. Baker, to avoid the abuse of technology under capitalism?

twobeers September 18th, 2011 at 3:08 pm
In response to bluedot12 @ 103

A weaker dollar is one of the foundations of his argument. It’s a powerful tool: a weaker dollar raises import prices, which brings jobs back, which increases employment and puts upward pressure on manufacturing jobs, which increases the tax base, thereby helping lower both trade and budget deficits.

In footnote 68, he says that a low budget deficit plus a strong dollar plus a low trade deficit is inescapably linked to high unemployment.

Dean Baker September 18th, 2011 at 3:08 pm
In response to twobeers @ 102

I have occasionally talked to some people in the administration. I have generally assumed that it was to humor me (get an invitation to the White House — wow). I sort of doubt that most of what I had to say was taken seriously, although I am impressed to see from the excerpts of the Suskind book that a financial speculation tax was apparently debated at the top levels — nixed by Geithner and summers.

Scarecrow September 18th, 2011 at 3:08 pm

Seems to me that the problem with discussing the value of the dollar relative to other currencies starts with using terms like “strong” vs “weak.” I don’t see how an “over-valued” dollar, kept artificially high for policy reasons, is in our interest. But that would be called a “strong” dollar, no?

eCAHNomics September 18th, 2011 at 3:09 pm
In response to Dean Baker @ 91

China needs to provide 20 million new jobs/year (or at least that was the # a decade ago. They are following the time-honored, successful export oriented model for development that every now-prosperous economy pursued in its development years. Diff is that China is bigger relative to world than other developing economies were back in the day. So Chinese policy is globally destabilizing, esp now that U.S. is no longer consumer of last resort. China is massively, and historically has reason to be, afraid of domestic political instability. See Taiping Rebellion as one of many examples, which includes Charles Gordon, the very same as Gordon of Khartoum. A rousing, not to mention instructive piece of history to know, both wrt China & wrt Gordon.

In addition I agree with your point. The last thing China wants to be (joined by other countries now like Brazil, Russia, India) is in the maws of the IMF/WB. So those countries are accumulating reserves like crazy. Completely verkachte (sp?) as a policy that would lead to global econ optimal, but there it is.

David Kaib September 18th, 2011 at 3:11 pm
In response to Scarecrow @ 109

This is an excellent point.

Dean Baker September 18th, 2011 at 3:11 pm

William,

if you look at broad real index we are just falling back to mid-90s levels. However, this understates the real value of the dollar because it uses the CPI to adjust real values rather than an index of traded goods. Our CPI shows a much higher rate of inflation primarly because of health care which is for the most part not traded. This means that the real value of the dollar has not declined as much as this index implies.

bluedot12 September 18th, 2011 at 3:11 pm
In response to Dean Baker @ 105

Good answer. Sounds like the right diagnosis. A lower dollar can help by increasing exports. But how do you make that happen? The housing problem seems intractable since it would require a political solution which is well —

bluedot12 September 18th, 2011 at 3:12 pm
In response to twobeers @ 107

I agree.

eCAHNomics September 18th, 2011 at 3:13 pm
In response to Scarecrow @ 109

You should view “strong dollar” as nothing more than a talking point by U.S. treas sec. Completely empty otherwise.

William D. Cohan September 18th, 2011 at 3:14 pm

i assume dean that you believe — as i have come to believe — that we should have just let the banks that fail, fail and the ones that survive, survive and not bailed any of them out?

Dean Baker September 18th, 2011 at 3:15 pm
In response to ComRad @ 106

I don’t know if there is a single tool for avoiding abuses of technology, but certainly trying to make sure that people suffer real penalties in the case of serious abuses would be a good step. For example, it seems to me that the short-cuts in the BP spill may have bordered on criminal negligence. People died (i think 11). It would be entirely appropriate that this incident be investigated as criminal negligence and if the facts warrant it, the people responsible should go to jail. However, i think we (meaning government and media types) have an attitude that high level execs are good people and don’t belong in jail no matter what they might have done.

bluedot12 September 18th, 2011 at 3:15 pm
In response to Scarecrow @ 109

Well I think of it when it costs less to buy another currency then the dollar is strong. It makes our products more expensive for others to buy and therefore exports go down, no?

eCAHNomics September 18th, 2011 at 3:17 pm

Bail out the economy, not the banksters. I.E. put the bailout resources into larger stim.

Way too late for that. The Carter-Reagan-Bush-Clinton-Bush-Obama continuum has carved the moral hazard of bailing out a completely corrupt U.S. fin ind into stone.

Dean Baker September 18th, 2011 at 3:17 pm

Yes, we would have been much better off if we had taken steps to ensure that the financial system continued to operate and let the chips fall where they may with the big banks. As it is, I don’t believe that, even with the resolution authority in Dodd-Frank, that anyone thinks we would ever let one of the big banks fail.

twobeers September 18th, 2011 at 3:17 pm
In response to Dean Baker @ 108

Your ideas are straight-forward, logical, and empirically demonstrable.

If those in Washington hear and choose to ignore you, well, Sinclair’s famous quote comes to mind…

bluedot12 September 18th, 2011 at 3:18 pm
In response to Dean Baker @ 117

Recent history supports your point — unfotunately.

Dean Baker September 18th, 2011 at 3:19 pm
In response to eCAHNomics @ 110

Yes, I was very encouraging by China’s successful stimulus. I won’t claim any great expertise on China’s economy, but it was remarkable how it managed to sustain an 8-9 percent growth rate in a year when its exports were collapsing. This suggests to me that they can move off the export-led model, but it will not be overnight.

eCAHNomics September 18th, 2011 at 3:19 pm
In response to ComRad @ 106

If you’re talking about “technological” advancements in financial markets, I call BS. All that has happened in fin “mkts” is to figure out a more hidden way of incr leverage. That’s as old as the hills, along with Ponzi schemes, fraud, con artists, etc.

[Let's show some respect for the author and host - bev]

William D. Cohan September 18th, 2011 at 3:19 pm
In response to Dean Baker @ 120

why do you think in the end, they decided to prop up the status quo instead of trying to implement a meaningful restructuring of the industry?

jean2 September 18th, 2011 at 3:20 pm
In response to twobeers @ 121

What is Sinclair’s “famous” quote?

bluedot12 September 18th, 2011 at 3:21 pm

Which brings up that fin reg legislation. What words of wisdom do you have on that?

twobeers September 18th, 2011 at 3:22 pm

You say in the book that the repeal of Glass-Steagall was an inconsequential factor in causing the housing bubble. Many progressive economists have argued otherwise. Can you elaborate on this?

bluedot12 September 18th, 2011 at 3:22 pm
In response to Dean Baker @ 123

IMagine that, a completely planned economy that’s working??

twobeers September 18th, 2011 at 3:23 pm
In response to jean2 @ 126

something to the effect that it’s hard to make a man understand something when his job depends on him not understanding it.

Dean Baker September 18th, 2011 at 3:23 pm

I am afraid that it was largely case of protecting their friends. Robert Rubin is sort of the godfather in this picture. The administration is filled at the top levels with his friends and proteges. I don’t think they could envision sinking Citi and the other big banks.

In fairness, I think there also is a deeply held sense of caution in the sense that it will always be safer to do tomorrow what you did today and hope for the best. Letting a Citi or Bank of America go under would involve big risks — no doubt about that — and these people are not risk takers.

William D. Cohan September 18th, 2011 at 3:23 pm
In response to bluedot12 @ 127

it’s a total head fake, designed — in 2,200 pages — to let the foxes back in the hen houses. by contrast, glass-steegal was something like 35 pages…very clear: either choose commercial banking or investment banking. worked pretty well for 55 years or so

Mommybrain September 18th, 2011 at 3:24 pm

When fascism comes to America it will be wrapped in the flag and waving a cross. S. Lewis

Scarecrow September 18th, 2011 at 3:24 pm

William Cohan — you mention Dean’s decision to make the book available at cost — to follow his own principle wrt to coypright, etc — how do you see the success of that model? Will this help get the book into more readers’ hands?

And Dean, this implies an ability of some organization to fund the effort — what do we need to do to grow that institutional ability? Seems to me, lots of progressive blogs have to struggle with the funding issue every day, and those who are getting by often have to accept conditions, e.g., to remain without bounds of acceptable criticism of the Administration. What’s your take on that?

bluedot12 September 18th, 2011 at 3:25 pm
In response to Dean Baker @ 131

Well, it would have been nice to put a few of them behind bars and stopped the bonuses for a year.

Mommybrain September 18th, 2011 at 3:25 pm

Both quotes suit the sit.

PeasantParty September 18th, 2011 at 3:25 pm
In response to Dean Baker @ 131

I think the entire administration and the Hill is designed like that. I am still shocked at all the Bush holdovers, even from Bush the first!

jean2 September 18th, 2011 at 3:25 pm
In response to bluedot12 @ 129

sounds like a Beatles’ song

Dean Baker September 18th, 2011 at 3:25 pm
In response to twobeers @ 128

I just have never seen what the repeal of Glass Steagall allowed that could not have happened otherwise. William earlier pointed to the SEC’s relaxation of leverage restrictions in 2004 as an outcome of the repeal. There is some dispute about the impact of this ruling (the investment banks had been heavily leveraged in the 90s also), but in any case the complaint should then be on the SEC ruling, not the GS repeal. After all, the GS repeal did not literally require the SEC to relax its leverage requirements.

bluedot12 September 18th, 2011 at 3:26 pm

Yeah that’s my opinion of it too. I used to like Barney Frank,not so much anymore.

ComRad September 18th, 2011 at 3:26 pm
In response to Dean Baker @ 117

I don’t think the avoidance of prosecution is so much our attitude as it is manipulation and obfuscation, largely enabled by technology.

It seems we are now enduring the coercions of the market. Perhaps that is why we are inundated with the projections of coercion onto “government”.

twobeers September 18th, 2011 at 3:27 pm
In response to Mommybrain @ 133

that’s a good one, too!

David Kaib September 18th, 2011 at 3:27 pm
In response to Scarecrow @ 134

By the way, Dean’s earlier book, the Conservative Nanny State, is also available on line for free.

William D. Cohan September 18th, 2011 at 3:27 pm
In response to Scarecrow @ 134

well people seem to like things that are free. the real question is will enough people even become aware of dean’s book so that it has material impact on the debate. the media tend to focus on books made by publishers that charge $30 per book and the media helps get the word out about books. lord knows it’s very very very difficult for writers to cut through the noise and get their books known. for every ron suskind that cuts through, there are hundreds that don’t, even if the books are free

Dean Baker September 18th, 2011 at 3:28 pm

Yes, I don’t think much of Dodd-Frank. There are definitely some positive steps (e.g. resolution authority of non-banks, requiring most derivatives to be traded on clearing houses, and Consumer protection agency), but given the severity of the crisis, we should have expected much more. And the Rs may roll back the limited gains we saw.

William D. Cohan September 18th, 2011 at 3:29 pm
In response to Dean Baker @ 139

no dean but the pressure the securities firms put on the sec to allow them more leverage was one of the consequences of the GS repeal and the SEC under donaldson, mr former wall street, just went along

Dean Baker September 18th, 2011 at 3:29 pm

Yes, it is hard to get a book noticed if it’s not by a name-brand author with a name-brand publisher, but we knew this.

Scarecrow September 18th, 2011 at 3:30 pm
In response to David Kaib @ 143

Yes, thanks.

Zaid Jilani September 18th, 2011 at 3:30 pm

What are some other public figures, writers, or economists who have shown a good understanding of the need to avoid loser liberalism? Gailbraith and Noam Chomsky are two that I can think of.

William D. Cohan September 18th, 2011 at 3:31 pm
In response to Dean Baker @ 145

indeed. i interviewed gary gensler on thursday. he said derivatives reform is basically nowhere and unchanged, three plus years after the crisis

PeasantParty September 18th, 2011 at 3:32 pm

Dean,

Do you think the message of the Wall Street Occupiers will get their attention? I know they live in their own personal bubble worlds, but something like this has to bother them to a degree.

Dean Baker September 18th, 2011 at 3:32 pm
In response to PeasantParty @ 137

It is striking, at least to me, that no one ever says to these guys “hey, you really blew it.” I mean Bernanke and Geithner were right at the center of the financial system as the housing bubble was growing ever larger and more dangerous. Yet, they did nothing.

This would be like inviting the captain of the Titantic to captain another cruise after his remarkable return from the tragedy. However, the “who could have known” doctrine has provided a blanket amnesty to all these people.

Scarecrow September 18th, 2011 at 3:33 pm

Yes, and higher Bassel cap requirements for bigger banks are “anti-American.” Jamie said so.

William D. Cohan September 18th, 2011 at 3:35 pm
In response to Dean Baker @ 152

my last two books — about goldman and bear — point some pretty stiff fingers at the bankers, traders, executives and regulators — they all knew; they just did not have the integrity and the incentive to stop the party — or to pull the punch bowl away

William D. Cohan September 18th, 2011 at 3:35 pm
In response to Scarecrow @ 153

jamie is a fool for saying that, as was proved three days later when the ubs trader went “rogue”

Dean Baker September 18th, 2011 at 3:35 pm
In response to PeasantParty @ 151

I think the Wall Street occupations are a good step. The nurses have gotten a fair bit of attention in their push for a financial speculation tax.

It is hard to know what will work at the end of the day. We have to keep trying different tactics and see what has some impact.

The media of course have this view that you have these ignorant know-nothings who are trying to interfere with serious policy-making. The facts would suggest the opposite. The folks making policy really do not know what they are doing and the protestors are pushing perfectly reasonable policy solutions.

PeasantParty September 18th, 2011 at 3:36 pm
In response to Dean Baker @ 152

That is so true. Also, Summers and Paulson are ring leaders in my view. I still can’t get over the grins and smirks after Bush announced that the tax payers would TARP them out of their mess. All that money and they still haven’t made it right and are still holding the same mortgage crap. Still throwing people out of their homes, while the economy is in no shape for people to be able to pay those mortgages.

twobeers September 18th, 2011 at 3:37 pm
In response to Dean Baker @ 147

I appreciate both the free access to your book, and that you have the courage of your convictions, but I’d really like to put a dead-tree version under a few neo-liberal xmas trees…

bluedot12 September 18th, 2011 at 3:37 pm
In response to Dean Baker @ 156

Ain’t that the truth.

Mauimom September 18th, 2011 at 3:37 pm
In response to Dean Baker @ 120

Dean, I’ve asked in probably five different diaries/articles: exactly what WOULD have happened if we hadn’t “bailed out the banks” via TARP? There were a lot of people running around with their hair on fire, waving 3 page “plans” for what they [Paulson] should be able to do with $700 billion, but I’ve just never heard described exactly what they were so afraid of.

Should we have let it happen? Seems to me it would be useful to know, “just in case” we find ourselves in this situation again.

Dean Baker September 18th, 2011 at 3:38 pm

That’s right. I don’t mean to say that it was all ignorance. Much of the story is corruption. Even the ignorance has large shades of corruption. I’m sure that Greenspan, Bernanke and Geithner are not stupid people. It was very convenient not to notice a housing bubble because people with considerable power were making huge amounts of money off of it. I suspect that if the bubble was driving Citi and Goldman out of business, this trio might have been able to see it much sooner.

DWBartoo September 18th, 2011 at 3:38 pm

Exactly so, William.

DW

Dean Baker September 18th, 2011 at 3:39 pm
In response to twobeers @ 158

We will have the dead tree version available in a couple of weeks. I think it will sell for around $7. That is just the printing cost, we are not making anything on it.

William D. Cohan September 18th, 2011 at 3:39 pm
In response to Dean Baker @ 161

amen

blackbeary September 18th, 2011 at 3:39 pm

Isn’t the tendency to overproduction an inherent flaw of capitalism?
Also, the housing bubble was just the tip of the iceberg. After securitization leveraged it, the system imploded.

bluedot12 September 18th, 2011 at 3:40 pm
In response to Dean Baker @ 163

Well, I’m gonna get it. thanks

hapa September 18th, 2011 at 3:41 pm

dean:

your book focuses on the need for fair-deal types to counteract markets built by ‘flood-upwards economics.’. james k galbraith has said for years that the big federal category error is ‘fiscal responsibility’ aka the household budget metaphor. stiglitz of course champions fixing market failures, including ecological impact.

ok. al gore just finished a giant sales pitch for his 3000-strong crew of presenters, all around the world.

i realize the VP has a big budget, but a) would you consider a project along those lines, reintroducing progressive econ to a union-less party-less america; and b) what would be your main topics?

defogger September 18th, 2011 at 3:41 pm

Hey Dean,it seems to me that our key trade problem is transnational circularity.We are not competing against other nations,we are competing against ourselves and hence subsidizing our own demise.For example,we constantly hear of China’s unfair trade practices,but over 50% of its imports into this country are produced by American transnationals that arbitrage the costs of labor,taxation and regulation via this systemic leverage.Without some form of protectionism.how do we contend with such internecine treason?

Dean Baker September 18th, 2011 at 3:43 pm
In response to Mauimom @ 160

There were a range of bad scenarios of what could have happened absent the TARP. The main point in my book is that the Fed had all the power it needed to keep the system of payments in operation. In fact, Bernanke cited the shutdown of the commercial paper market as the most pressing need for the TARP. (Major corporations use commercial paper to pay their bills, including their payroll.)

The Fed had the auhtority to single-handedly keep the CP market going and in fact announced a Fed special facility to buy CP the weekend after the TARP passed. I think that the Fed could have kept everything moving absent the TARP. I think the main issue for Bernanke was to get congressional fingerprints on a much larger bailout that was being operated through the Fed.

ComRad September 18th, 2011 at 3:43 pm
In response to eCAHNomics @ 124

As you should have noticed, the example I gave was the military abuse of technology.

Are you particularly defensive of technology in financial markets? Do you imagine that the mortgage slicing and dicing could have been feasible without computers? You are mistaken to believe that technology did not enable the financial manipulation and misrepresentation.

Technology provides a new territory for exploitation. Have you not learned this lesson?

Scarecrow September 18th, 2011 at 3:44 pm

One of my favorite aspects of Beat the Press, aside from the daily education, is the humor, sometimes subtle — especially in the titles — sometimes not so subtle. Where does that come from?

Dean Baker September 18th, 2011 at 3:44 pm
In response to blackbeary @ 165

It wasn’t there in the 50s, 60s, and 70s — wages kept pace with productivity growth. I would say that the tendency to overproduction really became chronic in the 80s when the tie between wages and productivity growth was severed — the result of deliberate policy.

veganrevolution September 18th, 2011 at 3:44 pm

My view, Dean, is that capitalism has run its course because it is unsustainable because endless growth through resource depletion cannot be maintained because we’d need more than one earth to do so. I think we need a new system. Capitalism itself is a radical evil, in my opinion, because it is destroying us and the earth.

twobeers September 18th, 2011 at 3:45 pm
In response to Dean Baker @ 139

I’ve read (maybe it was Mike Whitney? Michael Hudson?) that the looser lending standards and wilder mortgage plans resulted from the banks’ need to provide more and more fodder for securities and derivatives. Do you think so? If the breakdown of the firewall didn’t impact the bubble, do you have an opinion of the impact of the Commodities Modernization Act of 2000?

William D. Cohan September 18th, 2011 at 3:46 pm

to paraphrase schumpeter

DWBartoo September 18th, 2011 at 3:46 pm
In response to ComRad @ 141

I would suggest that the intentional destruction of the rule of law, across the board, from financial crime, to the unwillingness to prosecute those who tortured, and to the use of drones, has as much to do with a sense of actual and intended government “failure” as techological “prowess”, in the hands of the clever and sociopathic, ComRad.

DW

Dean Baker September 18th, 2011 at 3:46 pm
In response to ComRad @ 170

I am not a fan of the way technology has been used in financial markets — not sure why anyone would think otherwise. Anyhow, I think that a speculation tax would go along way, but probably not the whole story.

It is interesting that many in Congress and the administration want to set up a post Fannie-Freddie system in which the government would guarantee MBS. I really can’t understand the logic of this one. If securitization is an efficient way to deal with risk, then why is it necessary to have a government guarantee?

Dean Baker September 18th, 2011 at 3:47 pm

For better or worse, capitalism is what we have got and it is not going to go away because we may not like it.

Scarecrow September 18th, 2011 at 3:47 pm
In response to Dean Baker @ 169

What’s your take on the effect/merits of the Fed providing credit in dollars to help the ECB backstop European banks? Given the themes in the book, how should a progressive evaluate that — and respond to the inevitable right wing criticisms of anything Bernanke does?

perris September 18th, 2011 at 3:48 pm

great thread, great points;

By releasing The End of Loser Liberalism: Making Markets Progressive under a Creative Commons license and as a free download, Baker walks the walk of one of his key arguments — that copyrights are a form of government intervention in markets that leads to enormous inefficiency, in addition to redistributing income upward. (Hard copies will be available for purchase, at cost, in the near future.) Distributing the book for free not only enables it to reach a wider audience, but Baker hopes to drive home one of the book’s main points via his own example.

I have ALWAYS pointed out, there is NO such thing as a “free market”, the very term is sheer propaganda designed to fool middle class america into voting against themselves

there is no such thing as ownership, law, court adjuducation or enforcing a “sanctity of contract” without regulation

there isn’t even a monetary system without regulation and no regulation means “what I can take and keep is mine”

wat these supposed “free marketeers” REALLY mean is;

“the laws and regulations that help me gather profit are good, those that force me into paying my own bills or debt for the damage I cause are bad”

THAT is what a “free marketeer” really means

this is what the progressives and democrats and whoever decides to represent the middle class MUST point out EACH AND EVERY TIME some propagandist like ron paul argues against regulations

they are winning this debate, they are winning the war of words, they have the tools of effective propaganda and the masses are too foolish to see it when it happens

PeasantParty September 18th, 2011 at 3:49 pm

People have been taught to scorn the more handmade and skilled items. They are no longer sought after and have been replaced by shiny plastic stuff. It used to be that you could buy a vacuum or fridge that would last for almost twenty years. Now, it is all disposable cheap stuff in order to drive you to purchase more cheap stuff.

veganrevolution September 18th, 2011 at 3:49 pm

The sooner we realize that capitalism, especially American corporate capitalism based on greed and self-interest, is a fatally flawed ism, much like state socialism. I don’t think tinkering around the edges (i.e. social democracy or liberalism) will solve the greater problem which is resource depletion and growth.

Dean Baker September 18th, 2011 at 3:50 pm
In response to twobeers @ 174

yes, the weaker lending standards were certainly fueled by the desire for mortgages to securitize. This was an enormously profitable business in the bubble years.

Also the Commodities Futures Modernization Act meant that nothing could be done to regulate credit default swaps — hence AIG accumulating hundreds of billions worth with no one noticing. Of course there is no guarantee that Bush’s regulators would have done anything even if they had the authority.

twobeers September 18th, 2011 at 3:51 pm
In response to blackbeary @ 165

Some think that the demand for securities and derivatives precipitated, or at least accelerated and exacerbated, the bubble.

Chicken and egg, I guess.

DWBartoo September 18th, 2011 at 3:51 pm
In response to Dean Baker @ 152

The “who could have known?” doctrine, Dean, can only “work” if the rule of law is rendered “quaint” and effectively inoperable, by design and intent.

DW

Mauimom September 18th, 2011 at 3:51 pm
In response to Dean Baker @ 169

So TARP = just another vehicle for upward distribution of $$$$$$?

I was just blown away by “terrible terrible things will happen if we don’t pass this legislation!!!! Too terrible for you, poor stupid ordinary person to understand, but trust us, we wise MOTU understand, so give us the money.”

And that this crap was accepted without any delineation of the “threat.” Sorta like the rush to invade Iraq.

twobeers September 18th, 2011 at 3:52 pm
In response to Dean Baker @ 163

I’m stunned. Thank you.

William D. Cohan September 18th, 2011 at 3:52 pm

man, this is starting to get depressing, although it is hard to disagree with you

jean2 September 18th, 2011 at 3:52 pm

If not capitalism, what?

bigbrother September 18th, 2011 at 3:53 pm

Low interest drives capital to the jaws of the Wall street markets S7P 500 Dow and NASDAQ. That is why it is low not to stimulate the economy.

perris September 18th, 2011 at 3:53 pm

this isn’t true veganrevolution, it’s not “capitolism” that’s the problem it’s corporatism.

if there were no capitolism allowed yet corporations could exist they would STILL buy law and take advantage of whatever economic system we set up

believe me, capitolism has been highjacked by the corporatists, a monetary incentive based economy is not the problem, corporations are

William D. Cohan September 18th, 2011 at 3:53 pm
In response to Mauimom @ 186

don’t forget even if it was for all the wrong reasons, the congress rejected TARP the first time…then the market fell 700 points and congress passed TARP 2

BevW September 18th, 2011 at 3:54 pm

As we come to the end of this great Book Salon,

Dean, Thank you for stopping by the Lake and discussing your new book and the economy.

William, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

Dean’s website and book

William’s website and books

Thanks all,
Have a great week.

Next week:
Christian Parenti / Tropic of Chaos: Climate Change and the New Geography of Violence; Hosted by Miles Grant.

Joe McGinnis / The Rogue: Searching for the Real Sarah Palin; Hosted by “EdwardTeller”

Just quick reminder:
Membership drive! Are you an FDL member? If not, please join and help keep FDL delivering kick ass activism and independent journalism. You can join HERE.

ComRad September 18th, 2011 at 3:54 pm
In response to DWBartoo @ 176

But could it not be that technology has enabled the rewards of sociopathy to be more extensive? Yes, in fact, it has.

Would the proper government use of technology for forecasting and regulation mitigate it’s use for expropriation? Of course.

But the worship of it let the frontiersmen wreak havoc.

Pray tell me why we haven’t learned that wisdom?

Dean Baker September 18th, 2011 at 3:54 pm
In response to Scarecrow @ 179

It would be very bad news to see a euro meltdown and another Lehman-style financial freeze up, so having the Fed work to prevent this is positive. At the same time, I hate the fact that so much of this bailout seems designed to leave the banks in tack. The point should be to keep the financial system operating but to screw the shareholders, fire the executives who pushed the banks to insolvency and make bondholders feel some pain.

As it is, everything is being done to keep the banking system operating without any basic reforms. The one positive development is that Merkel and Sarkozy seem genuinely committed at this point to a financial speculation tax that will really bite (0.1 percent ). If this were to pass, it would have a huge impact on Europe’s banking industry.

blackbeary September 18th, 2011 at 3:54 pm
In response to Dean Baker @ 178

Humpty-Dumpty.

Dean Baker September 18th, 2011 at 3:55 pm

the stock market is not the economy

Mauimom September 18th, 2011 at 3:55 pm
In response to Dean Baker @ 177

I think that a speculation tax would go along way, but probably not the whole story.

So does that mean there’s no chance in hell we’ll get such a tax?

DWBartoo September 18th, 2011 at 3:55 pm
In response to defogger @ 168

Very interesting and excellent comment and question, defogger.

DW

Mommybrain September 18th, 2011 at 3:55 pm

Dean and/or William, what is your opinion of the FCIC. Did they do their job? Or was it just an exercise inPR.?

William D. Cohan September 18th, 2011 at 3:55 pm
In response to Dean Baker @ 195

this is absolutely right dean

perris September 18th, 2011 at 3:56 pm
In response to jean2 @ 189

jean, see my 191, if not capitolism then corporations would game whatever system took it’s place

we need to revisit the concept of a corporate umbrella, we need to put faces on business and their actions, and anything a business does must have the owner responsible criminally for harm it might do to individuals or society

it’s the concept of a corporate umbrella that is the problem

Dean Baker September 18th, 2011 at 3:56 pm
In response to BevW @ 193

Thanks Beverly and William,

also thanks to all the participants — many very good questions.

veganrevolution September 18th, 2011 at 3:56 pm

LOL. After the crash of 2008, I realized the inherent problem w/capitalism. I think we all know that we are at an endpoint now, and we need to start throwing out the old rules and begin to think of new ways of living. I am actually quite optimistic, because capitalism needed to be exposed for its unworkable moorings. Now people need to wake up and create a new world for us and our children. The hippies were right! Too bad they were erased from the history books by their own generation.

William D. Cohan September 18th, 2011 at 3:56 pm
In response to Dean Baker @ 197

but lawmakers respond to it as if it were…as do many investors…and cnbc and the media

William D. Cohan September 18th, 2011 at 3:57 pm
In response to Mommybrain @ 200

i thought the FCIC did a fabulous job and was vastly underappreciated. just check out the vast document cache

veganrevolution September 18th, 2011 at 3:58 pm
In response to jean2 @ 189

Skies the limit!

Dean Baker September 18th, 2011 at 3:58 pm

I think the Obama people were far too closely tied to the financial industry to ever consider a real overhaul of the system.

Scarecrow September 18th, 2011 at 3:58 pm
In response to Mauimom @ 198

Tim Geithner told the Europeans he opposes the financial transaction tax. They told him they didn’t need his advice. Tim came home to read he defied his own President on taking Citi down. All hail, President Tim.

DWBartoo September 18th, 2011 at 3:58 pm
In response to Dean Baker @ 161

Yes, it is amazing what one’s “paycheck” precludes one from seeing, Dean.

And such a new concept it is, as well. Really who could have imagined … besides many who DID raise questions which were studiously ignored.

DW

Scarecrow September 18th, 2011 at 4:00 pm

Thanks so much to Dean and William for making this a fun Book Salon, and good luck with the book. — John Chandley

Dean Baker September 18th, 2011 at 4:00 pm

Yes, and this is a huge problem. If we go running every time the market falls, then it will sharply curtail the scope for progressive action. This is another place where it is very important to educate the public. Unless they have lots of money (and most don’t), they have little at stake in a stock market plunge.

PeasantParty September 18th, 2011 at 4:00 pm

Dean,

I hold you in great regard. If there ever is an opportunity to make changes in DC, I’d love to see you hold office to guide this country in the right direction. Thank you for all you do and the excellent education articles.

jean2 September 18th, 2011 at 4:01 pm
In response to Scarecrow @ 211

Yes, thanks – very educational!

DWBartoo September 18th, 2011 at 4:01 pm
In response to Dean Baker @ 178

Perhaps not, Dean, but capitalism may well make US, that is the human species, “go away” …

What we have now is simply unsustainable whatever the Divine Right of Money may claim or imagine.

DW

Dean Baker September 18th, 2011 at 4:01 pm
In response to PeasantParty @ 213

Thanks — I’ve got you and my mother .

thanks for many good questions and comments.

twobeers September 18th, 2011 at 4:01 pm

well, they do call it the “dismal science”…

Elwood Anderson September 18th, 2011 at 4:02 pm

There is a fairly clear separation developing between people who believe in shared prosperty and sacrifice verses those who believe that only those who can make it on their own should govern. The problem is, the predators and fighters are predominantly in the latter group, which, if left to their own devices will win out. So, the former crowd need strong leaders to organize and fight the battle. With guys like Obama they’re not going to get there. They need another FDR who isn’t afraid to stand toe to toe with the predators and put them in their place. Until that happens, the party won’t become the party it once was. A third party would need the same ingredients.

Democrats who are not Wall Street Democrats need to mount a grass roots effort to take over the Democratic Party like the Tea Party did with the Republican Party. They have the numbers and organizati­onal skills to do it with union backing, and many independen­ts would join in the effort. Such a party would preserve and reinstitut­e regulation­s on finance, markets, and foreign trade, secure individual rights while limiting corporate rights and election funding, protect the safety net program, rebalance taxes on the wealthy vs. working people, adopt a single payer health insurance program, institute a federal employment program of last resort to replace unemployme­nt insurance, develop a first class, federally funded and owned education, communicat­ion and transporta­tion infrastruc­ture, eliminate the debt ceiling, replace the archaic reserve banking system with a modern money system, put the country on a path to sustainabi­lity and environmen­tal health, reduce the size of the military industrial complex, and abandon America’s attempt to police the world to make America a responsibl­e member of the world community. This would take generation­s, but there is no time like the present to get it started.

DWBartoo September 18th, 2011 at 4:05 pm

Yes great thanks to Dean and William. I hope that you both may visit with us again.

Thanks, as always, to Bev, as well.

DW

twobeers September 18th, 2011 at 4:06 pm

Many of us feel we’re not welcomed, so we’re looking for a new club.

ComRad September 18th, 2011 at 4:16 pm

Capitalism was portrayed as communally beneficial but that was a mirage. The predators have superior organization and will most likely win a class war.

Given that the consumption of the US is unsustainable they will use that crisis to capitalize on the decline. It’s likely they will only let up on their inflictions when some steady state is reached or new means of accumulation are found.

Or massive damage is done.

papau September 18th, 2011 at 7:14 pm

I also do not believe that the the repeal of Glass-Steagal had anything to do with the 2008 financial crisis – and I am joined by Krugman and just about all with economic training and an ability to read the Glass-Steagal law – including Dean Baker.

The few with an economics background and ability to read a law that think repeal of Glass-Steagal had “some” impact are forced to admit it was extremely minor, amounting to the idea that post ability to do a merger (there were no major mergers of deposit institutions with investment banks doing the criminal derivatives prior to 2008) a derivative issuing investment bank regulated by the Fed and never regulated under G-S in the past might feel safer, given the possibility it might get extra capital via a future merger, leading it to issue even more worthless derivatives – about as speculative as you can get without being laughed out of the room.

Obama sold this idea to take Hillary down in 2008 – seems about time to let go of the Obama lies of 2008.

papau September 18th, 2011 at 7:21 pm
In response to Dean Baker @ 75

You are the top of that list -

one of my better decisions was to get on your mailing list years ago!

Excellent book – and thanks for doing the interview.

:-)

papau September 18th, 2011 at 7:48 pm
In response to Dean Baker @ 183

I’m not sure about your comment that CDS regulation became impossible after The Commodity Futures Modernization Act of 2000.

The GOP Congress brought under regulation a great deal in the Commodity Futures Modernization Act of 2000 but refuse the Clinton request (made via the Diane Feinstein bill amendment) to deal with the Enron loophole (Senator Feinstein finally got it fixed in 2008). And while The Commodity Futures Modernization Act of 2000 specifically stated that CDSs are neither futures nor securities and so are outside the remit of the SEC and CFTC, the Fed continued to have regulatory control of investment banks – the issuers of the CDSs.

Once again Greenspan could have put a stop to the mess in 2000 – or earlier – but Greenspan, Rubin, and the GOP once again blew off any regulation. Why Clinton chose to not fire Rubin – and to rather ignore him (as Clinton did in the Rubin/GOP attempt to carve out of Social Security private accounts via the Democratic bill proposed by Senator Moynihan – with Clinton instead proposing a new benefit for everyone that left Social Security untouched – a voluntary add on payroll deduction account that acted like a 401k deduction from your income tax) is one of those political decisions I do not understand.

seabos84 September 18th, 2011 at 8:32 pm

we’ve got NO diversity of message – we’ve got the Kennedy School Of Government, College Of Big Wordy Tome Writing Teddy White Wannabees, and little else — the let’s-have-an-economy-based-upon-organic-tofu-barter crowd?

the righties attack attack and attack, from high and low, and they’re all on the same page when 1 of them figures out a f’king lie that works.

we’re all looking for that TOME Of Truth.

Based upon working 40 hours a week and getting paid for 52 weeks of the year => 2080 hours

it costs me $1.78 an hour so that:

when I go to the supermarket, or the local market, or the gas station, or my place of worship, or … any daily activity -

ANYWHERE in the united states, like my sister’s in Arizona or my cousin in Florida or my step father in Massachusetts -

I’m NOT accosted by hordes and swarms of starving disease ridden gasping dying seniors BEGGING for crumbs!

That costs me ONE DOLLAR AND SEVENTY EIGHT CENTS AN HOUR!

Cuz that $1.78 goes to Social Security and Medicare -

ASIDE from all this noble selfless do gooder be noblerererer be betterererer

there is a good selfish reason to invest in the community!

ummmm…

now what would happen if I had to BUILD every f’king road I travel on every day …

what would happen if for everything I did I had to string my electricity or bring my generator …

what would happen if the only way I could keep the surplus wealth I’d created was to have a private army to protect it or to have a private army accompany me everywhere (kind of getting that, aren’t we Darth Cheney?) …

what would happen if MY retirement was NOT dependent upon my employer, and my health care was NOT dependent on my employer, and my retraining was NOT dependent upon my employer – JUST MY PAYCHECK?? – hell – my employer BETTER treat me better cuz I’ll just replace the paycheck!

people can easily get NON-noble and NON-selfless and NON-altruistic —

why do the selling points of community investment always have to be founded upon noble selfless goody goody-ism?

conclusion:

a lot of social community investment could be and should be marketed differently, then people would support it.

rmm.

davidfetter September 19th, 2011 at 7:44 am

With utmost respect, Mr. Baker, the Walton heirs are not “creative,” except in the sense that they hire people to come up with phrases like “death tax” and other such tripe. Sam Walton was a felon who should have died penniless, and his heirs have done nothing worth having with their unearned wealth.

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