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Obama Pushes Economic Recovery Plan

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Posted on Jan 4, 2009
Obama address

In this series of weekly addresses posted on before news of Bill Richardson’s withdrawal from Barack Obama’s group of Cabinet nominees, the president-elect makes an appeal for an economic recovery strategy that would ideally prevent further job losses and spark a turnaround in Americans’ prospects as soon as possible.

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By Stephen Smoliar, January 6, 2009 at 6:48 pm Link to this comment

I never thought I would have to defend my “appreciation for science!”  Fortunately, the Books section of does a better job for me than I might have anticipated!  However, it is as an “insider” that I appreciate that many who “do science” confine themselves to a world that is solely objective, assuming that, if there ARE psychological or sociological factors to be taken into account, they can be reduced to objective representations than can be processed by appropriate logical calculi.  The study of history resists such reductive thinking;  and I prefer economic theories that offer similar resistance, thus avoiding such silly constructs as “efficient markets.”  I thank Alan Gurfinkle for demonstrating my premise that thinking about consequences is not part of the world of scientific analysis and invention better than I could have done!

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By Allan Gurfinkle, January 6, 2009 at 5:27 pm Link to this comment
(Unregistered commenter)


I’m not an acolyte, I’m a scientist.  If you had any appreciation for science whatsoever, you would realize that my ‘hyperbole’ was understated.  Science, and not finance, has made us God-like (OK maybe there’s a little hyperbole here) in our powers.  Science is like a mile high structure of amazingly complex and beautiful filigree that underlies and supports our entire society.  It is the wonder of the human race.

You can write that science wouldn’t flourish without finance, but you could also write that it wouldn’t flourish without natural resources, or farming, or indoor plumbing, or any of society’s other requisites.

“One good reason for Ferguson’s hypothesis (which I have yet to hear in one of his lectures) is that the successful management of credit and debt requires a keen sense of ANTICIPATING CONSEQUENCES.”

It’s difficult not to admire the financiers living opulent lifestyles while the rest of us are eating beans, but I don’t think it necessary to assign them qualities they don’t have.  Especially after practically none of the mainstream economists anticipated the sub-prime tidal wave until it engulfed them.

“Finally, I did not suggest that Wall Street be left to “do their business.””

I thought that was exactly what you did suggest.  And that is the effect of Obama’s rhetoric, (which I admit I haven’t listened to !), his ‘stimulus plan’, and his appointments to financial posts.  The goal of Paulson, Bernanke, Summers, Geithner, Rubin, et. al., is preserving the system that has rewarded them so lavishly.  They didn’t give a damn about the US economy yesterday, why should they give a damn today?  How could it be otherwise? 

The doomsayers/conspiracists point of view is that the ‘international bankers’, and this includes every financier listed above, is perfectly happy with the present state of affairs in the US, and won’t be unhappy to see it get worse.  Their coffers are full, there is already a talk of a fire sale of assets in the US, labor is on the ropes.  What’s not to like?

I don’t know if the doomsayer’s are right, but they might be.  Dean Smith says that appointing Geitner to Sec. of the Treasury is like making Osama bin Laden the head of Homeland Security.  It takes hardly any sense at all to assign a new captain after the ship hits the reef, yet, we’re keeping the same leadership.  Is this brilliant, stupid, or the result of a conspiracy?  I’m inclined to go with the latter explanation.

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By Stephen Smoliar, January 6, 2009 at 2:24 pm Link to this comment

Allan Gurfinkle:  “science and technology are full of astounding insights, incredible investigations, and frighteningly complex analysis.”

Who is being hyperbolic now?  From my rhetorical point of view, I would call this the “hyperbole of the acolyte,” entirely appropriate to what I called the Reverend Negroponte’s flock!  (LOL)  Let me try to explain on the basis of personal experience with the “Silicon Valley Miracle” discussed in my previous link.

Ferguson is a historian specializing in the history of economics.  He is a practitioner of neither finance nor science.  He examines chains of events over long time scales and tries to hypothesize why things turn out the way they did.  So consider this particular hypothesis being accused of hyperbole.  All that “frighteningly complex analysis” that leads to “astounding insights” would go without recognition or impact without the support of finance.  In Silicon Valley a primary engine of finance has been venture capitalism, which, as Ferguson has explained, is nothing more than one of those evolutionary stages of credit and debt.

One good reason for Ferguson’s hypothesis (which I have yet to hear in one of his lectures) is that the successful management of credit and debt requires a keen sense of ANTICIPATING CONSEQUENCES.  Scientific analysis and invention are not about consequences.  They are about defining a framework within which a problem may be expressed, stating a problem, and solving it, all in a “context-free” manner (to invoke Chomsky-speak).  Engineering technology basically works the same way:  When Edison decided to wire Manhattan with direct current, he did not waste time anticipating consequences.  On the other hand when George Westinghouse negotiated the acquisition of Tesla’s alternating current patent, he demonstrated that his strong suit was finance and that he could let others do the science and engineering for him.  That is but one data point to illustrate that Ferguson’s hypothesis is anything but hyperbolic!

Finally, I did not suggest that Wall Street be left to “do their business.”  When I expressed my point in terms of “see to themselves,” it was in recognition that the management of credit and debt will continue to evolve.  At the risk sounding too Malthusian, bailing out financial institutions that made bad decisions improves the chance that such bad decision making will continue to survive, thus thwarting the kind of evolutionary progress that Ferguson observed in the historical past.  The same goes for bailing out companies that manufacture products that people do not want to buy.  Folks like Henry Ford and Alfred P. Sloan used to joke about those who stuck to making buggy whips, but now the companies they grew are in similar straits!  I have every confidence that, left to their own devices, financial institutions will innovate their way to survival or be culled from the herd.  I am more concerned with the survival of the victims of the current generation of greed-based decision making.

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By Allan Gurfinkle, January 6, 2009 at 11:51 am Link to this comment
(Unregistered commenter)

Stephen Smoliar writes ....

“I side with Niall Ferguson’s position that financial institutions will always innovate new ways to do their business:”

I searched for an ‘LOL’ following this remark, and, finding none, followed the link to Ferguson’s excerpt ....

“The evolution of credit and debt was as important as any technological innovation in the rise of civilization, from ancient Babylon to present-day Hong Kong.”

This strikes me as absurd hyperbole.  There is nothing in the development of finance that is anything other than obvious to a greedy and clever person.  On the other hand science and technology are full of astounding insights, incredible investigations, and frighteningly complex analysis.  To equate them in any way is absurd.  Ferguson obviously knows nothing about science.

And, the idea of leaving Wall Street to ‘do their business’ ..... you’ve got to be kidding.  OK, I’ll supply the LOL.

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By dihey, January 6, 2009 at 11:29 am Link to this comment

Obama’s “stimulus package”. Reported: $ 100 billion for business; $ 200 billion for “middle class”.
Obama’s explanation: “this is not a political ploy. During my campaign I have promised a tax cut for the “middle class”. No word about giveaways to business.
You know what this deceiving is? It is Bush III!

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By Stephen Smoliar, January 6, 2009 at 8:24 am Link to this comment

It is worth remembering that the Congressional Progressive Caucus (CPC) strategy provides one of the more reasoned voices against the current spending plan.  Lynn Woolsey did this with rhetorical flourish in her remark that “anything much less than $1 trillion would be like trying to put out a forest fire with a squirt gun.”  If Allan Gurfinkle is concerned that none of this will directly address financial institutions, I would argue that the first priority of recovery involves the victims of those institutions and their deleterious practices.  I side with Niall Ferguson’s position that financial institutions will always innovate new ways to do their business:

Let those who did the damage see to themselves (as the historical record shows they always seem to do);  and let the victims benefit from the strategies of recovery!

The good news is that there seems to be a pretty strong consensus behind infrastructure repair (the first item in the CPC strategic package).  I see an amusing irony in this, since I remember those Clinton-era days of ancient history when the Reverend Nicholas Negroponte would preach the ascent of bits over atoms to his flock of WIRED subscribers (later rebottling his Kool-Aid in a book).  As the bits rose with the inflation of the dot-com bubble, few paid attention to the deterioration of infrastructure atoms.  It is nice to see the recovery of a sense of reality where the value of bits can only be assessed in terms of their service to the atoms!

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By ocjim, January 5, 2009 at 7:58 pm Link to this comment

While Congress is laying plans for a rescue plan of nearly a trillion dollars, Republican leaders in Congress and right-wing media spokespeople are trying to discourage, if not lay waste to such a plan.
While glossing over the extreme failures of neo-con economic policy of the past and re-imaging the failures with Rovian fantasy colors, right-wing media sources (like Fox Noise [designated by Progressives]) are distorting history with a Stalinesque flourish, all to suit their own agenda.

Speedy and proactive fiscal policy is the cornerstone of Barack Obama’s recovery plan with an emphasis on infrastructure spending.

Bernanke’s “loose-and-free” monetary policy is not working. Money is cheap, but few are putting it in circulation. Manufacturing concerns and timid consumers are hesitant to spend. Unemployment is rising rapidly.

A reasoned approach is that spending on infrastructure is an investment which makes the economy more productive, providing middle class jobs that can’t be exported, and over time underwriting conversion to a clean-energy economy. Each dollar spent yields some $3.50 in economic stimulus via the economic multiplier.

Many say that even the current Congress spending plan of $675 to $775 billion is too little.

Furthermore, if it takes Congress months to pass a stimulus plan, and compromise brings an even more cautious plan, the damage of falling production, falling prices, and failing consumer hopes will already be established, and a cautious plan will only slow the descent.

If the economy plunges for most of 2009 as a result, businesses and consumers will base their prospects on continuing decline rather than a turnaround in confidence.

Consensus says that it took World War II to really end the Great Depression, most likely because FDR did not have the support to sustain deficit spending. His opposition was so strong that he actually balanced the budget in 1937 and 1938. After some four years (1933-1937) of rapid growth under deficit spending, national output flattened during 1937 and 1938, that is until spending for the war increased.

In fact, the current right-wing antagonists use these years of stagnation to falsely support their effete ideology, that fiscal policy does not work.

Therefore, it is up to the people to rebuff the right-wing detractors in Congress, and perhaps even support a larger recovery package that showcases a massive investment in infrastructure.

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By dick, January 5, 2009 at 2:10 pm Link to this comment
(Unregistered commenter)

Trust and integrity are gone. Until and unless they return, no amount of pump-priming will be effective.If Obama is trustworthy and has integrity, he can help.

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By Allan Gurfinkle, January 5, 2009 at 6:46 am Link to this comment
(Unregistered commenter)

Being genetically unable to listen to politicians, I didn’t listen to Obama’s drivel, but I did read the Congressional Progressive Caucus strategy, and what I find remarkable is that neither (I’m assuming here with 100% confidence) that strategy or Obama addressed the problem of the ‘collapse’ of the financial system, but rather discussed the myriad ways we can try to spend our way out of it.

And, I do know that there are many investors/analysts that have great youtube videos, e.g. Jim Rogers, Max Keiser, Karl Denninger and others, that have been calling the collapse for years while Paulson and Bernanke were saying all is well, and they to a man say that the accumulated debt must be defaulted or otherwise cleared or we’re cooked.

And, I’ll add my own analysis, and that is that the whole derivative structure, from the credit default swaps upward, must be made illegal.  These ‘financial instruments’ have nothing more to do with the economy than the roulette wheels at Las Vegas, they are vehicles for gambling.  And we’re, the govt, in the process of financing trillions to prevent this illegal system from collapsing as it should.

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By Stephen Smoliar, January 4, 2009 at 5:17 pm Link to this comment

Does this wording suggest that Obama may be giving serious attention to the strategy proposed by the Congressional Progressive Caucus?

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