Financial Crisis

Remember those innocent days last summer, when the biggest worry was high gas prices? Florida already felt the pinch as tourism dropped dramatically. Then, as the financial markets collapsed last fall, Florida’s leaders woke up and began talking about diversification. Like deer caught in the crosshairs of a rifle scope, economic boosters darted around looking for new safe places in the knowledge economy, ways to revitalize agriculture, and even exploring private space development to supplement the stuttering NASA program.  read more »

The coverage of President Barack Obama’s first days in office has been intense, to say the least. Yet it has still managed to overlook an historical comparison that is worthy of our consideration.

Obama took office just a few months after a stock market crash that left no doubt about the rugged shape of our economy. The ensuing decline has been swift and scary, leading some to talk about a possible fall into an outright depression.  read more »

These are not boom times for optimists. But I believe that – combined with knowledge of what has worked in the past – there are numerous signs that the economy may turn around faster than many think.  read more »

As a result of the economic crisis, there is a broad consensus in favor of large-scale public investment in infrastructure in the U.S., both as part of a temporary stimulus program and to promote long-term modernization of America’s transportation, energy, telecom and water utility grids. But this momentary consensus masks the continuing disagreement on whether the U.S. government can legitimately promote American industries, and, if so, which industries. This is a problem for infrastructure policy, because different national infrastructures correspond to different national economic strategies.  read more »

This morning the Senate Finance Committee approved the nomination for treasury secretary of Timothy F. Geithner, head of the Federal Reserve Bank of New York. Geithner is a Wall Street darling, but taxpayers may have a different take. Senator Jim Bunning (R-KY) reminded us at the Senate confirmation Hearing January 20 that Geithner was part of every bailout and every failed policy put forth by the current Treasury secretary. After you read this, you should begin to see why I’m so opposed to Geithner’s appointment – I don’t want the fox any closer to the hen house than he already is.  read more »

When presented with complex ideas about complicated events, the human tendency is to think in terms of Jungian archetypes: good guys and bad guys, heroes and villains. The more complicated the events, the more the human mind seeks to limit the number of variables it considers in unison in order to make sense of what it sees. The result is a tendency to describe events in the simplest black and white terms, ignoring the spectrum of colors in between.

This principle can be seen in the current explanation of the financial crisis.  read more »

The idea that Citigroup could support the family by gambling didn’t begin with Robert Rubin. It’s part of a long tradition. What was different in the most recent go-round is that, this time, Citi didn’t invent the game. Of course, once it got to the casino it characteristically placed larger bets than anyone else.

Word that Citigroup is teetering on the brink of break up brings a certain wistfulness to this former Citibank speechwriter. Not because intensive care is something new for the old bank — it isn’t — but because it ended up on life support by following the crowd instead of leading it.  read more »

What will happen to the dog bakeries? I ask this question, because this line of business (and perhaps many others) escaped my attention for so long. I saw my first one years ago in suburban St. Louis. As one interested in economics, poverty and history, it struck me that dog bakeries represented a perfect symbol for the many “discretionary” business lines that have been established in recent decades in what has been called the consumer economy.

This discretionary economy consists of businesses for which do not exist in societies with little discretionary income. It includes in its ranks a host of businesses that did not even exist before the last couple of decades, from dog bakeries, to Starbucks, tony cafes, specialized clothing stores and personal fitness centers. While these businesses might have been attractive to the households of the 1940s, 1950s, 1960s, or 1970s, people just didn’t have enough discretionary income to support them.  read more »

The recent call by the porn industry – a big employer where I live, in the San Fernando Valley – for a $5 billion bailout elicited outrage in other places. Around here, it sparked something more akin to nervous laughter. Yet lending a helping hand to Pornopolis is far from the most absurd approach being discussed to stimulate the economy.

Some influentials close to the administration may even find the porn industry a bit too tangible for their tastes. After all, the pornsters make a product that sells internationally, appeals to the masses and employs a lot of people whose skills are, well, more practical than ideational.  read more »

The most anticipated tourist attraction in the city where I live, The Golden Gate Bridge, is a testament to the lasting utility of a well executed infrastructure project. The world’s most famous suspension bridge still serves as the critical artery connecting San Francisco to the bedroom communities of Marin County to the north, where much of the city’s workforce resides. Remarkably, this marvel of engineering was completed in the late 1930s – a time when the U.S. was coming out of the Great Depression.

The New Deal brought about an expansion of infrastructure that should inspire us. Yet nearly 70 years after its completion, the sobering reality remains: it’s difficult to imagine a project of that moxie being constructed today.  read more »