Why the Bailout Will Fail

Q: Does this crisis represent something deeper, like a general and unavoidable failure of our entire monetary system?

A: This crisis represents a generalized failure of the monetary system, and the sooner we get to that conclusion, the sooner we can begin to talk about solutions that treat the cause, not the symptoms.

Q: Are the failing institutions worth saving?

A: The failed institutions are not worth saving, because they represent a model that is now broken beyond repair.

Q: Will it work?

A: The current bailout plan cannot work, because it is too small and it is directed at the symptoms, not the causes.

Q: Can the government afford it?

A: The government cannot afford the cure. But even worse, the US government is already insolvent (when factoring in entitlement liabilities), and nobody is asking how borrowing an additional 12.5% of GDP does anything but make that problem worse.

much more at chris.martenson.com - Why the dollar rally is going to fail

Now Who Will the Feral Idiots Blame?

WASHINGTON | A campaign that blames the global financial crisis on a government push to make housing more affordable for lower-class Americans has taken off on talk radio and in e-mail.

Commentators say that was what triggered the stock market meltdown and the freeze on credit. They specifically target Fannie Mae and Freddie Mac, the mortgage finance giants that the federal government seized Sept. 6. They say that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems.

Subprime lending offered high-cost loans to the weakest borrowers in the housing boom from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

•Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

•Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that the critics lambaste.

The “turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007,” the President’s Working Group on Financial Markets reported Friday.

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Open Letter to the Next Farmer-in-Chief

Dear Mr. President-Elect,

It may surprise you to learn that among the issues that will occupy much of your time in the coming years is one you barely mentioned during the campaign: food. Food policy is not something American presidents have had to give much thought to, at least since the Nixon administration — the last time high food prices presented a serious political peril. Since then, federal policies to promote maximum production of the commodity crops (corn, soybeans, wheat and rice) from which most of our supermarket foods are derived have succeeded impressively in keeping prices low and food more or less off the national political agenda. But with a suddenness that has taken us all by surprise, the era of cheap and abundant food appears to be drawing to a close. What this means is that you, like so many other leaders through history, will find yourself confronting the fact — so easy to overlook these past few years — that the health of a nation’s food system is a critical issue of national security. Food is about to demand your attention.

Complicating matters is the fact that the price and abundance of food are not the only problems we face; if they were, you could simply follow Nixon’s example, appoint a latter-day Earl Butz as your secretary of agriculture and instruct him or her to do whatever it takes to boost production. But there are reasons to think that the old approach won’t work this time around; for one thing, it depends on cheap energy that we can no longer count on. For another, expanding production of industrial agriculture today would require you to sacrifice important values on which you did campaign. Which brings me to the deeper reason you will need not simply to address food prices but to make the reform of the entire food system one of the highest priorities of your administration: unless you do, you will not be able to make significant progress on the health care crisis, energy independence or climate change. Unlike food, these are issues you did campaign on — but as you try to address them you will quickly discover that the way we currently grow, process and eat food in America goes to the heart of all three problems and will have to change if we hope to solve them. Let me explain.

Read more in the NYTimes The Food Issue.

Annals of McCain - Palin, XXIV: Hatemongering

A lot of pundits seem dismayed and surprised at the moral depths to which Dishonest John McCain's campaign has sunk in the last week. I have to disagree. There is nothing surprising about it. This is his MO: do whatever he thinks is necessary. McCain has a long history of lack of principle and probity, whether it is in his personal life (a vile and abusive temper, disloyalty to his first wife) or his public life (corrupt behavior in the Savings and Loan scandal, chicanery on behalf of gaming interests and much more). Where I do agree with his new found critics is the frightening nature of his behavior in a time when the economy is spiraling out of control and a major depression is looming. Historically these conditions have unleashed the worst in the American character, a visceral Nativism and the McCain - Palin campaign events are enabling the kind of racist, xenophobic and vicious responses that tend to accompany hysterical fear turned and turn it to unthinking anger. It isn't just scaring me. It's scaring a lot of people, including Republican moderates (the ones that are left).

At the Effects Measure scienceblog - distinguished by the avalanche of examples they've compiled of the phenomenon in question.

Islamic finance rides the storm

A thriving financial sector sounds like an oxymoron these days. Even Australia's banks - among the most profitable in the world - kept a fifth of this week's interest rate cut to cushion their margins. But there is one sector that has tongues wagging in the hubs of commerce: Islamic finance.

While the Western world's financial system has been imploding, this small but rapidly growing share of world capital has weathered the storm.

Islamic finance takes its guidance from sharia.

The biggest markets are in the Middle East and Muslim countries, but global banks have opened sharia-compliant branches. Locally, the Muslim Community Co-operative is one of a few lenders offering the service.

Justice, partnership and opposition to excessive risk are the main principles guiding Islamic banks. Outright speculation and dealing with any party that has a balance sheet more than a third of which is debt are forbidden, as are investments deemed unethical by Islamic scholars, such as casinos.

But if these rules sound tough, the biggest difference is a ban on interest.

Charging interest is immoral because it does not take into account how changes in the value of the loan's security can affect the borrower, sharia says. Home owners who bought near the peak are now experiencing this harsh reality: interest gives banks a steady payment from the borrower, regardless of the property market's state.

However, profit is fine, and Islamic banks have devised ways to make money from lending. Instead of demanding interest, they buy the asset outright on behalf of the borrower. The borrower pays off the loan (the principle) and a fee for using the asset (rent, for example) until the amount is repaid and ownership transfers to the borrower. (More in BusinessDay)

Anti-democratic nature of US capitalism exposed

Noam Chomsky in the Irish Times;

Financial liberalisation has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy. Free capital movement creates what some have called a "virtual parliament" of investors and lenders, who closely monitor government programmes and "vote" against them if they are considered irrational: for the benefit of people, rather than concentrated private power.

Investors and lenders can "vote" by capital flight, attacks on currencies and other devices offered by financial liberalisation. That is one reason why the Bretton Woods system established by the United States and Britain after the second World War instituted capital controls and regulated currencies.*

The Great Depression and the war had aroused powerful radical democratic currents, ranging from the anti-fascist resistance to working class organisation. These pressures made it necessary to permit social democratic policies. The Bretton Woods system was designed in part to create a space for government action responding to public will - for some measure of democracy.

John Maynard Keynes, the British negotiator, considered the most important achievement of Bretton Woods to be the establishment of the right of governments to restrict capital movement.

In dramatic contrast, in the neoliberal phase after the breakdown of the Bretton Woods system in the 1970s, the US treasury now regards free capital mobility as a "fundamental right", unlike such alleged "rights" as those guaranteed by the Universal Declaration of Human Rights: health, education, decent employment, security and other rights that the Reagan and Bush administrations have dismissed as "letters to Santa Claus", "preposterous", mere "myths".

The End of Growth

Growth is gone. Over. Kaput. Finished. Get used to it.

If so, there will be an ocean of consequences. For those in the tiny universe of environmental NGOs, one of the consequences is this: The time for arguing against economic growth may be over. Yes, everyone who understands our human impact on the environment, and the disastrous implications of our economic growth imperative, knows that it is absolutely essential that the world find an alternative to growth; that instead, the human economy must contract to a point that it no longer threatens the viability of ecosystems. This is the essence of sustainability.

But imagine yourself talking to someone who has just lost her job. You tell this person, “You need to voluntarily further reduce your income and standard of living.” How’s that likely to go over?

Effective strategy demands recognition of the opportunities and limits of the unique historical moment. It seems that we have just moved from one historic moment to a very different one. In this situation, it’s more helpful to tell people (including policy makers) how to effectively deal with their immediate problems in a way that is consistent with long-term sustainability. Anything else will be irrelevant at best, extremely unwelcome at worst.

Growth is dead. Let’s make the most of it. A crisis is a terrible thing to waste.

Richard Heinberg at the PostCarbon Institute.

Remember Your Self....,

Paul Levy at RealitySandwich;

Lucid dreaming is a perfect metaphor, expression, and vehicle for realizing the dreamlike nature of both our experience of ourselves and the world around us. Just like we can become lucid in our night dreams, we can wake up in our waking dream and see how we are all collaboratively "dreaming up" our world into materialization, a realization which empowers us to co-operatively change the collective dream we are having.

When we become lucid in a dream, we realize that who we've imagined we are, what is called the "dream ego," is not who we actually are, but is merely a model of who we are. To identify with the dream ego is to become bewitched, fixated on and absorbed into a particularized stance which ultimately is illusory in that it has no substantial existence. Entrancing ourselves into imagining we exist in a way in which we simply do not is simultaneously a cause and result of a self-generating, auto-hypnotic self-constriction in consciousness which, ultimately speaking, we are doing to ourselves. It is what I call ME disease, whose root is a mis-identification of who we imagine we are (please see my book, The Madness of George W. Bush: A Reflection of our Collective Psychosis).

When we become lucid in a dream, we realize that who we were imagining we are - the dream ego - is being dreamed by a deeper part of ourselves...what I call the "deeper, dreaming Self." Jung himself had this realization in a dream he had during the last years of his life. In the dream he entered a church, and much to his surprise saw a meditating yogi sitting in front of the church. Upon closer inspection, Jung saw that the yogi had his face, and Jung then realized that the yogi was not Jung's dream, but that he was the yogi's dream.

In full-blown lucidity, we have an expansion of identity. We discover our inseparability and co-extensiveness with all parts of the dream. This is not a realization that belongs to the egoic, separate self, which is moment by moment contracting against itself, continually trying to strategize and manipulate the dream so as to full-fill its imagined sense of lack. The egoic, separate self is itself the very seeming obscuration to our natural lucidity, so how can it possibly become lucid? Rather, lucidity is an expression that we've seen through our self-created illusion and recognized the true nature of our situation, of who we actually are.

Now that we're all going to have to cut back on the levels of our consumption and distraction, perhaps we can get about the infinitely more serious business of observing, studying, and remembering ourselves....,

Why the Establishment Rejects McPalin

OCTOBER 8--Angered by a delay in the receipt of his voter registration card, a Louisiana man today threatened election officials, claiming that he urgently needed to cast a ballot to "keep the nigger out of office," according to police. Wade Williams, 75, was arrested this morning on a felony terrorizing charge after allegedly calling the Registrar of Voters and warning that he would come to the state office and empty his shotgun unless he got his registration card. Using profanity and racial slurs, Williams told a state official "about needing to vote to 'keep the nigger out of office," according to an Ouachita Parish Sheriff's Office affidavit, a copy of which you'll find here. Though the document does not name the candidate to which Williams is so violently opposed, it seems likely he was referring to Democratic presidential candidate Barack Obama. After being arrested at his Monroe home, Williams was booked into the Ouachita Correctional Center, where the below mug shot was snapped. En route to the jail, he "continued his 'tirade' about niggers and also stated that he had a shotgun, but had it hidden at his residence," reported Lt. Michael Judd. This surprising incident was brought to your attention by the ever-vigilant Submariner.

Leaders May Close World's Markets

Oct. 10 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world's financial markets while they ``rewrite the rules of international finance.''

``The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,'' Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis ``can't just be for one country, or even just for Europe, but global.''

The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi's remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.

Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis ``in coming days,'' he said.

Berlusconi didn't give any details about what kind of rules leaders were looking to change, except to say that leaders are ``talking about a new Bretton Woods.''

The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.

The End Of American Capitalism?

Analysis in today's Washington Post; The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism.

Since the 1930s, U.S. banks were the flagships of American economic might, and emulation by other nations of the fiercely free-market financial system in the United States was expected and encouraged. But the market turmoil that is draining the nation's wealth and has upended Wall Street now threatens to put the banks at the heart of the U.S. financial system at least partly in the hands of the government.

The Bush administration is considering a partial nationalization of some banks, buying up a portion of their shares to shore them up and restore confidence as part of the $700 billion government bailout. The notion of government ownership in the financial sector, even as a minority stakeholder, goes against what market purists say they see as the foundation of the American system.

Yet the administration may feel it has no choice. Credit, the lifeblood of capitalism, ceased to flow. An economy based on the free market cannot function that way.

Intractable Paradox

Governance and banks are doing their utmost to restore confidence in the intangible monetary system to drive economic growth. The operation of the economy entails irreversibly drawing down irreplaceable, finite natural material resources. The people in charge are striving to speed up the unsustainable process driven by money. Do you want them to succeed, or not?

The Root of All Evil...,

Comes now Roubini - The world is at severe risk of a global systemic financial meltdown and a severe global depression;

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:

- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;

- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;

- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;

- massive and unlimited provision of liquidity to solvent financial institutions;

- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;

- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;

- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;

- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.

At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression. At this stage central banks that are usually supposed to be the "lenders of last resort" need to become the "lenders of first and only resort" as, under conditions of panic and total loss of confidence, no one in the private sector is lending to anyone else since counterparty risk is extreme. And fiscal authorities that usually are spenders and insurers of last resort need to temporarily become the spenders and insurers of first resort. The fiscal costs of these actions will be large but the economic and fiscal costs of inaction would be of a much larger and severe magnitude. Thus, the time to act is now as all the policy officials of the world are meeting this weekend in Washington at the IMF and World Bank annual meetings.

Thursday midnite update: A few hours after I had written this note the market crash that I warned about is underway in Asia: the Nikkei index in Japan is down 11% and all other Asian markets are sharply down. This reinforces the urgency of credible and rapid policy actions by the G7 financial officials who are meeting in a few hours in Washington and the need to also involve in such global policy coordination the systemically important emergent market economies.

Give Us This Day Our Daily Bread.....,

In the Financial Post - Grain shipments stalled in credit drought;

The meltdown in financial markets has resulted in a dramatic slowdown in maritime trade, with major ports in Canada and the United States preparing for sharply reduced activity after several of the busiest years on record.

Statistics from the Port of Vancouver have yet to officially register a drop but at Long Beach and Los Angeles, among the biggest U.S ports, imports have already declined 9% this year.

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.

"There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."

So far the problem is mostly being felt in U.S. and South American ports, but observers say it is only a matter of time before it hits Canada.

"We've got a nightmare in front of us and a lot of people are concerned it's going to get a lot worse," said Anthony Temple, a grain marketing expert based in Vancouver.

Consequence Management Response Force

How time flies. It's been a few weeks since we related a story in the Army Times about the deployment of the infantry division's 1st Brigade here in the U.S. - comes now Amy Goodman with a more in-depth discussion of that development. Here are a couple of excerpts;

We welcome you both to Democracy Now! Why don’t we begin with Colonel Michael Boatner? Can you explain the significance, the first time, October 1st, deployment of the troops just back from Iraq?

COL. MICHAEL BOATNER: Yes, Amy. I’d be happy to. And again, there has been some concern and some misimpressions that I would like to correct. The primary purpose of this force is to provide help to people in need in the aftermath of a WMD-like event in the homeland. It’s something that figures very prominently in the national planning scenarios under the National Response Framework, and that’s how DoD provides support in the homeland to civil authority. This capability is tailored technical life-saving support and then further logistic support for that very specific scenario. So, we designed it for that purpose. [...]

AMY GOODMAN: Matt Rothschild, you’ve been writing about this in The Progressive magazine. What is your concern?

MATTHEW ROTHSCHILD: Well, I’m very concerned on a number of fronts about this, Amy. One, that NORTHCOM, the Northern Command, that came into being in October of 2002, when that came in, people like me were concerned that the Pentagon was going to use its forces here in the United States, and now it looks like, in fact, it is, even though on its website it says it doesn’t have units of its own. Now it’s getting a unit of its own.

And Colonel Boatner talked about this unit, what it’s trained for. Well, let’s look at what it’s trained for. This is the 3rd Infantry, 1st Brigade Combat unit that has spent three of the last five years in Iraq in counterinsurgency. It’s a war-fighting unit, was one of the first units to Baghdad. It was involved in the battle of Fallujah. And, you know, that’s what they’ve been trained to do. And now they’re bringing that training here?

On top of that, one of the commanders of this unit was boasting in the Army Times about this new package of non-lethal weapons that has been designed, and this unit itself is going be able to use, according to that original article. And in fact, the commander was saying he had even tasered himself and was boasting about tasering himself. So, why is a Pentagon unit that’s going to be possibly patrolling the streets of the United States involved in using tasers?

The End of Privacy.....,

In yesterday's Guardian, further thoughts on the Every Call and Every E-Mail project unfolding in the U.K. Plans for a vast central database of emails, phone calls and texts will see everyone monitored as a potential suspect. First, what the authorities want;

In the name of the fight against crime, and the fight against terror, we are all to be monitored as if we could be suspects. Computers will analyse our behaviour for signs of deviance. The minute we become of interest to anyone in authority - perhaps because we take part in a demonstration, have an argument with a security guard at an airport, spend too long on a website, or are witness to a crime - the police or the security services will be able to dip into our records and construct a near-complete pattern of our lives.

The shocking element to the new plan is that the authorities want their own database only because they find the current limitations frustrating. Under the Regulation of Investigatory Powers Act rules, the 700 or so bodies already licensed to watch us must make a certified request to phone or internet firms for individual records. More than 500,000 such requests were made last year. But the companies are reluctant to hang on to the data, and the security services would find a single, accessible database so much more convenient.

Then, a meditation on the possibilities which inhere to such a capability.

Stop and consider this for a moment. Think about how happy any of us would be to have our lives laid out to official view. All our weaknesses, our private fears and interests, would be exposed. Our web searches are guides to what is going on in our minds. A married man might spend a lot of time on porn websites; a successful manager might be researching depression; a businessman might be looking up bankruptcy law.

We all have a gulf between who we really are and the face we present to the world. Suddenly that barrier will be taken away. Would a protester at the Kingsnorth power station feel quite so confident in facing the police if she knew that the minute she was arrested, the police could find out that she'd just spent a week looking at abortion on the web? Would a rebel politician stand up against the prime minister if he knew security services had access to the 100 text messages a week he exchanged with a woman who wasn't his wife? It isn't just the certainty that such data would be used against people that is a deterrent, it's the fear. As the realisation of this power grew, we would gradually start living in the prison of our minds.

About that Greed, Incompetence and Fraud...,

There is No Plan B?

Comes now my man rembom with troubling questions about the "bailout" just now rushed through Congress by the Bush administration for the exclusive benefit of wealthy, incompetent, and quite possibly criminally fraudulent bankers...,

"Well, it looks like the Fed has discovered a Plan B. It turns out that the Fed can buy commercial paper directly from non-financial corporations needing credit to maintain operations. This will keep the credit markets working even if the zombie banks aren't up to the task. In other words, the threat of a complete meltdown in the absence of a bailout was nonsense and the media once again got taken for a ride by the Bush administration."Of course, relying on the central bank to dish out credit to corporations is not ideal, but neither is it ideal to overpay for $700 billion of junk assets on the books of troubled banks.

Too bad that the media didn't spend more time focusing on the options available, instead of selling President Bush's bailout package."

From Beat The Press blog, Oct. 7, 2008, by Dean Baker

Intellectual Cleansing - Part II

Most ambitious journalists start out on a daily local newspaper (I would soon end up on one), owned by one of a handful of large media groups. There, as I would learn, one quickly feels all sorts of institutional constraints on ones reporting. As a young journalist, if you know no better, you simply come to accept that journalism is done in a certain kind of way, that certain stories are suitable and others unsuitable, that arbitrary rules have to be followed. These seem like laws of nature, unquestionable and self-evident to your more experienced colleagues. Being a better journalist requires that these work practices become second nature.

These rules were constantly reinforced:

Promotion meant moving on from the lowly beat reporter, covering community issues, to other posts: the city or county council correspondent, who depended on council officials and councillors for information; the court reporter, who loyally regurgitated court proceedings; the business staff, who tried to liven up advertisers press releases; and the crime correspondent, who spent all day hanging out with policemen.

In other words, success at the newspaper was gauged in terms of obedience to figures of authority, and the ability not to alienate powerful groups within the community. Ambitious journalists learnt to whom they must turn for a comment or a quote, and where suitable stories could be found. It was a skill that presumably stayed with them for the rest of their careers.

Those who struggled to cope with these strictures were soon found out. They either failed their probationary periods and were forced to move on, or stayed on in the lowliest positions where they could do little harm.

Entire article archived here;

Fall of the Wall.....,

Naomi Klein on Democracy Now: Wall St. Crisis Should Be for Neoliberalism What Fall of Berlin Wall Was for Communism;

So I think we can see a couple of scenarios for the future. One, McCain wins, and it’s economic shock therapy. You know, the thesis of The Shock Doctrine is that we’ve been sold a fairy tale about how these radical policies have swept the globe, that they haven’t swept the globe on the backs of freedom and democracy, but they have needed shocks, they have needed crises, they have needed states of emergencies. It doesn’t necessarily have to be an outright military coup, which are the conditions in which this ideology had its first laboratories. It can just be a bad-enough economic crisis, a bad-enough hyperinflation crisis, in an electoral democracy that allows politicians to say, “Sorry about everything we said during the campaign. Sorry about the usual ways in which we make decisions, debate discussion. We’re going to have to haul up, form an emergency economic team and impose shock therapy,” usually with the help of the International Monetary Fund and the World Bank.

Milton Friedman understood the utility of crisis. And this is a quote—you know, I use it a lot, but I’ll use it now again, because I think it’s important—which he has at the beginning of the 1982 edition of Capitalism and Freedom: "Only a crisis, actual or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

Now, because I’ve been studying the utility of crisis for this free market project, which I consider to be very anti-democratic, it’s really attuned me to looking for the ideas that are lying around. And I’ve been paying really close attention to people like Grover Norquist, Newt Gingrich, the Republican Study Committee, these past few weeks. And I have an “ideas lying around” file, which are the ideas that they are floating right now in the midst of this economic crisis. And a lot of them are familiar, but the point is is that they’re being repackaged now as the way out of this economic crisis. So, it’s suspending the capital gains tax, getting rid of the post-Enron regulations, getting rid of mark-to-market accounting. In other words, more deregulation and less money in the public coffers. And it is interesting that the way in which this bill—the way the senators were trying to get the bailout bill through the Senate, after it had failed to go through Congress, was by adding tax cuts, a package of $118 billion worth of tax cuts. Some of them are good, some of them are not. But it’s a deepening of this crisis.

So, we know that the crisis is coming, and the question is, how are we going to respond? I think there needs to be better ideas lying around. I think the Milton Friedman Institute is about keeping the same old ideas that have been recycled so many times, that actually make these public crises worse, making sure that they are the ones that are ready and available whenever the next crisis hits. I think that is what—at its core, that’s what so many of the right-wing think tanks are for, and that’s what the Institute is for. And I think that is a waste of the fine minds at this university. I think it is a waste of your minds, your creativity, because all of these crises—climate change, the casino that is contemporary capitalism—all of these crises do demand answers, do demand actions. They are messages, telling us that the system is broken. And instead of actual solutions, we’re throwing ideology, very profitable ideology, at these problems. So we need better ideas lying around.