Barackface

Saturday, March 21, 2009

A Brighter Future Ahead

Big Crisis = Big Opportunity

I am for a second trillion dollar stimulus package. It was not the New Deal, but World War II that got America out of the flunk last time. We can't have a world war, but we sure can have a second stimulus package. And this second stimulus package has to have global dimensions.

Anatomy Of A Crisis

Money poured into America because the American banks were thought to be the safest for the elites around the world. What did they know? The American bankers did not know what to do with all this flush cash. So they started running ponzy schemes, legal ponzy schemes, subprime mortgage backed securities, credit default swaps, what have you.

The problem in the world is not too much capital, but too little. But the architecture of global finance made it look like there was too much capital, too few capital outlets. And so all that extra money went on to create a housing bubble. This was not exactly wealth creation, but it got counted as wealth creation in the banks' books.

Old White Men Need To Chew Gum
Needed: A New Global Financial Architecture
Stimulus: Make It A Trillion
Stimulus: Size Matters
Global Finance, Global Terrorism, Global Warming

Too Many Big Banks

If a bank is too big to be allowed to fail, that bank is too big, it should be broken into a few different banks. And it is never too late to break up banks like that.

Transparency, Accountability

There are banks and regulations. And there is this huge financial sector that has so far stayed out of that tent, without regulations. That is bad, that always was bad. Got to bring the entire financial sector under the tent. Infuse massive transparency and accountability. You can't play great soccer without the basic ground rules. I am all for the market, I am all for innovation. I am not saying the referee should now join the game. I am saying we need a referee.

America Can't Do It Alone

Over the past few years we have seen wild wildfires in Greece, California, in Australia. In each case the culprit was global warming, but local law enforcement hunted for arsonists.

Imagine a climate version of this financial crisis. Imagine a dirty bomb each in 10 big cities of the world on the same day. What we are going through is a finance version of such worst case climate and terrorism scenarios. The finance version is less heartbreaking, and it is so very heartbreaking as is.

But this is dress rehearsal. Handling this crisis will and should help us build mechanisms to deal with some future crisis in a different domain. More importantly, we should learn to prevent them. Could America and the world have taken actions over the past few years to prevent what is happening now? You bet.

Democratize the IMF, World Bank

Treat the people in the Global South like human beings. Pump more money into both. Bar the two from humiliating the poor countries every time they deal with them.

A Global Marshall Plan Needed

We don't need a world war, but we do need a global Marshall Plan. I am not sure about old fashioned aid. I am proposing a trillion dollars into microfinance. If the US Treasury gives a 5% return, microfinance gives twice as much. What has China been thinking lending Bush a trillion dollars to wage a wrong war? It should instead get into microfinance.

Big money needs to get into big infrastructure projects across the Global South. We have to make major investments in human capital.

Microeconomics, Macroeconomics, Globoeconomics

The theoretical framework of the academic discipline is not aware the world exists. Just like economics added macroeconomics to its body about 70 years ago, now is time to add globoeconomics to the same. The theoretical framework is missing.

Long Term Goal: World Government

Christianity is just one among many religions. America is just one among many countries, definitely true of Britain. When we are talking global cooperation on issues like climate and terrorism and finance, ultimately we are talking of a world government, anathema to the right in the US. But it is cooperation or doomsday. That is the stark choice. This financial crisis is dress rehearsal.

Global Finance: New Architecture

The ad hoc ways of global finance so far have proven so very inadequate. We need a framework. We need ground rules. We need transparency. We need accountability.

In The News

A.I.G. Sues U.S. for Return of $306 Million in Tax Payments New York Times
Many in Government Knew Weeks Ago About A.I.G. Bonuses
House Approves 90% Tax on Bonuses After Bailouts
Obamas to Plant Vegetable Garden at White House
Rapid Declines in Manufacturing Spread Global Anxiety
Talking Business: The Problem With Flogging A.I.G.
$2.5 Billion in Merrill Bonuses Would Elude Tax

Sunday, March 15, 2009

Old White Men Need To Chew Gum

Obama's Reform Agenda: Is He Trying to Do Too Much? TIME Mar 11, 2009‎ Buffett was — and is — an Obama supporter, but he took to the airwaves on March 9 to try to seize the young President's attention away from health care and education and energy and refocus it back onto the economy. Warning that Obama's agenda has become too sprawling and provocative, Buffett admonished, "Job 1 is to win the war, the economic war. Job 2 is to win the economic war — and Job 3." He added, "You can't expect people to unite behind you if you're trying to jam a whole bunch of things down their throat." The oracle's verdict was quickly endorsed by Jack Welch and Andrew Grove, retired CEOs of General Electric and Intel, respectively. And from Federal Reserve Chairman Ben Bernanke came this measured nudge: "Until we stabilize the financial system, a sustainable economic recovery will remain out of reach." ........ Obama fired back the same day. "I know there are some who believe we can only handle one challenge at a time," he said, invoking Lincoln's launch of the transcontinental railroad in the midst of the Civil War. "We don't have the luxury of choosing between getting our economy moving now and rebuilding it over the long term." Is the Worm Beginning to Turn? Buffett Throws Obama Under Bus RushLimbaugh.com (subscription) ‎Mar 10, 2009‎

Barack Obama has to walk and chew gum at the same time. That is his challenge. I understand these are tough times and there is only so much you can shove down the throat of the political system. But imagine America saying in World War II, we can make tanks, but no planes, because we got to prioritize. The current global crisis is of a gigantic magnitude, and it asks for a gigantic response. I happen to think the stimulus package is not big enough. Krugman echoes that sentiment, and the dude has a Nobel.

When Obama ran for president, there were people who were saying, he is too young, he can and should wait his turn. And I am like, you are right. If it is about Obama, the dude can wait his turn. 10 years from then he would still be younger than most. So why now? Why the urgency? Guess what, it was not about Obama, it was about America and the world. Obama could have waited, but not America, not the world. The time was now.

So if we are concerned about too much grey hair ending up on Obama's scalp, I say take it easy. Deal with this crisis, leave the big programs for the next president who might have more room for it all in eight years. Like Reagan said, hard work never killed a man, but why take a chance!

Barack Obama can afford to tackle one thing at a time. But the country, the world can not. He has to fight the Civil War, and he has to lay down the train tracks at the same time. He has to walk and chew gum at the same time. And I recommend the same to the old white men. I mean, old wise men.

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Saturday, March 21, 2009

A Brighter Future Ahead

Sunday, March 15, 2009

Old White Men Need To Chew Gum