‘Financial writers’ and establishment economists seem to live in a different world. They often bring to mind bats, hanging upside down in the cavernous, soaring rafters of a barn, analysing the world from a great distance, and upside-down. Take one Diana Henriques – described as a ‘senior financial writer for the New York Times‘. She was on the Rachel Maddow Show on US TV last night, reviewing the gargantuan $700 billion bail-out of US banks. In defence of the opaque and unaccountable activities of the Treasury team dishing out taxpayer largesse she said this: “No-one could lay out a war-game for this (crisis) in advance”. (Ehem, correction: some were well prepared, and could have.) But it was the next remark that took my breath away:
“We have not had any additional financial Leviathans collapse on us lately…that is a good sign…as another situation like that would terrify the market at this time…. I don’t think the financial markets are braced for a big insitution failing, and that certainly is a gain….”
Lets break this down slowly and quietly. There have been no ‘additional Leviathans collapse…..It is certainly a gain….that financial markets’ do not expect a big institution to fail. And another such failure, would ‘terrify the market’.
Forgive me, but from where I stand, on the ground, things look very different from this frankly batty, finance-centred perspective. From here I can see the biggest Leviathan of them all failing.
Its called the United States.
The idea that the NY Times and stock markets are cruising along, relaxed because no financial institution looks likely to fail, while the United States economy has shed more than 1.2 million jobs this year, is frankly, astonishing. Today the US Labor department announced that 4.09 million – I repeat 4.09 million people – claimed unemployment benefit in the month up to 22nd November, 2008 – the highest in 26 years. On this same day, tens of thousands of jobs in the auto industry hang in the balance, with workers, their families and communities threatened by the shock of unemployment, the loss of pensions and healthcare – not to mention marital and mental breakdown and social disorder. On this day, thousands of dealerships and suppliers to the Detroit auto industry face bankruptcy. The idea that while this is happening, the absence of a bank failure ‘is certainly a gain’ – says a lot about dysfunctional ‘financial writers’ and stock markets.
That one is reassured because the poor darlings in the finance sector sleep more soundly thanks to the $700 billion bail-out, while US consumption (70% of US GDP) is in free fall, demand collapses both at home and internationally, home sales and prices continue to spiral downwards, and orders for durable goods implode, shows a real blind-side for the real Leviathan – the US economy. That one can comment airily from the lofty rafters of the New York Times while the US builds up what Prof. Roubini calls a tsunami of debt to finance domestic bank bail-outs (TARP, Fannie and Freddie Mac, Bear Stearns, AIG, Citigroup) and magnifies these with a massive trade deficit and rising external liabilities, which in turn will weaken the dollar and raise real interest rates….shows that the world seen from those draughty New York Times rafters looks a whole lot different.
Batty, in fact.
4 thoughts on “A blind spot for Leviathan”
What a wonderful article! It really does put into perspective how removed from reality many (if not most) of the financial commentators
are. All they see is their own little world where all that matters is how much they stand to lose if the stock market does what it should have done
years ago – come back down to earth. The problems experienced by the rest of us “ordinary” people don’t matter to them! The fact that many of the
problems were caused by the financial sector in the first place don’t seem to occur to them.
Loved her book “The Coming First World Debt Crisis”, just afraid that I am reading it a bit too late.
It’s silly how much of
the news that we get in the USA is hindsight – someone needs to come up with a non-corporate news program that forecasts the events that will
happen (since knowing is vital) instead of telling us what happened in hindsight.
Where was this intelligent witty woman when I was in
college… opps that slipped out.
All the best…
How can you get your message out more so that these commentators can look as silly as they are.
Love your work
Diana Henriques comment suggests a person on the Titanic being thankful that it had not hit a second iceberg…
if the financial commentators appear ‘out to lunch’, the policy makers appear to out of their depth (with honourable exceptions) both in crisis
management, rushing to put out yesterday’s fire, and failing to recognise the systemic nature of the crisis.
We seem trapped between
‘hysteria’ (financial markets, the media) and complacency disguised as ‘doing what is necessary’ when it clearly is not.
Where are the
clear heads thinking through creating a renewing order?