email exchange

There is so much to write these days, but I am finding myself fairly tired at the end of every day. Its the type of tired where inspiration is low and all you want to do is sit on the couch and watch TV. I remember feeling that way a lot in California. Well, I'll catch up with everything over time, for now, because I don't want to totally ignore the Wall Street crash, here is an email exchange with a former professor.

My email:

As for Wall street, I seem to agree most with Nader when he calls the whole financial system a global casino. I feel fairly conflicted, because somehow I don't want them to get the bail-out from the very pockets of the people they have been taking advantage of for so long. Yet, if there is no bail-out, what happens then? What happens to the US, and the Global economy? Total meltdown could have terrifying geo-political consequences.

I guess, in the end, I would say give them the bailout but with significant regulation. However, you cannot legislate in good behavior, and I guess the system will spend the next 50 years trying to undo these regulations, like it did after the 1930s. So, regulation alone is not an answer. There is a more fundamental issue of greed and a disconnection from responsibility which needs addressing; and how you do that...

I just read an article in the nation by Greider. In case you haven't already seen it:

http://www.thenation.com/doc/20081006/greider2

Professors response:

Check out Kucinich's web site and the article by Paul Craig Roberts (Oct.3-5) on the Counterpunch site. The only approach that has a chance to be successful is one that addresses the problem from the bottom up. If people are working, and if their house payments are lowered by re financing them at reasonable interest rates (or at values that can be sustained over the long run), then people will be able to pay most of their debts on time and the financial system, on the whole, will remain solvent.

The rub in the financial sector, however, is similar to what Greider discussed in the SE Asian crisis: When the financial sector is uncertain of profits they withdraw their funds and starve the real economy. The government can address this liquidity problem by injecting funds, not to the main finance center banks (who will hold on to it to cover their speculative losses), but instead to local banks and credit unions who will lend it to local customers.

None of this will stop some contraction of the real economy as we adjust to the difference between what the capitalists imagined they could squeeze out from folks around the world and what people were actually able to produce for them; and as borrowers (individual, corporate and government) adjust their consumption to come into balance with what they can actually pay for over the longer term. Count on a real decline (with price and currency rate adjustments) of between 10 and 20%. No fun at all.