Today’s blog is predicated on the assumption that the polls are largely accurate, a major American city won’t be hit by terrorists this week, and Barack Obama will become the next president of the United States. Or as we stand now, the Untied States of America.
In J-school, we aspiring reporters were required to take three terms of economics, fitting with the profession’s general creed that journalists should know a little bit about everything but don’t need a lot to know about anything. Which pretty much works, because it makes you just informed enough to ask the questions to fill in the gaps, with the idea that your readers, who may know a lot about something but not a lot about many other things, can get a general grasp of what’s going on. In practical terms, this means you can, if need be, cover a city council meeting dealing with sewer system annexation without going, “What’s annexation? Or a sewer system?”
At the U of O, the general gig was take an term of microeconomics, another of macroeconomics, and then an elective of your choice. Since these were the 80s and Reagan had just been elected, I took a class on Milton Freedman and supply-side economics, which convinced me, largely, that the whole idea was a highly rationalized ponzi scheme and would make the rich richer and the poor poorer and could be sold to the eternal optimism of an upwardly mobile middle class. Even at 20, you get one right once in while.
Fast forward, the ponzi scheme has collapsed, and it looks like we’re on the brink of a return to the saner policies, which helped us recover from the Great Depression under Roosevelt (though WWII helped as well) and led to the booms of John F. Kennedy (which, sadly, he didn’t really live to see), and, in a more moderate form, the good times that were the 90s. This time will be different because the damage wrought by the Friedman types and the Chicago School is deeper and more systemic, but the funny part is that, just as in ’92, when Bush Sr. saw the writing on the wall and adjusted the tax bracket, Obama will benefit from the actions grudgingly taken by the this Bush administration, just as Clinton benefitted from George Sr’s moment of lucidity.
But economics is a lot like philosophy, of which Steve Martin pointed out, one learns just enough to fuck oneself up for the rest of one’s life. To wit, a take on the current economics crisis, from someone who slept through microecnomics, rather enjoyed macroeconomics because it was taught by…wait for it…a brilliant and funny Iraqi, and laughed through Uncle Milton’s bedtime stories.
Simply, if homeowners are going into default because they stupidly bought ARMs (adjustable-rate mortgages) with the idea that the sun would always shine, the stock market would always rise, and interest rates would always stay low, then got smacked by market adjustments and balloon payments, perhaps a solution would be to use a program with regulatory oversight to refinance ARMs into boring old fixed-rate mortgages and prop up undercapitalized banks that will take a hit when they don’t realize the balloons. Because if homeowners have to surrender their homes, the banks won’t receive any more money anyway, much less balloon payments. If homeowners could stay in their homes before the balloons, they might be able to continue to make payments over a 20- or 30-year horizon. Some lenders and real-estate developers are going to take it in the shorts, but, well, fuck ’em. They helped get us into this mess.
Besides. They can retrain for the green and infrastructure jobs that would be the second part of a economic recovery plan. It won’t work right away–it takes time to change direction on a ship this big (especially when it’s listing to the right), but, in time, saner policies will lead to a more secure future.
I dunno. It’s an idea. And I’m not going address derivatives because the only way you can get ahold of those concepts is to drop acid and lock yourself in a room with a stockbroker, and, frankly, I’m not that dedicated.