Mr. Wigderson assembles an army of straw men just in time for Halloween to march on the Occupy movement.
In a rambling, disorganized blog post today, Mr. Wigderson attempts to explain the Occupy movement in the context of… something or other. It’s hard to tell. Mad Men? The USSR? Ann Althouse? It’s unclear to me exactly what he’s after. But he apparently doesn’t care for the whole Occupy movement. Let me take a crack at educating you, Mr. Wigderson. It’s a tough, uphill slog, but I suppose someone ought to try. If only for the children.
The Occupy movement has been characterized by various people on the right as Marxists, hippies, dirty hippies, idiots, morons, dupes, “useful idiots” (for whom, it’s unclear), freeloaders, masturbators, rapists(!) and so forth. They’ve been accused of not having “a” message. I suppose the only good thing you could say about them is the messages on their signs are spelled correctly.
The Right’s usual modus operandi is to trash what they don’t understand. And they really don’t understand the Occupy movement. The mainstream media have struggled to explain it in one syllable words for easy digestion. Mr. Wigderson is a case on point. He variously claims that they are anti-semitic, Communists and freeloaders. Never mind that there is no actual evidence presented for these accusations, but whatever. We’ll let it slide. When chimps hurl feces from their cages, they rarely aim, their hope is that they’ll hit something. Let’s tackle the meat of the problem: Mr. Widgerson Doesn’t Understand What Has Happened to the Global Financial Sector an How It Applies to America.
Here is some sensible analysis by the columnist Thomas L. Friedman, no liberal he. In an OpEd at the New York Times on Sunday, Mr. Friedman finally seems to “get” Occupy Wall Street and explains why Americans are right to march and Occupy Wall Street.
Our Congress today is a forum for legalized bribery. One consumer group using information from Opensecrets.org calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.
American’s have a choice. They can stand with this status quo and stand with the financial services industry (Mr. Wigderson’s dog in this fight), or they can stand with the Occupy movement and move the nation beyond banks that are too big to fail and a financial services industry run amok (My dog).
It’s useful to reflect that Teddy Roosevelt, a Republican, inveighed against the same regressive forces at work in the America of his day.
Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to dissolve the unholy alliance between corrupt business and corrupt politics, is the first task of the statesmanship of the day. Theodore Roosevelt, “The Progressive Covenant With The People” speech (August 1912)
So what has happened that has people sleeping out in the snow? How did we arrive at this circumstance where an ostensibly conservative columnist like Thomas Friedman can call our Republic a corrupt enterprise? To understand that, you have to talk to an economist who can unwind the sordid tale of greed and deception, moral hazards and bailouts. The failure of a global banking system run wild.
At the IMF conference last week on Iceland’s recovery, MIT economist Simon Johnson put it most appropriately (NOTE: this is my own transcription of what he said, some is summarized, but it is all directionally correct. There is no official transcript of his talk yet. All errors are my own!):
Let me drill down on the banking side now, the financialization component of the European madness. Deuchebank, at the end of 2nd quater, had a balance sheet of 1.85 trillion euros, it had a capital, a shareholder equity of 60 billion euros. Now, according to the CEO of Deuchebank it is well capitalized. The last round of stress tests DB was regarded as well capitalized. They also said that of Dexia and Dexia has subsequently failed. DB is 30x leveraged and yet it has “reasonable assets relative to capital.” So how do you get from 1.85 trillion to 60 billion into a relatively healthy looking capital ratio? It’s time to learn about bank accounting. Let me tell you about risk-weighted assets. What’s a safe asset in the Eurozone? Greek debt? Sovereign debt in general? If you only remember one thing, remember this: Sovereign debt is not risk free. The Greek Republic, for instance, has been in default 40% of the time since independence.
We have built an entire banking system on an illusion, the illusion of risk-free investments. We did this in the United States with mortage backed securities. Europeans have done a different version with sovereign debt. The entire thing is a house of cards. It is excessive financialisation. These are the shocks coming at you and coming at me from Europe.
The American variant. Goldman Sachs, one of the biggest banks in the world. Balance of $800 – 900 billion, if GS were to hit a rock, and be on the verge of going bankrupt, could it collapse unimpeded by any kind of bailout? Nobody believes it. GS is too big to fail. To complex to fail. To integral to the financial system to fail. CIT Group had a balance of $80 billion and was allowed to fail. Nobdoy could find a disruptive effect of that failure. But Goldman?
The US financial system is based on a system of distored incentive, based on the idea of I get the upside, you get the downside, is unchanged by the reforms. What you need ot make banking work today is a big enough balance sheet behind you, think about that, from Citigroup, and a resolution authority that works. There is no resolution authority that can deal with the likes of Citigroup or any other cross border bank. Dodd-frank contains a resolution authority but it is not a cross-border resolution authority.
You cannot handle the failure of CITIGroup or JP Morgan Chase or Goldman-Sachs or Morgan Stanley. What do these banks want to do? They want to expand, and stay leveraged. They get all the upside. How much upside do they get? From this crisis? People who’ve studied it carefully, the top executives of the top 14 banks in the United States got $2.5 billion in cash, salary and benefits between 2000 and 2008. 5 of them got $2 billion. They are:
- Hank Greenberg, AIG (failed)
- Sandy Weill, CITI (failed)
- Angelo Mozilo, Countrywide (failed)
- Dick Fuld, Lehman Brothers (failed)
- Jimmy Cayne, Bear-Sterns (failed)
What’s the downside? Millions of jobs lost, homes lost, fiscal damage. Increase in net Federal debt held by the private sector is 50 percentage points of GDP, $7 trillion more or less. That’s the structure we have in the U.S. That structure has not been reformed. If anything, it’s given more power to the too big to fail banks. And nobody can tell you the size of the euro shocks that are coming.
Andy Grove, head of Intel, said that only the paranoid survive. I think that instinct is right. You must expect the worst. The world financial system is not your friend. The world will be shocked. You must prepare accordingly. Thank you.
You see, Mr. Wigderson, this is not about capitalism as an economic system as poised against your silly command economy model a la the USSR. No sir, it’s about saving capitalism from the crony capitalists and bloated financial sector that are dragging the markets to the bottom of the abyss. It’s about allowing businesses in the financial sector to become too big to fail. It’s about accountability and corporate responsibility. If you were a true conservative, you would hold corporations, like people, accountable. But when you stand against the Occupy movement, you reveal your true colors. You stand with the financial sector that has done such damage to the world economic system.
What people like you don’t or won’t grasp, either thorough willful or, more likely, ordinary ignorance is that the Occupy protesters don’t want to live in the USSR. They’re not Marxists or Communists. They’re Americans. They don’t want a handout. They don’t even want a new government. They want accountability for the destruction wreaked on the world by unfettered capitalism and it’s excesses. They want to live in an America where the banks are properly regulated and the markets are allowed to thrive for the benefit of all Americans, not just the 0.001%. And, Mr. Wigderson, they want jobs.
(A bit of advice, Mr. Wigderson, one blogger to another. You might want to send in some real ideas next time instead of just straw men. Real ideas tend to work better.)
9 thoughts on “Educating Mr. Wigderson”
A street-fighting Waukesha liberal. Woo hoo!
Wiggy and the like do not get paid for real ideas , or anything that advances the debate. they get paid to muddy the water and advance the koch/bradley cause nothing else.
My favorite part of Sqwiggy’s rant is when he suggests that capitalism is like one of the laws of physics. It’s as inevitable as gravity.
This should set-up a wedge within republican circles, because every good right wing christian knows that capitalism is handed down from God.
Sqwiggy is becoming the Galileo of the right. What a genius.
I thought you were gonna say they all know physics and gravity are nothing but a liberal lie sold by scientists with an agenda because Al Gore is fat.
Because that’s true, also.
Well I’m happy to have him be a “useful idiot” for me. 🙂
I agree with much of Simon Johnson’s comments:
“We have built an entire banking system on an illusion, the illusion of risk-free investments. We did this in the United States with mortage backed securities. ”
I agree, but I wouldn’t limit it the banking system or mortgage backed securities. They are just as much as an instrument of fiat currency as any other financial instruments including the hard currency. The only reason people buy T-Bills (or any other sovereign’s bond) as they have an illusion of being risk free or lower risk. Are they?
The Greek Bond holders didn’t fare so well. But the EU managed to squeeze out another 3-6 months before Greece goes back to the trough with the rest of the PIIGS.
If we are going to regulate leverage what’s the appropriate ratio. DB’s 30 to 1 is too much? Then we’re screwed . The U.S. Federal reserve is leveraged at 53 to 1.
Anyway, I suppose we can throw another log on the fire as Corzine’s MF Global Finance went chapter 11 today. But he walks away with a 12 Million dollar parachute.
The Greek bond holders took the risk and need to pay for that risk. That’s why the 50% haircut on their investments is entirely appropriate. But the question is one of appropriately evaluating investment risk at the sovereign level and recognizing that there is no such thing as a risk-free investment, even in US Treasuries. The risk is immeasurably small and any potential failure in the Treasury would be tied to a catastrophe so enormous as to render the entire economic system moot (asteroid strike, nuclear war, etc.), but there is risk.
The problem with the PIIGS wasn’t that they overspent but that they overBORROWED. And it wasn’t the government that did it, it was private banking. The capital inflows into the Eurozone periphery were enormous. Capital seeking cheap labor and cheap investments. It was a tidal wave of cheap money, but money with strings attached. The banks in the PIIGS nations were able to borrow at German interest rates! WTF? Their economies aren’t structured for that. No wonder they came tumbling down.
Now if you’re advocating for a hard-money / fiat currency / gold standard policy (a la Ron “Austrian Economics Ate My Brain” Paul, we’re gonna have a much bigger and broader fight. Crippling our ability to conduct monetary policy on our own currency is a really, really bad idea. Especially now. Why does Ron Paul want to give up monetary sovereignty? I often ask myself that question when I see the Paultards staring with loving devotion at their “savior.”
We can educate the wearisome Wigdys of the world 24/7 and it will have no effect, because facts don’t really matter to them. Like Bush 43, they create and recreate their own reality.
Yeah, but he’s an awesome “useful idiot” for presenting complicated information like this… 🙂
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