Has Obama been a success despite suspicions of crony capitalism?

[girl gone mad]

The prolific Mr. Harrison has some interesting thoughts on why questions about this administration linger, even in the face of its many notable accomplishments.

http://www.nakedcapitalism.com/2009/12/has-obama-been-a-success-despite-suspicions-of-crony-capitalism.html">Has Obama been a success despite suspicions of crony capitalism?
By Edward Harrison of Credit Writedowns

I hope this is a good subject to discuss in light of the recent Obama Administration machinations regarding Fannie and Freddie, Big Pharma, and Healthcare.

Before the Christmas break, I wrote a post to tie together my thoughts on why I have found the Obama economic program so unsatisfying despite some obvious success in stabilizing the economy. This first part framed the status quo as an unequal division of spoils that has become more and more unequal due to kleptocracy aka looting.

In this post, I want to talk about Obama’s economic policies in the context of what I perceive as a crony capitalism which is now endemic in Washington. As I see it, Americans are angry because the economy is still quite fragile and the personal financial situation for many ordinary Americans is still quite dire. Yet, the so-called fat cats seem more pigs eating at the trough of government largesse. This juxtaposition is galling and undermines any success that the Obama Administration has achieved.

Sellout, bamboozler, or ingénue?

The question is this:

• Did President Obama sell out (i.e. he was a good guy but has been corrupted in short order) or;
  
• Did Obama find out he couldn’t change the status quo so easily (i.e. he was a good guy who was naive about the President’s real power) or;
  
• Did the President simply bamboozle us (i.e. he was a bad guy who tricked the electorate with his silver tongue)?

I will assert that this question is irrelevant as it ascribes intent when we should be looking either at motive or outcome. If you do look at motive and outcome, you will see why I will focus more on government’s allowing a purge of malinvestment and less on government’s stimulating aggregate demand going forward.

http://www.nakedcapitalism.com/2009/12/has-obama-been-a-success-despite-suspicions-of-crony-capitalism.html">more...

[Name removed]

1. Deleted message

Message removed by moderator. Click here to review the message board rules.

[tblue]

2. "idiot"?

There's s book called "How to Win Friends and Influence People." You should check it out. Really. Cuz, honey, you're doing it wrong.

[tblue]

3. "purge of malinvestment and less on government’s stimulating aggregate demand"

I'm sorry, sweetie. Lol! I have an MBA and even I can't tell WTF that means at this time of night. Pls forgive me. Maybe I'll try again after a good night's sleep.

[girl gone mad]

4. fiscal stimulus works wonders in theory, but as was recently practiced, not so much...

too much was spent capitalizing zombie banks while leaving failed management in place, rescuing bondholders, paying off derivatives counterparties at 100%, etc.

This has turned out to be a political, as well as economic mistake.

[FrenchieCat]

5. It's always been a mistake as far as you were concerned.....

there's nothing new in what you are saying about this pronouncement of yours....
but the reality is that we still don't totally know,
but the curve seems to be bending towards the notion that it did indeed work,
slowly but surely.

If it works economically, it will reflect fine politically....
but now is not the time to call it...
Which is what you have decided to do,
again.

[Hardrada]

6. Obamatron Talking Point #48

[FrenchieCat]

9. You are offensive, but I'm sure you meant it to be exactly taken that way.

No real rebuttal, just some name calling that has nothing to do with the subject matter.

[dkf]

8. The AIG hole will never be filled.

Yes, the big banks have repaid TARP, but the big problem is AIG.

And the bailout will only be successful if they correct the causes of the collapse. If Obama can't do that, then the experience will have been for nothing and we will be just as vulnerable as before.

[FrenchieCat]

10. The point is

that the jury is still out in reference to the stimulus....
which was what my comments were referring to.

[girl gone mad]

11. I was actually just paraphrasing Edward Harrison in answer to the poster's question.

http://www.creditwritedowns.com/2009/12/moving-away-from-stimulus-happy-talk-to-focus-on-malinvestment.html">Moving away from stimulus happy talk to focus on malinvestment
Posted by Edward Harrison on December 21st 2009 at 10:06 am

...when Lehman Brothers collapsed in a heap, it was clear to me that we faced a stark choice. One choice was a deflationary spiral and the associated economic dead weight loss of a non-equilibrating global economy in Depression. The other choice was a soft depression cushioned by fiscal (and monetary stimulus). About a year ago I wrote an ode to Keynesian economics called Confessions of an Austrian economist in which I said that I choose fiscal stimulus to cushion the downturn and prevent a depressionary spiral.

The thinking was this: if government buoys the economy, the effects of deleveraging and the bankruptcy of large systemic players need not create a deflationary spiral that leads to a deadweight loss, social unrest or the usurping of democracy by populist autocrats.

But, I am going to move away from the happy talk about fiscal stimulus and re-focus on malinvestment (I have never really talked much about monetary stimulus as a solution). I am sure many of you saw this coming when I wrote “Stop the Madness now!” last month and I have been signaling my realignment with posts like “A few thoughts about the limitations of government.”

The reason is simple: in theory, fiscal stimulus can cushion the downturn and hasten real recovery by preventing a spiral into a non-equilibrating economic state. However, in practice, stimulus has been used as an excuse to maintain the status quo, prop up zombie companies and forestall the inevitable. This only lengthens the downturn, misallocating even more resources to less efficient uses. And all of the worries I had about social unrest, populism, and protectionism are coming true nonetheless.

To be honest, I always knew that the fiscal stimulus game was fraught with risk. Politicians will always use public money in part for their own devices. However, perhaps I was naive enough to believe this time would be different....

You are right, I could have written portions of this myself at any time in the past 14 months. Harrison may hold more credibility with you, having until recently been a proponent of the banking intervention schemes.

[dkf]

7. The AIG payout still steams me.

That was a direct THEFT of taxpayer funds.

[westerebus]

12. At the outset,

the bail out was a Repub-a-con program. So just who are we cheer leading for? The Bush-Paulson team or the Obama-Geitner team?

It's a continuity of Gulum-Saks investment insurance. Which has yet to be regulated as the causes of the credit crisis and their under lying problems remain.

Has it stabilized the stock market? For the most part, yes. Is the stock market the economy? No, it's not.

Are housing prices still falling? Yes, but not as fast. The debt of the government climbing? Yes, that's how they are cushioning the decline in consumer spending. Is it sustainable, to replace debt with more debt? They really, really want you to thing it is.

How long can we borrow to pay our bills? The consumer driven economy has cut spending and is saving. That should be your big clue.

So what's a few trillion among generations?