Cleaning Up the Mess

Bill Moyers had another good interview about the economy, this time with James Galbraith.

Professor Galbraith once served as Executive Director of Congress' Joint Economic Committee. He teaches economics at the LBJ School of Public Affairs at The University of Texas, where he also directs the University's Inequality Project, analyzing wages and earnings and patterns of industrial change around the world.

A few tidbits.....

I have been working on financial crises since the New York City rescue in 1975. And this is, by far and away, the biggest threat to the system as a whole that we've seen in my lifetime and I think the biggest threat since the late 1920s.

But we have an enormous advantage over our predecessors in 1929. We have the fact that the New Deal happened. And we have the institutions of the New Deal, though they have been badly damaged in the last decade, they are still with us.

The consequence of the failure of regulation, of supervision of the banking system over the past eight years, has been to cause a collapse of trust, a poisoning of the well.

Right now the thing that troubles me most is not the United States. The thing that troubles me most is that the same ideas of deregulation, of free markets, were applied in the construction of modern Europe. And the Europeans don't have the institutions of the New Deal, a central bank that can lend as necessary.

Uncle Sam's credit is excellent. Uncle Sam can borrow short term for practically nothing these days. Everybody wants to have Treasury Bills and bonds because they're safe.......So from our point of view, we're actually well placed, I mean, as the government of the United States is well placed to take the lead in pulling the country and the world out of this crisis.

One of two things can happen. The government can take action and help stabilize the economy in which case we will have more spending but also more employment. Or the government cannot take action and let the economy collapse in which case we will have much less tax revenue. The deficit is going to be larger either way.

.....the people who took over the government were not interested in reducing the government and having a small government, the conservative principle. They were interested in using these great institutions for private benefit, to place them in the control of their friends and to put them to the use of their clients.

They also turned over the regulatory apparatus to the regulated industries. They turned over the henhouse to the foxes in every single case.