Notebook, 2 June 2012: Is That All They Got?

With the rising drama in Greece about to unfold in a few weeks, the interminable process of writing and implementing a Volcker Rule, the recent disclosure of a $2 billion-plus loss from what JP Morgan Chase characterizes as a portfolio hedge, a bad unemployment report from ADP on Thursday and confirmation provided by the May Bureau of Labor Statistics report the next day, the business news reports repeatedly that Washington and the Fed agonizes over the possibility of another round of quantitative easing.

Normally, I would say something like, “which is fine. This is what the Fed is supposed to be doing,” and bear in ind that efforts continue on other fronts, such as the newly formed Consumer Finance Protection Agency, the Volcker Rule group (Securities and Exchange Commission, Office of the Comptroller of the Currency, Federal Reserve Board of Governors, and the Federal Deposit Insurance Corporation), and the various committees and agencies tasked with new responsibilities under Dodd-Frank, etc. Except that the latest financial crisis and the revelations of widespread practices such as predatory lending and trading, algorithm trading in equities markets (ranging from 70% to 80% of volume), issues of work and compensation, income and wealth inequality, who shoulders the tax burden and strategies to avoid participation in paying for America, and the tug-of-war over paying for government services like education, Social Security and Medicare, the control which the wealthy have over our political system, the failure of our legal system to provide redress of very real grievances, and more, all beg the larger questions:

  1. What are the characteristics and consequences of the global free market and are they worth its headaches?
  2. To what extent should society, through legislation, regulation and enforcement, define the business of business?
  3. Would prescriptive regulation (define what an industry is allowed to do) be simpler and easier than proscriptive regulation (which defines and prohibits, as they come up, the myriad tricks and gimmicks used to get around the law)?
  4. To what extend should certain sectors either be socialized completely or converted into public utilities, whose profits are modest but guaranteed, who are protected from competition, whose role in the economy and in society is sharply defined?
  5. What has the global economy done for and to America and Americans? Should GATT be revisited? Do we need another summit like the Bretton Woods meeting to address modern issues of international trade and finance, as Paul Volcker proposed this past week?
  6. Does the United States, like other countries, need an industrial policy? I would point out here that we have one already: defense. The defense industry in America thrives, shows a vast wealth of innovation from cloaking devices for US Naval aircraft to adjusting the rate of fire on the M-16 to attenuate the problem of muzzle-lift, and if our recent wars tell us anything, delivers real value.
  7. What do we do about corrupt practices which have been legalized through deregulation?
  8. Should states have more power to regulate? Should the 1978 Marquette Decision be overturned or should states be granted the right explicitly through legislation?
  9. How, beyond the obvious PR campaigns already being served up by Wall Street and its affiliate industries, do we actually build trustworthy markets? The retail invesstor has largely disappeared from equities markets and trading is almost totally my-algorithm-versus-your-algorithm. Is this really a market at all?

There are more large questions to be asked, and are asked, but only by those on the fringe thus far (including the right wing mainstream/fringe who is all too eager lately to decry the “Europeanization” and/or growth of the “socialist” threat to America). My feeling is that it was never enough to say “we beat the Soviet Union” (which just a little thought would reveal is a debatable claim anyways) as justification for the free enterprise system and leave it at that, but somehow, basking in yet another supposed example of America Triumphant, we never got around to it. The Occupy Movement, and those who, like myself, support or sympathize with it, are as far as I know the only ones asking these kinds of questions, and it’s my feeling that many, many more Americans are, right now, uneasy over what the current crisis has revealed.

So I ask again: QE3. Is that the best our “best economics thinkers” like Krugman, Roubini, Bernanke, Hazlitt, Volcker and Blodget can do? Because if it is, we’re in deep trouble.

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