I am referring to the struggle to bail out Detroit when DC capitulated to Wall Street in days. I have heard union members, members of congress, and ‘experts’ of all stripe ask this question for a month now and think I can picture definitively what they have been hovering around. I think I can describe both the fundamental principles and the ideological confusion buried in the rubble of this ‘Market Failure’. Since we have a huge clean up challenge before us and ‘money laundering’ has been a mainstay in this market mayhem let me start with a washing machine metaphor.
My washing machine has been acting up for months. It doesn’t always finish the job and it has been wasting hot water and electricity at a noticeable increase. Then three weeks ago it quit and my laundry has been commuting to family and friends while my partner and I debate repair or purchase. Last night the water line froze in my basement and the plumber will be here before noon today to get the water turned back on. So why do I debate for three weeks the pros and cons of washing machines yet hire the first plumber or handy man that can drop everything and come to my aid? The urgency (the legitimate urgency) in both a water supply and money supply crisis is in the reality that they both function as utilities. By utility I mean the dependency that the washing machine has on the water supply and the dependency that Detroit has on the money supply. By utility I mean that without water not only are there no clean clothes but there is no fresh water to drink, no hot showers, no clean dishes, a house full of thirsty pets and plants. By utility I mean that without a ‘liquid’ money supply no Chrystler mini-van, no Kenmore washing machines, corn stops moving from the great American bread basket to hungry mouths of the world, and I can’t trade for the cheap Chinese made bicycle with the American brand name. By utility I mean the power to hold individuals and whole (hole) societies captive.
Detroit would like to convince us that they are a utility, Wall Street doesn’t want that impression to get off of capital hill. Detroit wants us to believe the whole economy will collapse (indeed it will shudder) so that we will bail them out. Wall Street wants to continue its black mail on capital hill without being recognized and regulated as a utility.
Here is a more pertinent fundamental question, why do we hear so much insistence from congress on “conditions” for the auto makers when Secretary Paulson got a free reign with the financial system? I will go beyond the obvious insider dealing and power politics of a former Goldman-Sachs guru to point the finger at the essential condition necessary to this abuse of power ?your ignorance. Not you alone but our collective, Joe the Plumber, global ignorance of the utility nature of the financial system..
Please don’t be offended by my use of the word ignorance, I am a former school teacher and challenging ignorance is my stock and trade. I know ignorance does not make anyone stupid but it does make one vulnerable. We are ignorant and vulnerable by design and the designers are trying to escape responsibility. For over a century economic doctrine has been driven by special interests and administered by a secular priesthood that has perpetuated superstition and mystery quite as successfully as the Wizard of Oz. Only the stupid will continue to encourage them because ignorance can no longer be an excuse. Take a lesson from the Tinman and exercise your own capacity to understand economic reality. Then align yourself with responsible public servants and farsighted public policy that transforms financial markets from parasite to propagator on ‘main street’
I come to this perspective from a life of exploration as teacher, contractor, swine herdsman, EPA intern, house husband and most recently a masters candidate in Community Development and Applied Economics. The University of Vermont allowed me to plumb the depths of money mysteries and the allocation of limited resources while surrounded by economists from 4 schools; business, liberal arts, ag / life sciences, and the Gund Institute of Ecological Economics. I promise to appeal to any and all ideologies as it suits me on behalf of farmers, children, tradesmen, educators and agencies. My explorations are extended by my three sons. I cannot avoid international and corporate concerns. Jordan is interning with a legal office focused on slave labor in India. Preston teaches and certifies English speakers throughout China and is married to his South Korean table tennis coach. (and you thought ping-pong was just a party game.) Rob is a project director for the engineering firm that builds Wal – Mart stores among other things. ( it was several years before he braved the mentioned Wal – Mart to me in the context of LEED Certification and the greening of corporate America).
Aristotle may be the earliest western academic to label and critique the distinction between money for the sake of trade and money for the sake of money. His insight predates Wall Street but illuminates the fundamentals of human nature and a medium of exchange. Aristotle observed that most people traded for goods and services in a barter mentality (main street) but that certain people grasped the abstract nature of money and manipulated it to their advantage at the expense of others (speculators).
http://books.google.com/books?… – PPA157,M1
Paul Krugman alludes to a ‘special’ function of mega banks and the need for supervision but I think the function is as common as dirt.
http://www.onpointradio.org/sh…
By money laundering I mean the practice of disguising the underlying source of financial figures. This is simply writing down numbers that might be accurate for transactions that might take place. Ie – my house might be worth half a million dollars and I could sell it. So I will refinance it and take that eco tourist vacation to Costa Rica.
Liquidity is what 700 BBBBbbbb-billion $ is supposed to restore to the market but as several wise commentators have pointed out, liquidity is a result of TRUST not volume. Like water flowing down hill, money only energizes when it is moving. Just as gravity moves water from high energy state to lower energy state, trust moves money from stagnation into exchange.
I had difficulty deciding which (w)hole was most fitting as whole refers to the utility nature of the money and hole refers to the institutional vacuum created by superstitious deregulation. It is the ideological fantasy of self regulating markets that created the hole in our social accountability that now puts the whole of society hostage to the financial sector.
The superstition that GNP is a measure of our well- being and vitality as a people and its corollary that an ever increasing GNP is both possible and desirable is easily debunked but lingers as a relic of Cold War fear. Wikipedia provides a brief orientation and valuable cross references under the topic Gross National Product – subheading National Income and Welfare Economics as Religion, Robert Nelson
The fundamental ‘mystery’ often obscured by academic discussion and banking privacy is the nature and creation of money in a market system. Money, whence it came, where it went, JK Galbraith
Money as Dept http://www.youtube.com/watch?v…